Banks were an exception to this, and in different countries, the approach to privatization of banks varied. In the Czech Republic, the privatization of banks had been delayed for several years due to the government’s belief that privatized banks would stop providing soft loans to strategically important firms. This fear was underlined by the experience with foreign banks that were entering the market since 1992 and cherrypicking their clients. After several years, the bad debt burden on banks’ balance sheets reached such a scale that government had to step in. Most of the debt ended up with a special governmental agency and the losses are being paid from the state budget. The cost of the bank clean-up in the Czech Republic is estimated at approximately 21% of GDP. In some other countries [Hungary, Poland], the privatization of banks proceeded quicker and the fiscal costs were substantially smaller [est. 6% for Poland, 13% for Hungary; in Szapáry, National Bank of Hungary, 2001]. Given what I have just described, the financial sector in the accession countries is nowadays in remarkably good shape. The banking sector is sound and stable, the role of non-banking intermediation is growing, and clients have access to most of the products and services they have in the EU countries.
In looking for the origins of the crisis, one also observes instances of fiscal indiscipline, which caused problems at the Euro area level. In some member states, as for example in the case of Greece, EU funds were not put to proper use and in some cases ended up imposing a burden on future government finances. In my previous appointment at the European Court of Auditors, where I was responsible for coordinating the overall audit report on the spending of the EU budget, in almost every report  1  See L. Bini Smaghi, “Eurozone, European crisis and policy responses”, Goldman Sachs Global Macro Conference – Asia 2011, 22 February 2011. BIS central bankers’ speeches  1  during my six-year term, Greece was invariably singled out because of its problems and serious deficiencies in the spending of EU funds. Greece often had to pay back to the EU budget funds that it badly needed. It is evident that such weaknesses in the administrative and political structure put an unnecessary burden on Greece’s fiscal position. A recent study describes the first nine years of the euro, between 1999 and 2007 (that is, the pre-crisis period), as “ ‘wasted good times’ during which the foundations were laid for the present crisis … Almost as soon as the euro had been introduced, consolidation fatigue set in”.2 Moreover, governance at the EU level was weak. The application of the corrective arm of the Stability and Growth Pact was softened through intervention at the political level in 2003.