It's a question for Lucrezia. You did document that the euro area, after the crisis, performed poorly relative to the U.S. and inside the euro area there is a surprisingly strong performance on the

part of Germany and Greece and Italy underperformed. You said that we all knew why that was so, since I'm the exception could you please clarify it for me? Okay, let me turn to the other Vitor. Yes, no, it's a question for both in fact,

because the conclusions of the very paper, as Lucrezia pointed out, seem also to be grim, because indeed it shows that in spite of the change in core and periphery between the two periods,

the asymmetries are still there. But I have the doubt that when we look to the adjustment that has happened in the euro area, what we see is that there has been a huge adjustment,

not only in terms of fiscal but also external current accounts, and both our analysis and the IMF analysis show that the bulk of the correction in the current account was structural. It was

not because of conjunctural factors or import compressions or no, it's not that. And in spite of that huge adjustment, now all countries are growing in the periphery and have done a real adjustment, not just some short-term adjustment. That is what we sort of see.

Could this mean that this real adjustment now can be considered as something that

means that the sort of asymmetries or resilience to shocks has indeed changed in a significant way, looking into the future, so that your grim conclusion would not be valid? Thank you, Vitor. Next is Dirk. Thank you. Barry, it was really an interesting

overview and the cross-border flows, but they have not everywhere been the same. I'm wondering whether you have looked at it. In some countries, and we did together Ireland, for example, the cross-border flows were very strong. In some other countries, it was far less. Do you have a feeling what is really the distinguishing factor,

the differences between the countries? Thank you. Yanis? Thank you. One question to Barry and to Lucrezia. My experience in Greece is that,

taking into account the conclusions of the optimum currency areas, is that this theory does not take into account the willingness of policymakers to follow the rules of a fixed exchange rate or the optimum currency area. As we know from history, the gold standard

or the Bretton Woods collapsed, because countries did not follow, did not have the discipline to follow the rules. I think the same applies today in the euro, and I don't mean only irresponsible policymaking in the European South, but also misunderstandings in the European

North. So, how important is this element, Barry? I mean, in Greece, as we know, okay, financial flows were to non-trade the good sectors, but that was not the cause of the crisis. It was mostly the responsible fiscal policy which created the bubbles in the public sector that led also to a huge current account deficit. So, it was the irresponsible fiscal

policy rather than the financial flows. Thank you. Patrick Honehan. Thank you. My question for Barry also. So, you took us through this idea that there's a supply shock triggering a demand shock, and that this was something unanticipated in the previous literature. What I'd like to

understand is, do you think this is a new intrinsic dynamics of the monetary union, or is it just that there was this exogenous surge in financial globalization at the same time, and we don't expect to see it again? Okay, thank you. John Neelbauer.

In 1998, I wrote a piece on asymmetries in the Eurozone pointing to the problems of housing market asymmetries, housing and credit market asymmetries. Spain, Ireland, certainly, and the

UK, if the UK had joined, we would have had similar problems to Spain and Ireland. That was part of the issue. But it seems to me the Greek and the Italian problem are much more a problem of failed governance. It's the political process which is so dysfunctional

in those economies. Thank you. Bernard.

John reminded us yesterday of the importance to distinguish the structural break from cyclical factors. The first shock of the Euro existence was Lehman. The first shock was actually the introduction of the Euro itself. And my question is about the role of stop flow

adjustment and the balance of payments. If you go back to Javazzi Blanchard, that paper, when Spain and Portugal had current account balances in excess of 10%, is that to be seen as a one-off adjustment to the introduction of the Euro, which was then reversed in 2008?

Or was it sort of a change in the correlations within the Euro area? Thank you. That's a great set of comments and questions. Maybe first you look crazy

just because you had a specific question, and then to Barry. Okay. Yes. Okay, Vitor. Well, I mean, I have some conjecture. So I think in Italy, the question, I would agree, it's not that Italy didn't have the boom and bust narrative.

