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Financial stability: Where it went andfrom whence it might returnGeoffery UnderhillUniversity of AmsterdamThe global crisis which has been ricocheting around the global economy since late2007 seems to have undermined, perhaps even destroyed, the traditional foundationsfor financial stability in the US and Europe. This chapter focuses on recommendationsfor the provision of financial stability, and in doing so builds some bridges between twoof the PEGGED themes – financial stability and macroeconomic governance. Thereare three essential points to be drawn from the range of research findings from thePEGGED political economy team:• The policy dilemmas and choices confronted by the contemporary system of global/EU financial and monetary governance are longstanding, well-known, and there is ahost of historical experience and literature to draw upon going forward.• The potential and more obvious flaws of the pre-crisis system of financial governancewere well-known and debated in the many rounds of reform that precededthe financial collapse. Our analysis reveals that the ideas upon which the reformshave been built remain largely stuck in the pre-crisis mode and are thus unlikely toachieve their goals. Worse, the Eurozone is descending into modes of crisis resolutionthat are known to be dysfunctional and destructive of successful economicgrowth and development.• Reform that is more likely to provide financial stability for the longer run requiresnew ideational departures drawing on established historical experience, considerableinstitutional innovation, a reformed policy process, and institutionalised attentionto the political legitimacy and long-run sustainability of financial opennessglobally and in the EU.57