Fortunately, this is what we are seeing across Europe today. Governments have already done a lot to tackle the imbalances that accumulated in previous years. Progress in implementing economic reforms has been extraordinary. Deficits are being reduced. Current account imbalances are being unwound. Wide-ranging structural reforms are underway.
Particularly impressive is the scale of the adjustment that has taken place in countries receiving financial assistance. In many countries these efforts have largely removed the underlying drivers of the sovereign debt crisis. But while sovereign debt markets have improved, bank lending is still very fragmented across the euro area. Credit in some countries is still difficult to obtain.