Press Release: Euro-area growth on a firm footing

The recovery of the euro-area economy appears to be on solid ground, with GDP growing in the first half of the year at a pace not seen in the last six years, finds the Quarterly Report on the Euro Area published on 2 October 2006. Domestic demand has finally bounced back and has become the main source of growth. In a context of improving labour market and easing oil prices, the economic outlook could turn out better than expected in the near term. Further ahead, however, downside risks are set to become more prominent. In particular the equity price turbulence that was seen in late spring indicates that risks to growth related to the macro-financial environment have intensified. The focus section of the report looks at labour-market developments in the euro area and concludes that structural reforms and persistent wage moderation have boosted the economy's employment performance. Nevertheless, there is scope to further improve the functioning of labour markets. That past efforts are paying off should encourage further steps in the right direction.