The global economy faces a number of economic challenges: Economic growth in most industrialized nations is slowing, the crisis-hit countries of Southern Europe are suffering the effects of low competiveness and, even in some G7 countries, sovereign debt has reached levels in excess of 100 percent of gross domestic product (GDP) (see figure 1). As domestic demand is weak, many industrialized nations are banking on increasing their exports in order to boost domestic production and employment. However, this is resulting in large current account imbalances worldwide.
