Thus, European authorities must create time to re-found their monetary union based on credible fiscal arrangements and more flexible economies that can adjust quickly to inevitable shifts in internal European competitiveness. In our opinion, the existing European resources, including the European Financial Stability Facility and the European Central Bank facilities, can be used much more efficiently to create a multi-year window for these adjustments.
Just as demand must be rebalanced in Europe between countries with current account deficits, such as Spain, and those with surpluses, such as Germany, so too must it adjust globally. Under current policies, large current account imbalances can be expected to persist. Continued reliance on domestic demand in advanced economies promises disappointment.