GDP growth is projected to remain negative through 2014. Delays in bank resolution together with continuing fiscal consolidation and deleveraging by the over-indebted corporate sector will be a drag on demand. Domestic demand is expected to slowly pick up towards the end of 2015. Improving conditions in world markets will stimulate exports. Despite the recent rise in indirect taxes, inflation will remain subdued due to the large degree of slack. Indeed, unemployment is likely to rise further.
Bank resolution and recapitalisation should proceed without delay. Restructuring of companies should be based on market-based solutions that use private capital. Planned privatisations of stateowned enterprises will help in this regard, as will enhanced corporate governance. Containing public debt remains a priority, although the automatic stabilisers should be allowed to operate fully around the structural consolidation path. The efficiency of key public spending programmes should be raised.
Note: All data definitions based on internationally comparable standards and may differ in specific cases from common national definitions.