European Commission, (2014), “Quarterly report on the euro area”, Vol. 13, N. 3 (2014).
The focus section reviews ongoing developments in household and corporate indebtedness in the euro area and analyses the different patterns of adjustment underway. The analysis suggests that the adjustment process still has a long way to go, including in economies that have already deleveraged by a considerable amount. In several vulnerable countries, corporations and households may still need to cut their debt-to-GDP ratio by at least 30 percentage points.
The first special topic discusses the short-term impact of structural reforms on economic activity in a constrained monetary policy environment in which interest rates are close to zero. It shows that although some reforms can have a negative effect on growth in the short term, the effect remains small, and that postponing reforms is not a good policy option.
The second special topic takes a look at the differing vulnerability of Member States to fluctuations in the euro’s exchange rate. It documents some differences in the pass-through of the nominal exchange rate into inflation, as well as in the price elasticity of export volumes.