I am sure that the density of the EU framework of integration and cooperation has played a very positive part in tackling the crisis. Via both inter-governmental mechanisms (such as the European Financial Stability Facility, EFSF) and supranational initiatives (such as the European Financial Stabilisation Mechanism, EFSM), the EU and its Member States have created an important source of external financial support for the domestic adjustment programmes introduced by Greece and Ireland. The availability of this support has also bolstered and underwritten consolidation measures implemented at national level. The financing programmes have imposed strict conditionality on the recipient countries. They insist upon the implementation of essential measures, namely fiscal consolidation, financial sector restructuring and broader structural reform. While the EU is an equal partner with the IMF in imposing such conditionality, the EU countries that have provided financial support to countries in distress have insisted on IMF involvement because of the credibility this lends to the conditionality of the programme. Its involvement in Asia would be much more difficult. Note that the EU component of the financial support does not enjoy preferred creditor status – a situation unthinkable in other parts of the world. Given the depth of economic ties and trust between countries within the euro area, a sense of “common destiny” is felt by all, leading to this exceptional level of support.
As regards monetary policy, the Eurosystem has implemented a set of measures that ensure the provision of liquidity to the euro area financial system, including to the banks of those peripheral countries that are currently subject to the greatest market scrutiny. With respect to fiscal and macroeconomic imbalances, euro area governments are now strengthening the rules for fiscal and broader economic policy coordination. They have created and are refining facilities that can provide external financial support to those Member States facing the most intense pressures in sovereign debt markets. These developments aim to correct the deficiencies in the institutional architecture of Economic and Monetary Union exposed by the financial crisis. These facilities need to have sufficient resources as well as the flexibility to contain market pressures and coordinate the public and private sectors so as to achieve a sustainable and mutually beneficial outcome in an environment where several equilibria may be possible. The Asian experience in the mid- to late-1990s demonstrates that radical reform can lead to a sustained recovery – one achieved largely without restructuring public debts. Indeed, one can argue that Asia has emerged from its financial crisis stronger than before: the institutional weaknesses which contributed to the build-up of financial fragilities, but were masked by high growth rates during the pre-crisis boom have been addressed. Similarly, Europe will emerge from its current travails stronger if the weaknesses revealed by the recent financial crisis are properly identified and corrected through institutional innovation and reform. I am confident that this will be the case.