In the last few days there was wide adhesion from the private sector to the Greek debt swap, which warded off the possibility of a disorderly default, at least for now. Nonetheless, the situation remains complex. The ECB’s recent actions open a window of time to allow implementation of fiscal adjustments in Europe, strengthening of banks and 2  BIS central bankers’ speeches  adoption of structural measures to boost growth. Implementing these programs, however, involves facing serious difficulties. Political, social and economic costs are paid in the short-run and may generate tensions, whereas benefits are to be seen only in the medium term. Therefore, we cannot rule out a rebound of financial tensions. All in all it seems as if, at least in the short run, the imminent threat of contagion to economies systemically most relevant has diminished. This is reflected in risk, volatility and liquidity indicators that have dropped from the maximum levels of late 2011, while stock market and other asset prices have recovered so far in 2012. Outstanding among the latter are commodities. News in the United States is more encouraging, although recovery is still envisaged to be slow, and the labor market continues to show significant imbalances. However, the US evolution compensates the decline in the Eurozone. Data of emerging economies show that activity has decelerated. In several cases, it is difficult to distinguish how much is driven by international forces, how much by natural domestic slowdown or by specific events.
Related to this is the question of whether Asian governments have the political will to devolve monetary policy to a single central monetary authority. Asia is more disparate than Europe in its political systems, and it has often been noted that there is less of a tradition of cross-border institutionbuilding here than there is in other regions. It is quite striking, for example, that the approach to free trade agreements so far has been rather piecemeal, where in Europe they have grown and developed from a strong and centralised common market. Indeed, one serious political obstacle that has often been pointed out is the lack of embryonic supranational bodies within Asia from which to launch Asian monetary union efforts. These disadvantages must, of course, be recognised. But, on the other hand, it should be remembered that European monetary union has been a unifying force - a common interest that has brought countries together. All of these "special considerations" point to the conclusion that Asia is not yet ready to implement monetary union. In the process of discussing them, it may well turn out that Asian monetary union is a non-starter. But that does not mean that we are not yet ready to talk about monetary union. After all, it took Europe about half a century to move from the idea of monetary union to the reality.