Against the background of robust growth of the world economy with a synchronized upturn in advanced and emerging markets, the upturn in euro area economy is expected to continue. GDP growth is forecast to slow only slightly this year to 2.3 per cent and 1.8 per cent in 2019. The labour market situation will continue to improve, with the unemployment rate at the euro area level forecast to decline by ½ of a percentage point per year from the 9.1 per cent rate registered in 2017. Consumer price inflation has picked up in 2017, but EUROFRAME institutes do not expect underlying inflation to rise to the ECB’s target of close to but below 2 per cent any time soon. While the economic recovery is gaining strength in Europe, and monetary policy is set to reduce its expansionary stance and become progressively less supportive, we find that cyclical positions of individual countries continue to differ and significant imbalances remain. In a box, we discuss the likely trade-offs in the post BREXIT policy arrangements  between the UK and the European Union from the prism of a simple schematic and focus on three key areas of negotiation - market access, labour movement and budgetary contribution. There is no magic formula and the decision is ultimately political.

The report can be downloaded here (PDF).