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APPENDIX I

Euro Area: Economic Indicators

(Annual percentage change)

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Sources: IMF, World Economic Outlook; European Central Bank.

WEO, March 2001.

Contribution to growth.

Includes intra-euro area trade.

Harmonized definition.

Based on national indices until 1995 and harmonized indices subsequently.

In percent of GDP.

Percentage change in the stock of M3.

1

In accordance with the Executive Board’s decision 98/125 on the modalities of surveillance over the monetary and exchange rate policies of the euro area, this report is issued only for information of Directors. It is meant to provide the context for the bilateral consultations with the euro-area countries whose reviews are not clustered around the annual Board discussion of the euro area’s policies. A second report to be discussed by the Board after the 2001 Annual Meetings will be prepared following a mission to EU institutions in late June, 2001.

2

The staff visited Frankfurt, Brussels, and Luxembourg during January 22-31, 2001. Meetings at the European Central Bank (ECB) were held with President Duisenberg, and Ms. Hämäläinen, Mr. Issing, and Mr. Padoa-Schioppa (members of the Executive Board), as well as with senior staff. Meetings at the European Commission were held with Commissioner Solbes Mira, Mr. Ravasio (Director General for Economic and Financial Affairs), and other officials including at Eurostat. The staff presented the mission’s concluding statement to the Economic and Financial Committee (EFC) and to the Eurogroup. The team comprised Messrs. Deppler (Head), Zanello, Jaeger, Ross, Kontolemis (all EU1), and Mr. Rosenblatt (PAR).

3

This view is corroborated by econometric work by the staff, as well as at the OECD (Economic Outlook, December 2000) and the Commission (The EU Economy 2000 Review, November 2000.)

4

In December, the ECB staff released GDP growth projections for the near term. For 2001, growth was then forecast in the 2.6-3.6 percent range.

5

In addition, financial vulnerabilities arising from the recent expansion of European banks’ overseas operations and their exposure to the telecom sector could come to the fore.

6

Wages have accelerated on a per hour basis, notably in France and Germany, but for reasons unrelated to wage demands (the 35-hour initiative in France, and working days adjustment in Germany). Compensation per employee and unit labor cost data continue to show a flat trend. No major wage rounds are envisaged for 2001 in France and Germany; ongoing ones in Italy do not appear to threaten wage moderation, while in Spain backward indexation might add to cost pressures.

7

The latest observation confirms the downward trend: M3 growth fell to 4.7 percent (year-on-year) in January.

8

See the forthcoming Spring 2001 WEO.

9

Intra-euro area exports tend to exceed intra-euro-area imports by some 5 percent of the export values, or ¾ of 1 percent of area-wide GDP. In part, this reflects thresholds on reporting requirements that lead to underreporting of intra-euro area imports by smaller firms. The ECB published figures for the euro area that allow for this discrepancy.

Monetary and Exchange Rate Policies of the Euro Area
Author: International Monetary Fund