EUROPE has a lot of economic problems. It has the sort of problems everyone has: demographic headwinds, plateauing educational attainment, the need to continue pushing out the technological frontier, and so on. It has the regular sorts of problems some countries do better than others: tangled and excessive regulation, rigid labour markets, overly large and inefficient public sectors, and so on. It has the acute problems now common to rich countries: excessively large and overleveraged banks, deleveraging households, and piles of bad loans. It has the chronic financial problems now common to rich countries: no one knows how to manage systemic risk in the financial sector and address moral hazard. It has the very nasty problem of policy spillovers in a currency union that lacks the institutional capacity to manage them: fiscal or financial trouble in the smallest of euro-zone states can destabilise much larger economies, and efforts to raise the external surplus in one euro-zone economy necessarily complicate life for other euro-zone economies trying to do the same thing. It has all these problems, and some of them are directly responsible for the ongoing crisis while others are steady drags that make both short-term crisis fighting and long-term growth more of a slog.

But Europe has another big economic problem, and that's a nominal problem:

The red line shows year-on-year growth in the euro zone's nominal output or, if you like, how much more money, in euro terms, is being spent across the euro area relative to the year prior. The blue line shows the same number, in dollar terms, for the American economy. The large divergence at the end corresponds to the large divergence in the performance of real growth and unemployment. Now a dip in nominal growth will often result from a real factor. But a sustained decline in nominal growth is the central bank's fault. It can't prevent a drop in the productive potential of an economy (thanks to, say, the mysterious loss of its long-time offshore banking centre). But it can prevent a drop in the productive potential of an economy from translating into a drop in spending in the economy: it just has to pump in more money. In general, it is a good idea for central banks to do this. When they don't, the drop in nominal growth itself becomes an economic problem. When there is less money flowing around an economy prices have to adjust downward to prevent a big drop in real activity. So do wages and debt contracts. If all those nominal variables don't adjust quickly and smoothly you get big economic dislocations: unemployment, people who can't afford to keep servicing their debts, and so on. It's one thing, in other words, when you can't pay your debts because a sinkhole swallowed up your factory. It's another thing when you can't pay your debts even though your productivity growth has followed your expectations, because your wages have been falling due to a decline in the amount of money circulating through the economy. The latter is the central bank's fault. And it should go without saying that if you have an economy suffering from an outbreak of sinkholes, it will be much harder to adjust and respond if the central bank is simultaneously saddling people with unanticipated drops in total nominal spending. This brings us to the mutterings of Dutch finance minister and current Eurogroup head Jeroen Dijsselbloem. Mr Dijsselbloem has contributed to an exciting few days for financial markets with his on-again, off-again comments to the effect that the depositor bail-ins used to help fund Cyprus' bail-out just might become a template for dealing with future banking issues elsewhere in the euro zone. In Mr Dijsselbloem's defence, this is obiously what many high-level officials in core euro-area economies are thinking. And the principle that uninsured depositors should contribute more when holes in failing banks are being plugged and taxpayers less is sound, in terms of justice and incentives. His statement only looks daft and dangerous because of the current threat of euro-zone-wide bank runs. Right, that.

But here we get a sense of why the nominal problem is in many ways the problem. It's tempting to argue that a focus on demand-side issues in the euro area is silly because there are so, so many obvious structural issues that require reform. But the two can't be separated.

One could argue, for instance, that bank runs on the continent wouldn't be such a big threat if huge bank losses weren't being amplified by a deep, demand-side recession. There's no avoiding a big housing adjustment and knock-on bank losses in Spain, it's true. But a big drop in nominal growth in Spain means that it's much worse than it has to be. Nominal home prices have to fall by more for a desired real adjustment, wages have to fall by more making servicing of a given loan more difficult, and so on.

Even if bank runs weren't a risk, the Dijsselbloem solution would be dangerous in the current environment. The European Central Bank could simply fill bank funding holes by printing money. That would have nasty moral hazard implications but on the bright side it would prevent bank resolutions from causing money-supply growth to fall well below expectations, adding to the nominal problem. The promise to hit uninsured deposits as a matter of course, by contrast, improves incentives but should lead us to revise our expectations of money-supply growth down. That wouldn't be a problem if we knew the ECB would work aggressively to offset the fall, through Fed-like asset purchases, for instance. But the steady decline in nominal GDP growth suggests that the ECB either isn't interested in addressing the nominal problem or feels hemmed in politically. Either way, the ECB's behaviour puts the euro zone in a suggestion where sensible reforms become dangerous because they exacerbate the nominal problem.

Central bankers like to say that monetary policy isn't a panacea, and they're right. But monetary policy can solve the nominal problem. And because the severity of so many other problems is contingent on the severity of the nominal problem, bad monetary policy can make it difficult to get anything else right.