EVALUATING THE EFFECTIVENESS OF FINANCIAL REGULATION IN ENHANCING STABILITY IN THE EUROZONE: INSIGHTS AND LESSONS FROM RECENT CRISES

Abstract

This paper explores the evolution and effectiveness of financial regulations within the Eurozone, focusing on the responses to two major crises: the Eurozone debt crisis and the COVID-19 pandemic. It examines the significant regulatory measures implemented in these periods, including the establishment of the European Stability Mechanism (ESM), the Banking Union, and the Next Generation EU (NGEU) recovery package. The study evaluates the strengths and limitations of these measures, highlighting the successes in stabilizing the financial system and supporting economic recovery, as well as the challenges faced, such as managing fiscal sustainability and addressing social impacts. Through a detailed analysis of these regulatory responses, the paper identifies key lessons learned from recent crises, including the need for a balanced approach to fiscal consolidation, the importance of enhancing regulatory frameworks, and the necessity for ongoing adaptation to emerging risks. The findings underscore that while significant progress has been made, gaps remain that require continuous refinement of the regulatory practices. The paper concludes that for the Eurozone to achieve sustained economic stability and effectively manage future financial shocks, it must address these gaps and implement the proposed recommendations. This includes enhancing the robustness of the Banking Union, ensuring long-term fiscal sustainability, and preparing for future challenges such as technological disruptions and climate change. By integrating these lessons and maintaining a forward-looking approach, the Eurozone can strengthen its regulatory frameworks and foster a more resilient and prosperous economic environment for its member states.