The second wave of the crisis in Europe, particularly in the eurozone, was instigated by uncertainty about the fiscal solvency of the member states. Greece is definitely insolvent. It remains to be seen whether some other member states are also insolvent. For this reason, the eurozone is again gripped by the fear that the sovereign default crisis could coincide with a banking crisis. However, the scenario analysis shows that EFSF and national bank stabilisation funds are sufficiently large to secure financial stability. This conclusion holds under very conservative assumptions and provided that very restrictive capital adequacy requirements, to be laid down by new Basel III regulations, are met. However, this has failed to assuage the concerns of market participants because of the political credibility crisis. The crisis will re-emerge as long as the "what" and "how" of the work by the EFSF and ECB, as well as other institutions remain implicit. In the final run, the crisis will hit again as long as market participants do not realise which countries are actually insolvent and which are not. The eurozone will probably not fall apart. Institutional changes over the last year and a half provide a clear picture of the new financial stability architecture. Croatia should not build its relation to the eurozone based on current difficulties, but should look at a long-term perspective. Even if political caution and fears prevail in the short run and Croatia decides to delay its ERM II entry, the new element of the stability architecture – the Euro Plus Pact provides a useful economic policy framework. It addresses the two main weaknesses of Croatia – competitiveness and fiscal adjustment.