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It's a long road to restoration – and euro doesn't help

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A sticker which reads, "crisis actor", is placed by protesters on a fence surrounding the construction site for the new HQ of the European Central Bank during a demonstration in Frankfurt

A sticker which reads, "crisis actor", is placed by protesters on a fence surrounding the construction site for the new HQ of the European Central Bank during a demonstration in Frankfurt

A sticker which reads, "crisis actor", is placed by protesters on a fence surrounding the construction site for the new HQ of the European Central Bank during a demonstration in Frankfurt

The eurozone is still stuck in a sluggish and uneven recovery, six years after the onset of the financial crisis. The countries with heavy sovereign debts are finding it difficult to address the overhang, since rising tax revenues from resumed economic growth have not materialised. Several countries will struggle to keep their deficits on a downward path. As long as they continue to run deficits their debt burdens continue to rise.

There are two developments which would help: a resumption of steady economic growth, of which there is limited evidence, would cut deficits without further austerity, and inflation at a modest level. A little inflation helps to reduce the real burden of debt and makes it easier to manage costs downwards. Unfortunately the average eurozone inflation rate has fallen to just 0.5 per cent per annum, versus the official target of 2 per cent.


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