Getting worse more slowly isn’t good enough


In the absence of growth, it will be very difficult for peripheral countries to bring deficits down and stabilise debt levels. And without those developments, markets will continue to panic with some regularity and the size of bail-outs will grow.

And that brings us to the third hurdle: Europe must maintain a public commitment to keeping things together. Output per capita across most of the southern euro zone has been flat or falling (mostly falling) for almost five full years. There is no immediate end in sight; forecasts for 2013 generally anticipate another year of contraction for several peripheral economies. It is surprising to me that there haven’t been more, larger, and angrier protests than we have seen to date. And uglier politics.