In another criticism of the “savings glut” view of the crisis, Claudio Borio and Piti Disyatat (2011) 18 are correct in pointing out that “a focus on current accounts in the analysis of crossborder capital flows diverts attention away from the global financing patterns that are at the core of financial fragility. By construction, current accounts and net capital flows reveal little about financing.
In the absence of a nominal exchange rate the alignment of national fiscal policies and the prevention of imbalances via rules is a necessary condition to support the credibility of the single currency. The recent agreement reached by the European Parliament and the Council on the “Six Pack” is a step in the right direction.