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Economic Assessment of the Euro Area: Forecasts and Policy Analysis

Following a period of sluggish growth, the Euro Area is showing signs of recovery and this is reflected in the GDP growth forecasts for 2006 and 2007. Growth in the final quarter of 2005 was weak at only 0.3 per cent, but we are forecasting a recovery to a stronger rate of 0.7 per cent in the first quarter of 2006. We expect this performance to be maintained through 2006 and so we forecast GDP growth of 2.2 per cent for this year. For 2007, we forecast a slightly slower rate of GDP growth, 2 per cent. The forecast also. | EUROFRAME - European Forecasting Network EUROFRAME-EFN Economic Assessment of the Euro Area Forecasts and Policy Analysis Spring Report 2006 Special Policy Issue Convergence and Integration of the New Member States to the Euro Area March 2006 www.euroframe.org CONTENTS Page EXECUTIVE SUMMARY Chapter 1. Outlook for the Euro Area 1 1.1 Overview 1 1.2 Global Outlook 1 1.3 Euro Area Detail 15 1.4 Additional Topics 22 Forecast Tables 27 2. European Policy Monitoring 34 2.1 Monetary Policy in the Euro Area 34 2.2 Fiscal Policy in the Euro Area 37 2.3 Progress on the Lisbon Agenda - Relaunch of the Lisbon Strategy 42 3. Special Policy Topic Convergence and Integration of the New Member States to the Euro Area 46 3.1 Introduction 47 3.2 Adjustment in the EMU Overview of Issues 49 3.3 Adjustment needs and adjustment tools in NMS 52 3.4 Aspects of the preparation phase 65 3.5 Implications for the Euro Area 68 3.6 Conclusions 71 Appendix 1 Complementary Tables Graphs 76 List of Appendices .