Press Release: Euro area records best growth performance since 2000

Domestic demand and external trade, the two engines of growth, have well performed in the fourth quarter, finds the Quarterly Report on the Euro Area published on 29 March 2007. Overall, 2006 has been a very good vintage for the euro area, in terms of growth but also in terms of employment, with the creation of almost two million jobs. Prospects for 2007 remain favourable. The first focus section of this report looks at recent labour cost developments and notes that brightening economic conditions have not translated into accelerating wage growth. Looking ahead, risks appear very balanced. Price stability will require wage agreements at the national level to take into account trend productivity developments, the cyclical situation of labour markets and the underlying position in relative price competitiveness within the euro area. The second focus looks at the volatility of GDP growth. Volatility has decreased significantly in the euro area, a trend which may be ascribed to structural changes in the economy and better macroeconomic policies, notably thanks to the stability-oriented economic policy framework set up since the start of EMU.