European Economy. Quarterly report on the euro area 2011.

Abstract

Following the difficult period of deep recession in 2009, the euro-area recovery that set in subsequently remains on track. However, growth in the coming quarters is expected to not accelerate much and is bound to be uneven due to divergent adjustment needs of Member States. The Commission's spring 2011 forecasts point to a likely expansion in euro-area output of 1¾% in both 2011 and 2012. The recovery will be supported by a progressive broadening of the sources of demand. But the ongoing deleveraging process in the private and public sectors will continue to weigh on spending in the short term. Considerable risks surround this scenario, not least related to unrest in the Middle East and North Africa and its negative impact on oil prices, as well as the threat posed by sovereign bond market fragility. The contributions in this edition of the Quarterly Report take a closer look at some of these risks, notably regarding the growth impact of oil price shocks and the measures taken to address country-specific vulnerabilities in a number of euro-area Member States.