Euro area: A surer footing
After several false starts, the economic recovery has taken hold. Activity in the first half of 2006 grew at the fastest pace for some years. Exports and investment have been the main drivers, but there are signs that households have started to boost spending as well. Consumption should underpin the recovery, with business and residential investment playing less of a role than they have done recently. Overall, GDP is projected to grow in the 2 to 2.5% range through 2007 and 2008.
With the recovery on a surer footing, monetary stimulus should be removed. If the recovery maintains strong momentum, there may be a need to raise interest rates further in 2008 as well. The improvement in the fiscal position is welcome, especially in the countries that had high deficits, but further steps are needed to move towards a sustainable fiscal position. Additional reforms to enhance the single market would improve the euro area’s economic performance and its resilience to shocks.
| Population (000s), 2005 | 311 357 |
| Area (000 sq km) | 2 503 |
| Currency | Euro |
| GDP (Billion USD), 2005 | 9602.2 |
| Life expectancy at birth (Women, Men), 2004 | 81.9, 76.0 |
| Total labour force (000s), 2005 | 146 265 |
| Government type | Federal Republic |
| Indicators | % change unless otherwise indicated |
| 2006 | 2007 | 2008 |
| GDP growth | 2.6 | 2.2 | 2.3 |
| Household savings ratio | 10.1 | 10.0 | 9.9 |
| Consumer price index | 1.4 | 1.9 | 1.8 |
| Short-term interest rate (%) | 3.1 | 3.8 | 4.0 |
| Unemployment rate (%) | 7.9 | 7.4 | 7.1 |
| General government financial balance (% GDP) | -2.1 | -1.5 | -1.4 |
Current account balance
(% GDP) | -0.3 | -0.1 | -0.1 |
Source: OECD©
OECD Observer No. 258/259, December 2006
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