the young workers), that, as a result, carry extremely large economic and social costs. This is socially unfair and economically inefficient. European countries must made more efforts to resolutely pursue – and with far greater urgency than in the past – the necessary structural reforms in product markets, labour markets, pension systems and so on. In this respect, a key contribution to the strengthening of the euro area’s long-term economic prospects will come from the thorough implementation of the Europe 2020 strategy, with its focus on key areas such as: (i) education, research and innovation; (ii) resource efficiency; and (iii) high levels of employment and social cohesion. III. (c)  Enhancing the crisis management framework  In response to the sovereign debt crisis, the euro area has recently armed itself with an important tool to safeguard area-wide financial stability. At the European Council meeting of 24 and 25 March 2011 the Heads of State or Government of the EU agreed to establish a permanent European Stability Mechanism (ESM) based on the existing temporary European Financial Stability Facility (which will remain in place until June 2013). The ESM will grant financial assistance to countries in distress in the form of credit, with the assistance provided under strict conditionality and on the basis of a strict analysis – conducted by the European Commission and the IMF, in liaison with the ECB – of the sustainability of the relevant country’s debts. The establishment of the ESM represents an important addition to the institutional fabric of EMU.
While still low by historic standards, it is 100 basis points above its previous level. And we must add to this rise in the Treasury bond rate the increase in the foreign credit premiums facing the emerging economies. Emerging markets’ currencies have depreciated substantially against the US dollar, and their market capitalization is lagging behind the advanced economies’ stock markets. The external financial conditions facing our economies are entering a normalization stage, but they are still favorable from a historic perspective. In short, after six years since the outbreak of the global financial crisis, international conditions are returning to normal. This scenario implies that most Latin American countries, including Chile, will be getting a weaker impulse from abroad at least in the short run, due to  BIS central bankers’ speeches  1  the drop in the terms of trade and the more stringent external credit standards. Still, over the medium term, a recovery of developed economies’ growth is certainly good news. And much more so, if we consider that a persistent “easy money” era may create economic and financial imbalances which, the longer they last the higher the price that has to be paid in terms of economic and balance sheet adjustments down the road. The question is, where do the emerging economies stand to deal with this transition? There is no simple answer to this. Some have used the boom years to consolidate their fiscal accounts, balance sheets and macroeconomic policies.