Growth is set to be stronger in Europe’s emerging market economies than in its advanced economies. For both parts of the continent, downside risks to the outlook dominate, with the sovereign debt trouble in the euro area being the most pressing challenge facing policymakers.
Substantial measures have already been put in place in the euro area to overcome the crisis. At the national level, strong adjustment policies are being implemented to rebuild and bolster confidence. At the regional level, the crisis management capacity of the European Union (EU) is being strengthened, and the governance framework revamped. Important actions are still required to deal decisively with weak banks across Europe’s advanced economies, and to follow through with implementing the EU-wide reforms that have been agreed in principle. Read more....