Despite recent signs that the German economy  is not faring as well as hoped, we remain confident that its relatively sound structural position will ensure that it is one of the first economies to emerge from recession. By contrast, the Southern European economies and Ireland are beset with much greater difficulties. The Irish and Spanish economies are already facing the fall-out from a major house price correction. Greece, Portugal and Spain all have current account deficits of around 10% of GDP and may need a sustained period of below trend growth and a large improvement in their competitiveness to reduce their reliance on foreign funds. On the face of it, then, these economies face an altogether longer and more painful adjustment.