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This chapter provides an analysis of the measures adopted to address the euro area crisis. First, a quick intervention was necessary in order to stabilize the situation of certain euro countries. To this end, several loan facilities were created, and the European Central Bank (ECB) also played an important role in calming down the markets. Second, several measures have been adopted in order to improve budgetary surveillance and economic coordination. Third, inadequate financial regulation was one of the causes at the heart of the global financial crisis that started in 2007, and which is connected to the euro area crisis. Accordingly, the EU has undertaken, and is still in the process of undertaking, important reforms aimed at the creation of a stronger financial framework, and a so-called banking union for the euro area.

The crisis has resulted in an increased dominance of the executive at both national and supranational levels, including executive expert bodies such as the Commission and the ECB. This dominance of the executive—and, especially, of national executives—has manifested itself in several ways. In general, there has been a resurgence of intergovernmentalism, or the adoption of decisions by means other than the Community method. This chapter analyses the causes and facets of this resurgence. It pays special attention to the adoption of measures of international law outside the EU legal framework; to the use of EU institutions in this ambit; and to the consequences of executive dominance for democratic and judicial control.

Shortly after Mario Draghi took office as president of the European Central Bank (ECB), he called for what he named a “fiscal compact”, a further step towards improving fiscal discipline in the euro area. In response, the leaders of 25 European Union countries soon announced their intention to adopt a new fiscal treaty. This was not the first time that European policymakers had put the emphasis on fiscal discipline as a remedy to the crisis. In the aftermath of the global crisis, the United States and the euro area actually adopted two opposite strategies. In the United States, priority was given to private deleveraging, with bold support from the central bank. In contrast, the drive to consolidate was stronger in the euro area and monetary policy less supportive. Although there are several explanations to this, fundamentally, many in Europe genuinely believed that the euro crisis was essentially rooted in fiscal imprudence. Although it is hard to dispute that countries in the euro area must reverse the drift in public-debt ratios, to tighten aggressively when the economy is already in recession is a risky strategy. Too-early and too-aggressive tightening can result in dreary economic performances, disappointing budgetary outcomes, and public resistance to austerity – the opposite of the intended result. The backlash came in 2013, when austerity started being widely blamed for the continent’s woes.