Seeing rebalancing as being all about cutting costs is misguided as benefits diminish with more countries engaging in such activities. However, pursuing structural reforms to raise productivity, in contrast to wage moderation, benefits substantially and uniformly all countries. “We do not need all euro area countries to adopt identical structural reforms. What we need is a framework that takes into account both how  19  Constâncio, V. ibid. 20  Baker, A. (2013): The bankers’ Paradox: The Political Economy of Macroprudential Regulation, School of Politics, International Studies and Philosophy, Queen’s University of Belfast. 21  Draghi, M. (2016): How domestic economic strength can prevail over global weakness, keynote speech at the Deutsche Börse Group New Year’s reception 2016, Eschborn, 25 January 2016. 22  European Commission (2015): Completing Europe’s Economic and Monetary Union, Report by: Jean-Claude Juncker in close cooperation with Donald Tusk, Jeroen Dijsselbloem, Mario Draghi and Martin Schulz. 23  Coeuré, B. (2016): Rebalancing in the euro area: are we nearly there yet?, speech at the Danish Economic Society, Kolding, 15 January 2016, (https://www.ecb.europa.eu/press/key/date/2016/html/sp160115.en.html). 6  BIS central bankers’ speeches  countries differ based on their national conditions, and how they are similar by virtue of being in a monetary union. Within those parameters there are various combinations of countryspecific institutions that can produce smooth adjustment.” (Praet, 2015) 24. These notions should, of course, be the key ingredients of the Macroeconomic Imbalance Procedure and the Structural Reform Support Programme (as of 2017).

In real terms, this corresponds to growth rates of 4-5%, which is relatively high by historic standards. Differences across euro area countries have been considerable: while in Spain, France, Ireland and Italy, residential property prices were rising on an annual basis by between 11% and 17% in 2002 and 2003, they have been falling slightly in Germany and Austria in the last four years. The dynamism of property prices in several euro area countries is very much related to the very low levels of interest rates brought about by the introduction of the euro. For several euro area countries, the adoption of the euro marked a significant fall in real interest rates, as it implied a “regime change” towards a more stable macroeconomic environment. The fall in interest rates, in turn, allowed households to borrow more and accumulate more debt. As a consequence, household indebtedness in the euro area has increased significantly in recent years. In 2004 it is estimated at 54% of GDP, up from 46.5% in 1998 and 43% in 1995. The rise in household debt has not, however, been accompanied by higher interest payments as a ratio of disposable income in the euro area as a whole. This ratio amounted to 4.6% in 2003, similar to the 4.8% observed in 1998. However, the strong rise in house prices and the substantial increase in household indebtedness have raised some concerns. Given the differentiated path of house price increases across countries, this concern is obviously more relevant and stronger in some countries than in others.