Introduction:

In the beginning of 2014, it seems as if the euro area as a whole has recovered from the impact of the financial market crisis of 2007/08, the following drastic fall in GDP in 2009 and the turbulences of the European sovereign debt crisis since 2010. Besides Greece, for all other countries which were heavily affected by the loss in trust in their solvency, the outlook, according to the European Commission (2014b), is much brighter than it had been in the years before. The latest economic forecast starts with the depiction of a firming, although not undisputed recovery: "Europe's economic recovery, which began in the second quarter of 2013, is expected to continue spreading across countries and gaining strength while at the same time becoming more balanced across growth drivers. As it is typical following deep financial crises, however, the recovery remains fragile." ((European Commission 2014)

After a negative real GDP growth of -0.4 per cent in 2013, the European Commission now expects 1.2 per cent in 2014 and 1.8 per cent in 2015 for the euro area.

These signs of a recovery follow a series of austerity measures in the euro area which were applied to reduce public expenditures and thus deficits and – in the long run – debt-to-GDP ratios. The so-called structural reforms of the labour market and in the fields of social policies and taxation aimed at an improvement of both public finances and price competitiveness. They were applied mainly in those countries which were characterised before by a debtfinanced growth model. Although these countries showed a good performance in the beginning of the monetary union, part of their increases in GDP and employment growth were financed by external debt and went along with current account deficits. Now, after the first years of adjustment programmes for Greece, Ireland, Portugal and a similar policy in Spain, the development of current accounts shows a compression of deficits in the countries in dire straits and surpluses for most of the other countries of the euro area. Does this indicate an improvement in price competitiveness and a successful adoption of an export-led growth model? If so, one could argue that those countries have learned their lesson.

Unfortunately, a more in-depth review of key indicators does not support this assessment. In this article, the development of current accounts is depicted and put into the context of changes in macroeconomic indicators demonstrating that the applied austerity measures mainly restricted imports but did not sufficiently foster exports so that these countries were not able to switch successfully to an export-led growth model. Moreover, such a strategy can work for some countries but not for all within a monetary union. Still some inherent problems of Europe's institutional setting remain unsolved and unaddressed which in the future will again lead to an increase in current account imbalances and to a dampened growth trend if the rules within the monetary union are not revised comprehensively.