First, because of the global nature of the shock, European countries cannot redirect their production to satisfy demand from the U.S. or China, as they did a decade ago. This makes member countries dependent on trade within the eurozone, which represents 45 percent of the currency area’s GDP. Second, the amplification of the shock across supply chains will be greater this time.
So far, the measures I have listed are based on national policies – even though they concern many countries. But there is also a truly international aspect, namely reducing global imbalances. These constituted an integral part of the global pattern of low interest rates and large capital inflows, particularly into the USA.