Financial Times
December 10, 2012
The eurozone is living through lean times, but there is light at the end of the tunnel. On the one hand the short-term economic outlook remains weak. On the other hand, there are signs that confidence is returning.
Ireland has returned to the debt markets. In September more private capital moved into Spain than out for the first time in 15 months. And Italy recently sold 10-year debt at the lowest yield since 2010. That was clear recognition of the resolve shown by Mario Monti’s government to boost competitiveness and pursue sound public finances. With Italian bond yields on the rise again after Mr Monti’s decision to stand down, it is also a reminder of the need to maintain resolve in the future.
The progress made reflects important decisions at both the national and European levels. These decisions have begun to rebuild confidence, calming markets and countering fears of a collapse of the euro. Far-reaching structural reforms are helping to rebalance the eurozone economy. Progress is tangible: current account imbalances among eurozone members have fallen markedly, as competitiveness lost by some members in the decade before the crisis is regained.
It is true that the correction of current account imbalances has so far come predominantly in deficit countries, but this is no surprise given the scale of the challenges they face. As John Maynard Keynes noted before the Bretton Woods talks, such adjustment is “compulsory for the debtor and voluntary for the creditor”.
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