Recommendation for a Council Recommendation on the economic policy of the euro area

Economic recovery in the euro area continues, but remains fragile. There has been significant progress in recent years: since 2015, euro area GDP has recovered its pre-crisis level in real terms and unemployment has declined to its lowest level since 2010-11. However, aggregate demand is sluggish, inflation is well below target, in spite of very accommodative monetary policy by the European Central Bank, and growth is hindered by the legacies of the crisis, such as persisting macroeconomic imbalances and a high level of indebtedness in all sectors of the economy, which require deleveraging and reduce resources available for consumption and investment.

Additionally, while the growth potential of the euro area economy has been on a long-term downward trend, that trend has been further accentuated by the crisis. In spite of signs of improvement, the persistent investment gap and the high level of unemployment create the risks of further dampening growth prospects. The asymmetric nature of the rebalancing in the euro area economy has continued, with only net debtor countries correcting their imbalances, and is resulting in an increasing current account surplus. As part of the global agreement within the G20, euro area Member States are called to use all policy tools – monetary, fiscal and structural – individually and collectively – achieve strong, sustainable, balanced and inclusive growth.

ESO: Background information: Launch of the 2017 European Semester http://www.europeansources.info/record/launch-of-the-2017-european-semester/

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