EURO AREA: THE OUTLOOK BEYOND RESILIENCE - Europe is resilient, but needs more dynamic growth - Pilar Castrillo, Head of Economic and Market Analysis & Gergely Hudecz, Principal Economist

2024 and 2025 reflect the averages of ECB (Mar 24), EC (Feb Source: ESM and Eurostat. [...] 2024 and 2025 figures reflect the averages of ECB (Mar 24), EC 24) and Consensus Forecasts (Apr 24) (Feb 24) and Consensus Forecasts (Apr 24) 7 SIGNS OF CYCLICAL RECOVERY IN EARLY 2024 Manufacturing new orders rebound Credit flows bottoming out? Trade-weighted and euro area manufacturing PMIs Credit to households and firms, quarterly flows, % of GDP 70 12 100Monetary policy tightening 65 10 98Cred. [...] 11 ALONG WITH A MORE FRAGMENTED GLOBAL ENVIRONMENT Euro area current account balance Split by developed and emerging markets, 4q-roll, % of GDP Source: ESM based on Eurostat, ECB 12 THE POLICY MIX FISCAL CHALLENGES: BUILD UP BUFFERS, INVEST & REFORM Fiscal stance in the euro area Public investment % of GDP % of GDP 1 4.0 National funds 0.8 Contractionary 0.6 EU funds 3.5 0.4 0.2 3.0 0 -0.2 Expansi. [...] debt holdings % of GDP (Q1-Q3/2023, in percentage points) 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5 -2.0 -2.5 -3.0 Eurosystem Domestic Other euro area Rest of world Note: Estimates of Eurosystem amortizations are based on WAM of holdings as of Note: The chart reports the change in the share of each sector’s holdings (at market valuation) of general November 2023 for PEPP, and December 2023 for PSPP. [...] last quarter of 2013 and their holdings’ share of general government debt securities issued by Germany, France, Source: ESM calculations based on European Central Bank data.