Budget deficits in some European countries are getting smaller, but there is debate among economists about whether things are actually getting better. Banks are still undercapitalized and little progress has been made in establishing a banking union. Unit labor costs have been dropping, when it was increasing labor costs that contributed to the crisis. However, Nobel Laureate Paul Krugman argues that the European policy in place is actually making the situation worse by insisting on austerity.

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