Adjusting countries can quickly improve their relative prices and export more to other members of the union. But if internal demand is too weak and inflation too low, such rebalancing across countries obviously becomes harder. And to some extent, this is what we saw in the euro area after the crisis.
At the Pittsburgh Summit in 2009, the G-20 committed itself to a new “framework of strong, sustainable and balanced growth” as also on a “Mutual Assessment Process” (MAP) to determine the degree to which G-20 macro policy actions are “collectively consistent” when examined together. The framework and its assessment should ensure that individual actions of countries add up to a coherent path forward.