Chart 5 shows the deviation from average of the year-over-year percentage change in each measure since 2000 and the decomposition of this deviation into three causes: excess capacity (or slack), ERPT, and an unexplained residual term (“others” in the chart). Let me say a few words about each of these three elements.
According to a recent IMF paper, cross-country risk sharing in the euro area is not only more limited (roughly half that seen in existing federations), but also falls sharply in severe downturns. See “Fiscal Risk Sharing: New Evidence for the Euro Area”, IMF Technical Background Note, September 2013.