The adjustment of the remaining imbalances is subject to a number of challenging interdependencies such as the feedback loop between banks and sovereigns, the impact on domestic demand of simultaneous debt deleveraging in several sectors and difficult conditions for financing the necessary shift of resources towards the production of tradable goods and services. Nonetheless, adjustment is moving ahead, underpinned by a reduction in domestic demand in deficit countries that is partly cyclical and partly structural as well as gradual changes in relative costs and prices across sectors .
