1. Petya Koeva Brooks and Mahmood Pradhan European Department, IMF

2.  Chapter 4, World Economic Outlook, October 2014: “Are Global Imbalances at a Turning Point?”  IMF SDN 14/7, July 2014: “Adjustment in Euro Area Deficit Countries: Progress, Challenges, and Policies”  IMF Country Report No. 14/199, July 2014: “External Rebalancing in the Euro Area: Developments and Policies”

3.  Point 1: Current account imbalances have narrowed  Point 2: Adjustment has been asymmetric  Point 3: Demand contraction—as opposed to relative price adjustment—has been the main driving factor  Point 4: The adjustment is expected to be durable; but much depends on underlying view of potential output/output gap  Point 5: Both country-specific and area-wide policies are important to advance the adjustment within the euro area