Euro area: Higher unemployment

The euro area is in a deep recession, with external demand collapsing and domestic demand being weakened by tight financial conditions, rising unemployment and heightened uncertainty.

Activity is expected to contract throughout 2009 and pick up only gradually in 2010, as the tensions in financial markets start to fade and the full effects of policy stimulus are felt. Rapid growth in unemployment and a large negative output gap will continue to dampen inflationary pressures throughout the projection period.

Given the weak outlook for inflation, additional monetary stimulus through further reductions in the refinancing rate and measures to ease credit and liquidity conditions is warranted. Further discretionary fiscal measures are also justified in member countries that have sufficient budgetary scope and where stimulus might otherwise taper off too rapidly. Ongoing area-wide assessments of bank balance sheets will need to be transparent and rigorous. Medium-term growth prospects would be enhanced by clear and credible plans for future fiscal consolidation and further structural measures to deepen the single market and enhance competitive pressures.

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©OECD Observer No 274, July 2009

Economic data

GDP growth: -9.8% Q2/Q1 2020 2020
Consumer price inflation: 1.3% Sep 2020 annual
Trade (G20): -17.7% exp, -16.7% imp, Q2/Q1 2020
Unemployment: 7.3% Sep 2020
Last update: 10 Nov 2020

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