It is being compounded by the fact that the policy options facing the members of a currency union are more restricted than those that would face a country with its own currency.
In preparing the Reserve Bank’s latest forecasts of the world economy, we have assumed that the European authorities do enough to avert a real disaster but are not able to avoid periodic bouts of considerable market volatility and uncertainty. There are, of course, a range of other scenarios, many of which, unfortunately, are on the downside.