2  BIS central bankers’ speeches  Several factors suggest that these developments are not purely cyclical. On the demand side, estimates by the ECB, as well as the IMF and the European Commission, suggest that – with the exception of Greece – the majority of current account adjustment in deficit countries has been “non-cyclical”.3 “Non-cyclical”, however, does not mean “structural”. What it means is simply that, though falling demand did depress imports during the crisis, potential growth has fallen as well. Thus, when the output gap closes, current account positions should not substantially worsen. “Non-cyclical”, however, does not mean “structural”. What it means is simply that, though falling demand did depress imports during the crisis, potential growth has fallen as well. Thus, when the output gap closes, current account positions should not substantially worsen. On the supply side, there is also evidence of structural shifts in deficit countries that should help sustain their export performance. Cost competitiveness – measured in terms of real effective exchange rates deflated by unit labour costs (ULCs) – has improved strongly since the start of the crisis. In most cases real effective exchange rates now stand close to 1999 levels or even below. That suggests much of the pre-crisis “excesses” have been reversed. To give some examples, in Ireland the improvement in cost competitiveness from peak to trough is close to 50 percentage points. In Greece and Latvia the figure is around 30 percentage points.
Benoît Cœuré: Rebalancing in the euro area – are we nearly there yet? Speech by Mr Benoît Cœuré, Member of the Executive Board of the European Central Bank, to the Danish Economic Society, Kolding, 15 January 2016. *  *  *  Ladies and gentlemen, Mr President, dear Per, The euro area crisis was a crisis fuelled by imbalances. Imbalances laid the ground for economic and financial turmoil, in part due to the euro area’s design flaws. And the difficult process of repairing imbalances within that design sustained the turmoil further and let its consequences become entrenched, tearing our social fabric. If we want lasting stability and growth in the euro area, we cannot let the same things happen again. The long-term solution is to complete our monetary union and make it less vulnerable to shocks. The foundations of this road have been laid by the Five Presidents’ Report, and it implies setting up new risk-sharing mechanisms among the participating economies. But that will not happen in a situation where large imbalances between member countries already exist and are considered as a state of nature. Just like John Rawls pointed out with his concept of the “veil of ignorance”, it is impossible to achieve an optimal solution for a group if the winners and losers are clear a priori. Citizens are rightly suspicious that risk sharing may turn into risk shedding.