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2018 OECD Economic Surveys: Euro Area 2018

image of OECD Economic Surveys: Euro Area 2018

The euro area economy is growing robustly, and GDP growth is projected to remain strong in 2018 and 2019. These improved economic conditions should facilitate further reforms needed to enhance euro area resilience to downturns and ensure its long-term sustainability. Rapid resolution of remaining non-performing loans would facilitate new bank lending and better transmission of monetary policy. Governments should use the recovery to improve fiscal positions and gradually reduce high debt, which would reduce the risk of pro-cyclical fiscal stances in bad times. Simplifying the fiscal rules, while keeping the necessary flexibility, would make the rules more operational. Banking union remains unfinished and futher progress is key to achieve greater private risk sharing. To further loosen the potentially harmful links between banks and their sovereigns, a combination of policies incentivising banks to diversify their holdings of sovereign debt and the introduction of a European safe asset should be considered in parallel. A fiscal stabilisation capacity at the euro area level, such as an unemployment benefits re-insurance scheme, could help absorb large negative country-specific and euro area shocks and complement national fiscal policies. More integrated capital markets would deepen private risk sharing through more diversified financing and greater cross-border investment.

SPECIAL FEATURE: IMPROVING EURO AREA RESILIENCE

 

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Basic Statistics of Euro Area, 2017

This Survey is published on the responsibility of the Economic and Development Review Committee of the OECD, which is charged with the examination of the economic situation of member countries.The economic situation and policies of the Euro Area were reviewed by the Committee on 3 May 2018. The draft report was then revised in the light of the discussions and given final approval as the agreed report of the whole Committee on 4 June 2018.The Secretariat’s draft report was prepared for the Committee by Jan Stráský, Aida Caldera Sánchez and Guillaume Claveres under the supervision of Pierre Beynet. Statistical research assistance was provided by Patrizio Sicari and editorial assistance was provided by Elisabetta Pilati. The previous Survey of the Euro Area was issued in June 2016.Information about the latest as well as previous Surveys and more information about how Surveys are prepared is available at www.oecd.org/eco/surveys.

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