Economic and monetary union (EMU) has promoted prosperity and encouraged economic integration. However, the euro area as a whole has experienced low growth and a lack of resilience. These issues are related. Many of the structural rigidities that restrain growth also reduce the economy’s ability to absorb shocks. In the public debate, the union’s poor performance in these two areas has often been blamed on the single currency itself. However, this criticism is misguided. The economic problems are mainly structural; the solutions therefore are largely in the hands of individual member governments. Thus, the primary policy challenge for the euro area is to improve growth and resilience by boosting economic flexibility. The second challenge is to get fiscal policy back on track. Population ageing will hold back growth in coming decades and will have large implications for fiscal policy in all euro area countries. This Survey discusses all these issues, but puts more emphasis on the macroeconomic factors. The more structural issues will be dealt with in greater depth in the 2007 Economic Survey of the European Union.