It was now time to rebuild.

It would be fair to say that the onset of the crisis found the eurozone and the whole EU lacking the tools or even the understanding required to address the problem of an asymmetric shock to the common-currency area and the impact of one eurozone member defaulting on its debts. After initial denial and months of inaction came ad-hoc solutions steeped in moral hazard rhetoric; eventually the response to the crisis shifted from the initial fire-fighting towards creating new tools and to an attempt at designing a new architecture for the eurozone and the EU.

This involved introducing a more robust framework for crisis management and support, gingerly moving towards a genuine “fiscal union” by deepening policy coordination, as well as strengthening institutions for more effective governance. At the same time, it was eventually recognized that in most countries the origin of the crisis was not in the fiscal stance per se but lay instead in the banking sector, whose liabilities ended up on public balance sheets as governments bailed out the banks or guaranteed their deposits. This eventually led to an attempt at breaking the banking/sovereign feedback loop and to significant but as-yet-incomplete moves towards creating a banking union in Europe.

“Whatever it takes”

In this sequence of events, if there is one singular moment that marks the inflection point in the eurozone crisis, it was undoubtedly in late July 2012, when the new ECB president made it clear the eurozone’s central bank would use “within its mandate” all the instruments in its disposal to preserve the integrity of the common-currency area (Draghi 2012). Mario Draghi’s “whatever it takes” remarks succeeded where many previous attempts at staving off the crisis had failed; they set off a huge global market rally and sent the spreads on government bonds tumbling. Despite further bumps on the road at a later date, such as the 2013 Cyprus episode and the 2015 Greek referendum, the Draghi pronouncement was truly the point at which the eurozone turned a corner.