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The economy has to contend with strengthening external headwinds but
the euro area is showing resilience helped by strong growth in emerging
markets, shows the latest Quarterly Report on the Euro Area (QREA)
published by the European Commission on 26 March.
Commenting on this event, Joaquín Almunia,
European Economic Affairs Commissioner, said: "The euro-area economy
continues to face strong headwinds, including persistent uncertainties
about the duration and the ultimate cost of the financial turmoil, a
weakening US economy and surging commodity prices. And, in spite of its
sound economic fundamentals the euro area is starting to feel the
pinch".
Euro area GDP growth decelerated from 2.6% year-on-year in the third quarter of 200
7 to 2.2% in
the fourth quarter. This deceleration owes much to a weakening of
private consumption on the back of surging consumer prices. In
February, inflation was running at 3.3%, up from 1.7% in
the summer of last year. However, continued strong growth in investment
supported by high capacity utilisation and the high profitability of
the non-financial corporate sector is encouraging. According to the
Commission’s interim forecast of February 2008, economic growth in the
euro area is expected to slow down to 1.8% for 2008.
The
report also examines the more stable inflation and growth rates
experienced by the euro area, like most industrialised countries, over
the past two to three decades. This 'Great Moderation' is not just due
to luck in the form of milder shocks, but also improvements in economic
policies, in particular better monetary policy.
The single European currency (euro) was officially introduced in 2002. Today 15 out of 27 EU Members have joined the euro area.
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