We need to develop a clearer presumptive framework of this kind – no doubt with provision for exceptions where they could be properly justified – before the next crisis hits us, because what debtor countries and their private sector creditors believe they can expect will influence their behaviour in the meantime. BIS Review 36/2001  5  What we all have to recognise is that the exceptional amounts of official funding committed during the Asian crisis are far less likely to be forthcoming in future. And to the extent that official funding is forthcoming, conditions may well be attached to ensure that it is not used simply to re-finance payments of short-term debt to private sector creditors or to fund a resident capital outlflow. Several of the tools which the G7 communiqué identified are designed to have precisely this effect. The last thing that the official international community wants is to get dragged into the micromanagement of relations between debtor countries and their creditors. We would all agree on the desirability of voluntary solutions, which might be easier to achieve if borrowing countries and their major creditors – above all the short-term lenders – were to establish, during the good times but on an on-going basis, arrangements for regular dialogue. Nor would anyone want to insist upon the imposition of constraints on capital outflows.
To continue reducing debt vis-à-vis the rest of the world, sustained external surpluses must be run. And that in turn calls for the maintenance of gains in competitiveness, which throughout the recovery have been based on the moderation of labour and financial costs and which, hereafter, should hinge to a greater extent on productivity gains. Indeed, in the recovery to date, the increases in total factor productivity continue to be smaller than those in other developed economies. That is in response to numerous institutional, regulatory and structural factors that public policy should seek to correct. These factors include certain shortcomings in the labour market – such as excessive turnover and temporary contracts – and in the education system; scant generation and dissemination of technological advances; competition-curbing regulatory elements; and the improvable quality of business management. In this respect, it should be borne in mind that, during the expansionary phase prior to the crisis, the loss of competitiveness in terms of the surplus per unit of output was on a similar scale to that mentioned for ULCs. However, the subsequent correction has been much smaller, which explains why the current level of the value-added deflator has grown 10 pp more in Spain than in the euro area as a whole in cumulative terms since the monetary union began functioning. The design of a regulatory framework more conducive to competition should allow for a greater contribution of business margins to gains in competitiveness visà-vis the euro area.