It is difficult to judge how much these financial strains have affected U.S. economic activity thus far, but there seems little doubt that they have hurt household and business confidence, and that they pose ongoing risks to growth. Another factor likely to weigh on the U.S. recovery is the increasing drag being exerted by the government sector.
It is only against the background of the past that the adjustment programmes currently underway in several euro area countries can be understood. It was past economic developments and policies that led to excessive imbalances in a number of countries. And it was those imbalances – fiscal, macroeconomic and external – that were neither healthy nor sustainable.