Conclusion Roughly eight years of extremely accommodative monetary policies on both sides of the Atlantic might lead to the notion that the ECB and Fed have been confronted with similar or even homogenous challenges. This would be a misapprehension. Major institutional and structural differences at the onset of the financial crisis explain why the clean-up efforts in the US were faster and more effective and the recovery was more sustainable. After the institutional short-comings of Monetary Union had been painfully exposed, much progress has been achieved on the road to completion and further integration. However, this institutional reform package took time. Now, economic recovery, although still timid, is under way in the euro area. But this finding cannot be taken as an excuse to rest on our laurels. More determined structural reforms need to be implemented to lift the growth potential and overcome the ultra-low interest rate phase. A more determined approach to tackle the problem of non-performing loans is necessary to tackle the remaining legacy of banking crisis. When the macroeconomic ship is engulfed by a major storm, all hands – not just monetary policy – need to man the pumps. This, indeed, holds true on both sides of the ocean. 1 Lang, J. H., Peltonen, T. and Sarlin, P., “A framework for early-warning modeling with an application to banks”,  Working Paper Series, ECB, forthcoming. 2 Ghysels, E., Idier, J., Manganelli, S. and O. Vergote, (2014), “Ahigh frequency assessment of the ECB Securities  Market Programme”, ECB Working Paper No. 1642.
The US had a trusted process through the Federal Deposit Insurance Corporation, backed by a credit line from the US Treasury. By contrast, prior to the crisis many member states of the euro area did not even have a national resolution framework. Since 2008, the FDIC has resolved over 500, mostly smaller banks in the United States. While determining the exact definition is tricky in the euro area, the number appears less than a hundred.1 All this explains why the recovery of the banking sector took longer in the euro area, which our monetary policy had to work to mitigate. And what is more, when public authorities in the euro area did intervene to backstop their national banking sectors, the fiscal implications naturally differed: the onus fell entirely on national budgets. This in turn contributed to the second area where the euro area and the US diverged: the emergence of the so-called “vicious loop” between banks and sovereigns, which further delayed the financial repair process. Importantly, this vicious loop not only further impaired monetary transmission, but it also had implications for the stance of monetary policy. The need for accelerated fiscal consolidation to quell the sovereign debt crisis constrained the ability of fiscal to carry out macroeconomic stabilisation in the euro area and hence the overall policy-mix. Whereas the US could consolidate its budget against the backdrop of a firming recovery, some euro area governments were forced into a pro-cyclical fiscal stance. That in turn worsened the macroeconomic environment in which monetary policy had to operate.