Cri­sis con­trol and mit­i­ga­tion

Enterprise - - Economy -

Fi­nan­cial as­sis­tance by home coun­tries to their fi­nan­cial in­sti­tu­tions may have po­ten­tially dis­rupt­ing spillover ef­fects. It must be en­sured that fi­nan­cial res­cues at­tain their ob­jec­tives with min­i­mal com­pe­ti­tion dis­tor­tions and neg­a­tive spillovers. The co­or­di­nated re­sponse put in place in the au­tumn of 2008 in the face of the risk of fi­nan­cial melt­down shows that EU pol­i­cy­mak­ers be­came fully aware of the need for a joint strat­egy. The need for deeper pol­icy co­or­di­na­tion and im­proved cross-bor­der cri­sis man­age­ment is a key les­son learnt from the re­cent cri­sis. Fis­cal stim­u­lus also has cross-bor­der spillover ef­fects, through trade and fi­nan­cial mar­kets. Spillover ef­fects are even stronger in the euro area in the ab­sence of ex­change rate off­sets. The need for a fis­cal boost un­der­pinned the adop­tion of the En­force­ment and Emer­gency Re­sponse Pro­gram (EERP) in De­cem­ber 2008. More­over, the ac­ti­va­tion and strength­en­ing of the EC Bal­anceof-pay­ment Fa­cil­ity helped to pro­vide sta­bil­ity in Cen­tral and East­ern Europe.

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