So this is why I wanted to flag it. It's more about the structural, and it actually is a story that precedes the Euro. I mean, Italy moved together with Germany with the core of European

countries until the mid-90s, and then since the mid-90s, it started diverging. So a lot of, I mean, I can tell you long stories about that. It is about our corporate sectors, the difficulties on joining the information communication technology and so on. But a lot

is also fiscal. Italy had primary services between 2% and 5% for about, I don't know, 25 years, 30 years. I mean, it's crazy. So it's this combination, okay? And of course, governance, et cetera. Now for Greece, you can probably say similar stories, although Greece

had a boom, okay? Greece is Greece, okay? Allow me to say Greece is Greece. Now Germany, I think, is much more controversial, okay? So why Germany was such a big winner? Now, I know that the IMF has done studies by looking at the initial exchange rate and

competitiveness shock, and I think that if you look also at market shares, in Italy and Germany, which share a lot of similarities in the structure, the manufacturing sector, you know, export-driven economies, Italy was a big loser with respect to Germany. And I think this has

been fully documented by, you know, IMF papers and so on. So that's one thing. And on Victor, the other Victor, all countries, I agree with you. I mean, I think there has been this incredible adjustment, and in fact, you can see it in my chart. They're all back, okay? And now, is this going to happen? Are they going to be vulnerable in the

future? It's not obvious, but I think that initial levels of income per capita matters, because some of these countries, they still have to converge. And convergence is a tricky thing, okay? Because a lot of, you know, if you look at Spain and so on, convergence has been

done through, you know, has been coupled with financial fragility. So we have to watch, okay? So we have to have the good convergence and not the bad convergence. That's a policy thing. Okay, thank you Lucrezia. Barry? Thank you to Lucrezia for her comments and observations. She emphasized the importance of

distinguishing the post-global financial crisis period from the years that came before. I'm sympathetic in principle. It turns out not to be so important in practice for the exercise that we undertake in this paper. We find basically the same thing when we cut the dataset

in 2008 as we do when we roll it forward by the better part of a decade. An important caveat here is that when we do the estimates, we look at the whole period. When we look at the data in 2009, because everybody is hit by a very large shock, 2009 is a big, big outlier for all

the countries and you'd get very high positive correlations across the board if you include that data point. It shows up as a big negative aggregate demand shock and a smaller negative aggregate supply shock in the time series. We leave it out when we do the

correlations. Lucrezia's interesting exercise was a different perspective from ours on the evolution of the constituent member states of the monetary union because her question

is from a trend rate of growth point of view, who did better and who did worse? It's interesting substantive question which is do we think that the members of a monetary union need to grow at similar rates on trend? Is that important for the smooth functioning

of a monetary union? Do we need to see real convergence in terms of faster growth rates in the countries that start out behind or not? So we have historically seen

catch up growth in the poor regions within the United States and we don't see that now anymore. We have a variety of strains in the US. I'm not sure whether or not this is a source of some of them. Vitor Constantio asked about how grim my conclusions are.

On the one hand, they are grim. On the other hand, they are not, the two handed economist's argument. On the one hand, we do not find evidence of faster speed of adjustment in Europe. So you can estimate a vector auto regression. You can shock it. You can look

at the impulse response and say how many periods, how many years does it take to complete 90% of the eventual adjustment and we're not seeing faster adjustment in that sense in our data than we did earlier on. There are hints of slower adjustment within the United

States which would be consistent with the idea that labor mobility has declined in the US and others. The positive, the less grim interpretation of the results is that everything we found is consistent with the high importance of banking union to a company. Monetary

union and Europe as we heard yesterday has made significant progress in the direction of banking union if bank supervisors take these cross border financial repercussions into account when setting regulations. One can hope that their impact would be less.

And to Dirk, no, we haven't looked yet at differences across member states in the impact of these financial flows. Finally to Patrick, are the shocks that we saw in the data

intrinsic to monetary union or were they simply a corollary of financial globalization and now that financial globalization is moving in reverse there's less reason to worry. The differences across economies that we see are consistent in our minds with the

idea that it's monetary union, the perceived reduction, the perceived elimination of exchange risk within the euro area prior to 2008 that drove these financial flows and correlations.

You don't see the operation of financial factors to the same degree all across the euro area but you seem to see them dramatically in economies that came into the euro in 1999 with high interest rates, high spreads relative to the core.

Great, thank you Barry. So let's turn to the second paper in the session. So Paul.