We have already discussed the reasons for confidence that household borrowers will be able to meet their obligations. Lenders, too, appear well positioned to weather any such adjustments. Commercial banks remain highly profitable and well capitalized, and other financial intermediaries show few signs of widespread problems.
It would follow from this that the likelihood of a system of closer co-ordination in which domestic policies are allowed systematically to be affected by regional exchange rate concerns is pretty small. It further follows that the prospect for monetary union is quite remote indeed.