OECD Economic Surveys: Euro Area

1999-0804 (online)
1995-3747 (print)
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OECD’s periodic surveys of the Euro Area’s economy. Each edition surveys the major challenges faced by the country, evaluates the short-term outlook, and makes specific policy recommendations. Special chapters take a more detailed look at specific challenges. Extensive statistical information is included in charts and graphs.

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OECD Economic Surveys: Euro Area 2010

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13 Dec 2010
9789264090019 (PDF) ;9789264090002(print)

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The 2010 edition of OECD's periodic review of the Euro area economy.  This edition includes chapters covering exiting from the crisis, resolving unsustainable imbalances, rebuilding public finances and fiscal discipline and minimising risks from imbalances in European banking.
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  • Basic statistics of the euro area (2009)
  • Executive summary
    The euro area has experienced a severe recession, followed by a sovereign debt crisis in some euro area countries, in the wake of the global financial crisis. This was the first major test of the robustness of the euro area in a downturn. Swift monetary policy easing, massive intervention to support the financial system and supportive fiscal policy helped to stabilise the financial system and mitigate the contraction in private demand.
  • Assessment and recommendations
    Euro area countries have experienced their most severe recession of the post-war era, alongside other OECD economies, followed by a sovereign debt crisis in some euro area countries. This has been the first major test of the resilience of the euro area since monetary union. The end of a prolonged global credit and asset price boom around mid- 2007 led to turmoil in interbank markets, which intensified into a full-blown international financial crisis from September 2008 after the failure of Lehman Brothers. World trade dropped sharply and there was a rapid retrenchment of private consumption and investment, exacerbated by low confidence and financial sector weakness. Unemployment has increased significantly, although a substantial fall in average hours worked helped to accommodate the weakness of labour demand. While headline inflation rates have been volatile, underlying inflationary pressures have weakened as the result of the scale of economic slack.
  • Exiting from the crisis
    The euro area has experienced a financial crisis and severe recession, alongside other OECD economies, followed by a sovereign debt crisis in some euro area countries. The end of the global asset price and credit booms led to weaknesses in the financial sector that started to appear in 2007. This intensified in September 2008, following the failure of Lehman Brothers, leading to a full-blown financial crisis and a dramatic contraction of private demand and world trade. Considerable policy stimulus has helped to stabilise the economy through a rapid easing of monetary conditions, supportive fiscal policy and large-scale government support to the financial system.
  • Resolving and avoiding unsustainable imbalances
    Some euro area countries accumulated large and persistent external imbalances during the upswing, revealing important weaknesses in the macroeconomic management of the monetary union. Greece, Ireland, Portugal and Spain ran large current account deficits by historical standards, while Finland, Germany and the Netherlands had substantial surpluses. Some of these deficits and surpluses were larger than appear justified by economic fundamentals. The massive debt accumulation made deficit economies vulnerable to shocks, complicated their recovery from the world financial crisis, and has challenged the stability of the euro area. In some countries, fiscal policy failed to counter and sometimes aggravated these pressures. 
  • Rebuilding the public finances and fiscal discipline
    The public finances are in poor shape following the crisis. There has been a large increase in government borrowing as a result of the operation of automatic stabilisers and discretionary fiscal stimulus. High government borrowing also reflects the end of buoyant revenues, related to the credit cycle, used to finance unsustainable spending increases. Support to the financial system has increased government liabilities in some countries, adding to already high overall debt levels. Credit spreads for many governments have widened substantially and confidence is fragile. Budgetary pressures have been particularly severe for countries unwinding excessive private or public borrowing.
  • Minimising risks from imbalances in European banking
    The euro area financial system took excessive risks during the global credit boom, which in some countries led to an unsustainable increase in credit, higher asset prices and housing booms. This process helped to fuel large imbalances within the euro area. Banks played a key role in channelling funds from economies with large surpluses to deficit countries, leading in some cases to the accumulation of considerable risks for borrowers and lenders.
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