Is the US current account deficit sustainable?
No, but the extent and timing of its adjustment are uncertain. 2. How will the adjustment take place? Through a combination of substantial changes in exchange rates; a modest, largely endogenous slowing of US growth; and, it is to be hoped, some acceleration of domestic demand in the rest of the world. 3. What are the implications for the euro area? It is likely to have to absorb more than its proportionate share of the adjustment. 4. What are the implications for US and euro area fiscal policies? It is urgent for the US to address its fiscal imbalance. The case for compensating fiscal action in the euro area is less compelling. In any case, the European Central Bank (ECB) will bear a major responsibility for sustaining European growth and stimulating domestic demand. 5. Is there a role for policy coordination to help manage the adjustment process? Yes, starting with information exchange and shared analyses. You have heard my short answers to the five questions. After that fine lunch,
