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<\/div>\n<\/figure>\nA decisive moment was\u00a0Mr Draghi\u2019s remark, in July 2012<\/a>, a moment of crisis in sovereign debt markets, that: \u201cWithin our mandate, the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.\u201d He was right. The announcement of the ECB\u2019s \u201cOutright Monetary Transactions<\/a>\u201d programme in August 2012 turned his promise into a policy. That shifted market opinion and lowered elevated yields on Italian and Spanish sovereign bonds. The ECB slashed interest rates and, in 2015, also launched its\u00a0asset purchase programme<\/a>.<\/p>\n Other steps have included the creation of the European Financial Stability Facility and its permanent successor, the\u00a0European Stability Mechanism<\/a>; programmes of\u00a0support for crisis-hit countries<\/a>, four of which \u2014 those for Cyprus, Ireland, Portugal and Spain \u2014 have now concluded successfully; the determination of crisis-hit countries to do what was required to stay in the eurozone; the creation of the\u00a0Single Supervisory Mechanism<\/a>\u00a0for banks; and steps towards a\u00a0banking and capital markets union<\/a>. Whatever the mistakes made in creating and running the eurozone, members have shown themselves far more determined to keep it afloat than outsiders, notably in the UK and US, expected.<\/p>\n Yet challenges remain. In its most recent analysis of the eurozone, the International Monetary Fund\u00a0notes<\/a>that: \u201cThe crisis of the years 2007-08 marked the end of the convergence trend and the start of a divergence trend, which is only slowly being corrected.\u201d True, some crisis-hit countries have shown dramatic recoveries, in particular Ireland. The real GDP per head of Portugal and Spain is also back where it was in 2007. Yet Germany\u2019s has risen 20 per cent relative to that of Italy over the past decade. Greek real GDP per head is still more than 20 per cent lower than it was in 2007. Joblessness also remains elevated in Greece, Spain and, to a lesser degree, Italy.<\/p>\n Public and private indebtedness also remains high in many countries. It is helpful therefore that the growth of nominal GDP is now above the yield on government bonds, even in Italy. Partly because of the debt overhangs, but also because the patience of the public has frayed and the room for policy manoeuvre is limited, another shock could be a disaster. This recovery must endure.<\/p>\n So the ECB must not tighten prematurely. After all, core consumer price inflation has been below 2 per cent since 2008. Fiscal policy should also be used wherever there is room, notably in Germany. The weaker economies must also push ahead vigorously with pro-growth and pro-employment reforms.<\/p>\n What, then, of the eurozone reforms?\u00a0I doubt<\/a>\u00a0the wisdom and feasibility\u00a0of Emmanuel Macron\u2019s proposals<\/a>, particularly his ideas for substantially enhanced fiscal integration. The results of the\u00a0German election<\/a>\u00a0must also make big moves towards this far harder. The banking union does need a fiscal back-up for deposit insurance. But that may be as far as fiscal integration can go.<\/p>\n![\"\"](\"https:\/\/www.ft.com\/__origami\/service\/image\/v2\/images\/raw\/http%3A%2F%2Fcom.ft.imagepublish.prod.s3.amazonaws.com%2Ff9b67fc6-a2be-11e7-9e4f-7f5e6a7c98a2?source=google-amp&fit=scale-down&width=500\")
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