of households ’ bis central bankers ’ speeches disposable income stood at roughly 14 percent in the euro area, 8. 6 percent in the us, and 5. 4 percent in the uk. trade within the euro area and the eu is flourishing as well as the exchange of goods and services with the rest of the world. the euro area is the most open major economy in the world. in 2011, exports of goods and services from the euro area stood at 22. 7 percent of gdp compared to 12. 6 percent of gdp in the us. the current account in the euro area is broadly in balance ( - 0. 4 percent of gdp in 2010 ). for this year the imf forecasts a current account deficit of 3 percent for the us. optimum currency areas : basic considerations the above mentioned figures are publicly available. they are well known to scholars and market participants. why then, one may ask, are markets still so suspicious against the euro area? why is there a talk of a sovereign debt crisis in the euro area rather than in the us or the uk? and why has the epicenter of financial markets turmoil moved from the us to the euro area. before i try to answer these questions in greater detail, let us recall some of the basic considerations of optimal currency areas. when countries or states participate in a currency union they abolish their nominal exchange rate. by doing so they sacrifice a hitherto important means of adjustment vis - a - vis the other countries or states participating in the currency area. 50 years ago nobel prize laureate robert mundell argued that adjustment to economic shocks has to occur via other channels. mundell and other protagonists of the optimum currency area theory highlighted three major channels for adjustment in a monetary union in the absence of internal nominal exchange rate flexibility : – first, price flexibility can help countries or states to overcome economic shocks by adjusting wages and reducing relative prices in order to rebuild competitiveness. – second, cross - border factor mobility – in particular on labour markets – can foster adjustments to shocks as employees from anemic economies move to the healthier ones until the former regain competitiveness and growth. – third, funds may flow from the more prosperous countries or states to the weaker ones via fiscal transfers. 3 while the first two adjustments channels clearly help to approach a new equilibrium in the aftermath of an asymmetric shock, the third one could only temporarily dampen the burden of adjustment and play a stabilizing role. in

##fp growth, it can be stated that tfp in the production of goods is slightly larger in the euro area than in the us. rather, the higher overall tfp growth in the us is driven by stronger tfp growth in services, in particular in distributive trade ( 0. 2 vs. 0. 5 ). for good order, one should not forget that productivity and technical progress in general and in services in particular are subject to measurement difficulties. tfp figures – being a residual – can only represent a rough metric. thus, the tfp contribution can be plagued by measurement errors, erroneous assumptions about market structure, or the nature and existence of the aggregative production function. the residual will also be a catch - all of neglected factor utilization, factor quality improvements over time, statistical complications associated in calculating factor rewards ( appropriate tax and depreciation allowance for capital income etc ). 2 in a nut shell : the main difference between the measured growth differences in the euro area and the us are attributed to the difficulties to assess differences in the technological progress of ict services. see trichet, jean - claude ( 2011 ), speech at the jackson hole economic symposium panel : setting priorities for long - term growth jackson hole, u. s. a., 27 august. bis central bankers ’ speeches employment having identified the limited explanatory power of growth statistics to compare mature economies with rather similar per capita growth rates, one might preferably rather look at the development in labor markets to gain some information about the economic dynamism. between 1999 and 2011, the euro area has created 14 million jobs. during the same period of time, 8 million jobs have been created in the us. heterogeneity within the currency area contrary to common belief, the heterogeneity within the euro area is not significantly bigger than between us states. although it is very common to distinguish between the countries of the euro area and focus on the diversity among individual member states, this exercise is rarely done for the us. in fact, however, the dispersion of many key economic indicators is very similar. let me provide some detail on the heterogeneity within the respective currency areas. before the crisis, the dispersion of inflation in euro area countries had remained broadly stable since the late 1990s. the level was similar to the 14 us metropolitan statistical areas. during the crisis a temporary increase in inflation dispersion in the euro area was observed.