It is worth inquiring into the causes of the world economy's resilience in the face of these shocks. Firstly, it is probably indicative of the greater microeconomic flexibility of both the developed and the emerging economies. It appears the structural reforms of recent years, aimed at increasing the adaptability and responsiveness of economies to adverse effects, are beginning to bear fruit. Consequently, it is crucial to further such reforms, especially in times of plenty, when their cost is lower, so that when lean times arrive the economy has the spontaneous adjustment mechanisms in place to reduce the cost and duration of the crisis. Secondly, from the macroeconomic policy standpoint, the recent economic slowdown shows the importance of having sufficient fiscal and monetary policy leeway to be able to react to adverse disturbances, meaning in turn that prices and public finances should have performed favourably during economic upturns. Fortunately, on this occasion, the slowdown found the main economies in a relatively balanced inflationary and budgetary situation. This was conducive to a monetary policy response (which was more intense in the United States, in step with the sharper reduction in the pace of activity in this country) and to the operation of the automatic stabilisers, without jeopardising the long-term fundamentals. The notable exception is Japan. Here there is no further room for additional stimuli on the demand side owing to the economic and financial problems inherited from previous years. And this has led to the economy going into recession for the third time in ten years.

The firm, concerted response by the monetary authorities in the main economic areas softened the initial impact on financial markets and meant that the effects on the world economy were relatively short-lived, though sharp, and confined to specific sectors. Broadly, the design of the euro area members' fiscal policies in 2001 prevented expansionary discretionary measures being adopted. Such measures would have jeopardised the sustainability of recent fiscal consolidation achievements and, given the lag with which such measures operate, they could have had a counter-productive effect on the cyclical stability of the economies in the area. However, the available estimates of the structural budget balance show that, at the aggregate level, there was a slight deterioration last year as a result of the tax cuts applied in certain countries before the cyclical weakening had become apparent. Further, fiscal results have shown that, in certain countries, not enough room for manoeuvre was available to absorb the budgetary effects of the slowdown without drawing too close to the limits set in the Stability and Growth Pact. Clearly, in such cases the consolidation drive made has not been sufficient to attain a balanced budgetary position. In this respect, it is of paramount importance that EMU members maintain the commitments entered into under the Pact and do so symmetrically, as reflected in the conclusions of the Barcelona Summit. The appropriate response by economic policies to the slowdown in 2001 has therefore contributed to the recovery of the European economy apparently under way since the beginning of the current year.