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Relief in Brussels is palpable: the European Central Bank's conditional promise to act as buyer of last resort for the bonds of troubled eurozone members has removed an existential threat, at least for the time being. And crucially, some northern countries that had previously paid only lip service to the impossibility of a euro break-up now mean what they say.
The eurozone now has a permanent rescue fund. An embryonic banking union to break the death clinch between highly indebted sovereigns and banks is being formed. There is even talk of a separate budget for the eurozone to cushion economic blows. Yet the new architecture may take a decade to complete and even then, the institutional pillars will not ensure the euro's long-term viability. For that, growth and convergence are needed -- the reverse of the divergent north-south economic, fiscal and financial trends still balkanising the eurozone and preventing the ECB from delivering a single monetary policy for the entire area.
On some levels, debtor countries are making progress in rebalancing their economies, albeit at the cost of harsh austerity measures that have brought down governments, triggered violent protests and left much of Europe in recession. Greece, Portugal and Spain all had current account deficits exceeding 10 per cent of GDP in 2007. This year, only Greece's will top 3 per cent. Not all the improvement is due to a collapse of imports. Spain's exports are up 23.6 per cent since the fourth quarter of 2008, according to Deutsche Bank
There has been no shortage of reports down the years pinpointing how Europe can raise its game, from removing barriers to cross-border competition to building pan-European energy and transport networks. Nevertheless, the labour productivity gap between the European Union and key competitors has widened in the past decade. Innovation capacity is poor -- the ‘Where is Europe's Google?' question -- and even Chinese firms now spend more on research and development than EU companies.