The financial crisis has shaken the global economy to its core. It has exposed the fragility of the foundations of private finance: opaqueness, hazard and sometimes fraud. The crisis has also revealed the weaknesses of public finance, both in the euro area and in other industrialised countries. In the euro area it has proved to be a watershed for collective reflection. It has spurred self-reform.

The success of monetary union is measurable by many yardsticks. Since 1999, average inflation has indeed remained anchored at the European Central Bank's definition of price stability. Price stability has not come at the cost of higher real volatility, or lower growth. Over the period from 1999 to 2009, real per capita incomes in the euro area rose steadily at the same rate [1.2 per cent per annum] as in the US or the UK. Job creation became consistently more robust over the same period. Finally, the eurozone as a whole does not display any degree of external imbalance.

However, years of macroeconomic stability and economic progress may have inspired complacency. Not unlike the “search for yield” that has undermined private finance, low interest rates may have encouraged more public borrowing. Macroeconomic reforms were delayed in most of the European Union. In some countries, fiscal myopia was concealed by impenetrable accounting practices. Fragile public finances proved vulnerable to derailment when the crisis finally hit – and they did derail.