5 3.9  4  3.0  3 2.4  2  1.7  1.6  2.8  2.3 1.7  1.5  1.1 0.8  1  0  -1 -2  -3  -3.0  -4  -5 Eura area  Germany  France  Italy  Spain  Greece  2010  Austria  Poland  2011  Czech Rep  Slovakia  Hungary  Romania  2012  Source: European Commission Autumn forecast 2010 and Interim Forecast February 2011  www.oenb.at      -1-  oenb.info@oenb.at  Significant adjustment needs on the part of these periphery countries:   Short run: Cost cutting, wage moderation;    Long run: Reforms to strengthen productivity growth.
But every imbalance has two sides: Surplus countries (Germany, Netherlands, Austria) should strengthen domestic demand (2 ways):   Structural reforms to enhance investment (ECB/Bundesbank view);    Income and tax policy to strengthen consumption (FT view);  BIS central bankers’ speeches  9   –  Otherwise, deflationary drag – could not be compensated by loosening monetary policy (pushing on a rope).