The slowdown in economic activity in the Eurozone and inflation structurally below the target rate have raised the spectre of “Japanification”. This would mean effective growth running below potential, very low interest rates and negative inflation. In Japan, this combination of factors resulted from the bursting of the financial and real estate bubbles of the early 1990s. There is a range of factors that could cause “Japanification”. Faced with the challenges of an ageing population and slowing productivity gains, the Eurozone will need to focus its efforts on boosting its potential growth and its resilience to shocks. Short- and medium-term economic policy choices will therefore be crucial in limiting, as far as possible, the risk of “Japanification”.
The economic convergence of member states lies at the heart of thjavascript:void('Automatique')e initial project to create the eurozone, but it has followed a jagged path over the past twenty years. Convergence is a multifaceted concept that covers not only the criteria stipulated in the Maastricht Treaty but also growth dynamics and income dispersion. In the period before the Great Financial Crisis, nominal convergence was relatively complete, but progress towards real convergence was much more mixed. There are several major obstacles to a sustainable convergence within the European Monetary Union, including the lack of eurozone’s optimality, possibility of currency devaluations and macroeconomic stabilisation mechanisms.
In the eurozone, a large proportion of savings banks and co-operative banks belong to institutional protection systems, within which they undertake to support each other mutually. From a strictly accounting point of view, these networks do not constitute banking groups. However, regulators recognise that they are highly integrated and allow their members to apply a prudential treatment similar to that used by companies belonging to consolidated groups. These mutual support arrangements are to some extent part of the trend towards consolidation in the banking industry.
