Europe’s Financial Architecture in Transition

Since the start of the financial crisis in 2008, European economies have been hit by unprecedented exogenous shocks. The ECB has countered these with unconventional monetary policy, extraordinary high new fiscal borrowing and a permanent Stability Mechanism (ESM). On top of all that, in response to the coronavirus crisis, European Community Bonds have been issued for the first time. All of these new measures have proved helpful, but equally contradictory to the rules of the single currency as laid down in the Maastricht Treaty. The intertwining of monetary and fiscal policies is currently proving to be a precondition for the cohesion of the common currency. This makes it indispensable in the design of a resilient and credible new financial architecture for Europe.