How far has the eurozone come towards resolving its crisis? The optimistic answer would be that it has rescued itself from a heart attack, but must still manage a difficult convalescence, with a good chance of further attacks. It must also adopt a regime able to protect itself against future crises. This task, too, is incomplete. But the eurozone has secured time. The big question is how well it now uses it.

Arguably, the crucial step is to agree on the nature of the illness. On this, progress is now being achieved, at least among economists. It is widely accepted that the balance of payments is fundamental to any understanding of the present crisis. Indeed, the balance of payments may matter more in the eurozone than among economies not bound together in a currency union. Hans-Werner Sinn of CESifo, in Munich, has done much to explain, in his words, that “the European Monetary Union is experiencing a serious internal balance of payments crisis that is similar, in important ways, to the crisis of the Bretton Woods System, in the years prior to its demise”. A special issue of the CESifo Forum, published in January 2012, is dedicated to this theme. In March, Bruegel, a Brussels-based think-tank, published a seminal paper entitled “Sudden stops in the euro area”. Then, in late March, Jens Weidmann, president of the Bundesbank, explored the issue in a speech in London on “rebalancing Europe”.

In the years of euphoria before the financial crisis, private capital flowed freely, not least into countries in southern Europe. Greece, Portugal and Spain ran current-account deficits of 10 per cent of gross domestic product, or more. These financed huge excesses of spending over income in private sectors, public sectors, or both. These economic booms also generated large losses in external competitiveness.