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The adjustment in the eurozone is underway. There is also no doubt it is painful, especially for the people in some countries of the periphery. However, let me give you some evidence of what has actually been achieved. In programme countries, we have seen a strong improvement of structural primary balances since 2009. In Greece, for example, this is estimated to have improved by more than 14 percentage points of GDP between 2009 and 2012. To put this into context, in this country, the ‘sequester’ calls for cuts of $1.2 trillion over 10 years. The equivalent of what Greece has done would have meant for the US an adjustment of $1.6 trillion over three years.
It is true that much of the adjustment has been driven by a contraction in domestic demand. However, in Ireland and Portugal export performance has also been strong, because programme countries are now reaping the benefits from their significant improvement in cost competitiveness.
This is evident from the significant reduction in unit labour costs. For Greece, Ireland and Portugal we see about a 10 percentage point improvement relative to the euro area average. The adjustment in Ireland has been spectacular, and translates into about an 18 percentage point improvement between 2008 and 2012. This means that the past excesses have by and large been undone.
Such a deeper economic union will not be the archetypical Union, which some of you may have in mind. It is worth remembering that the Union on this side of the Atlantic was built over almost 250 years, and it took 150 years to establish a central bank. The EU is 60 years old, and the euro, only 13.
Over recent years, the euro area has taken big steps forward to reinforce its framework for fiscal and macro-economic governance. Member States continue to display unprecedented solidarity towards each other, providing financing for programmes of economic adjustment along with the IMF. The establishment of a banking union, including a single supervisory mechanism involving the ECB and, the forthcoming proposal for a single resolution mechanism, are further examples of deeper integration.
Going forward, it would be a grave error to underestimate the continuing political commitment to making the single currency a success. But it also remains true what was once said, namely that EU institution-building is like the love-life of the elephant: Everything goes on at a very high level, a lot of dust gets raised - and you have to wait for months and years for results.