Just as the financial expansion of 2001–2007 did not create sustainable growth in the developed world, financial consolidation – although necessary – will not alone be a sufficient condition for growth. A key ingredient to sustainable growth is the revival of real investment. It is not a substitute for financial consolidation, but a complement to it.
And it requires a change in the time horizon and risk appetite of investors who for several years now have been hoarding liquidity and “quality”. The way forward is in profitability of REAL business investment, and improved international competitiveness of those economies and sectors which are in need to deleverage.