The extension of the compliance period that has been recently given by the Commission to various countries means that the pace of the adjustment can become more gradual, in full respect of the structural approach under which effective action under the Stability and Growth Pact preventive arm is measured. The final goal of continuing to reassure markets about future debt sustainability cannot be abandoned.
It is encouraging that the market reaction to recent developments, including our own OMT, has substantially reduced yields and spreads, particularly for Greece that also benefited from a rating upgrade. Nevertheless, it is also clear that the rebalancing process would benefit from a more favorable European economic environment with higher growth. Here, four elements could help.