This Commentary finds that the recent adjustment measures taken by the Greek government in combination with the financial support proffered by the Eurogroup may not be sufficient to deal with the risk of instability in EMU in the longer term. The author argues that other imbalances, most notably the current account imbalances within EMU, need to be addressed to avoid a deflation spiral that would aggravate sustainability problems in highly indebted countries. The Greek crisis highlights the need to take steps to strengthen the economic governance of the euro area. A key component of these steps would be a stronger, growth-oriented, surveillance. Pier Carlo Padoan is Deputy Secretary General and Chief Economist at the OECD.
This is the first in a new series of commentaries contributed by members of EuropEos, a multidisciplinary group of jurists, economists and journalists devoted to fostering an ongoing forum for the discussion of European policy and institutional issues.