BIS Review 19/2003  1  In the euro area structural weaknesses have been building up for more than a decade. They are well known, as is the adequate therapy. Labour market inflexibility is the core European weakness. In a currency union, market flexibility is all the more crucial as exchange rates can no longer cushion asymmetric shocks.
The euro-area countries now need to seize the opportunity to embark on serious reforms during times of crisis, where the reform zeal is more pronounced than at more quiet times. The key message the present situation of the world economy conveys for Europe is that Europe would be well-advised to improve its ability to grow on its own.