This paper aims at establishing the link between economic performance and financial stability in the European Union. We use the seminal framework – both in terms of variables and econometric method – of Beck and Levine (2004) to estimate this causal relationship, independently from but controlling for the level of financial depth. Using a panel GMM with instrumental variables, our contribution is to test how different measures of financial instability (an institutional index, microeconomic indicators, and our own statistical index derived from a Principal Component Analysis) affect economic performance (or components of aggregate dynamics like consumption, investment or disposable income). We find that financial instability has a negative effect on economic growth.