A key part of this challenge is that member states tend to be exposed to divergent regional developments while at the same time the single currency makes currency appreciation or depreciation no longer available as an economic policy tool. Principally, member states may address their regional issues by employing independent fiscal and economic policies.
Fiscal consolidation has begun, with the combined deficits of all levels of government falling from 4.8 per cent in 2009 to an expected 2.8 per cent this year.9 Disciplined by its inflation target and reflecting the relative strength of the economy, the Bank of Canada was the only G-7 central bank not to engage in quantitative easing, and we have been the only one to move away from emergency settings of interest rates.