Euro Challenge

2012

The Current Economic Situation
The Euro Area Economic Situation – March 2012
The euro area economy as a whole contracted (i.e., growth was negative) at the end of 2011. In 2012, the euro area will likely undergo a mild recession (a period of negative growth) but is expected to stage a gradual recovery in the second half of this year. Already, there are signs of stabilization, and recent measures taken by the ECB and European leaders are helping to overcome the "euro crisis".

Key concepts
Gross Domestic Product (GDP) is the value of all goods and services produced in a geographical region over a period of time (years, quarters, months).
GDP growth tells you by how much GDP increased in a given year or quarter. It is usually expressed as a percentage. In normal times, GDP growth is positive. In a recession, it turns negative. Some part of the increase in GDP over a given period may be due to increases in the prices of goods and services (inflation). Real GDP growth tells you how much of the increase in GDP is due to increased production of goods and services, i.e. after stripping out inflation.
The unemployment rate is a measure of how much of the labor force is not employed. An unemployed worker is someone who is without a job, but has been actively seeking one.

That crisis, which originated as a debt crisis in a few "peripheral" euro area countries (Greece, Ireland and Portugal) widened in
2011 as investors feared that the troubles would spread to larger countries (so-called "contagion", particular to Spain and Italy) and that European leaders would not be able to manage the crisis. The depth and persistence of the crisis has affected the euro area economy as a whole via several channels: 1) banks are lending less money to businesses and consumers; 2) worried businesses in turn lay off workers