The impact of the financial crisis on the Euro area

This year should see a sharp downturn in the Euro Area's economic growth. After peaking at 2.6 per cent in 2007, real GDP growth is projected to slow down to around VA per cent This year and fall to about 14 per cent in 2009. We expect GDP growth in the Euro Area to remain just below 1 per cent in 2010, before returning to trend in the medium term. In 2008 the Euro Area is forecast to experience two consecutive quarters of falling output, due to declining external demand and the severe disruption of the banking sector and financial markets. Although the worst of the crisis appears to be over following concerted intervention by European governments (See Box A), the Euro Area is likely to go through a period of sustained economic weakness in the short run