The ECB and the Sovereign Debt Crisis

Résumé

The financial turmoil and the sovereign debt crisis have reminded us of how important effective institutions that ensure an efficient adjustment mechanism to economic shocks are. In monetary unions this is even more the case becasus countries sahre their monetary sovereignty and lack the possibility to manoeuvre the nominal exchange rate to correct internal and external imablalances. Euro area governments must urgently bring forward the necessary structural reforms and engage in sustainable fiscal policies within a strengthened euro area governance framework. Major agreements on reforming the financial supervision and banking regulation frameworks have been reached. But these initiatives also need to be fully implemented and futher progress in some areas is still needed.