Not just Greece. In recent months, the fears of market operators “have increasingly focused on the financing needs of Spain and Italy as sovereign issuers". In many other countries, "with the worsening of the debt crisis, the climate of confidence worsened further” and it is therefore “essential to restore confidence in the sustainability” of the Eurozone's public finances. This is the alarm raised by the ECB in its latest monthly bulletin.
At present, the economic outlook for the Eurozone "remains subject to high uncertainty and considerable downside risks". The results of business surveys “show a weakening of economic activity in the fourth quarter of the year".
However, the ECB expects that in 2012 “economic activity in the euro area will register a recovery, albeit very gradual, favored by the resilience of global demand, very low short-term interest rates and all the measures taken to support the functioning of the financial sector”.
In this situation, “cost, wage and price pressures in the euro area are expected to remain subdued over the policy-relevant horizon”. As for theinflation, “is likely to hold above 2 percent for several months to come.” Only then will it fall “below that level”.
To deal with the crisis, the ECB believes that the maneuvers to consolidate the public finances must focus "mainly on spending reduction“. Furthermore, it is necessary to proceed "at the same time with reforms that favor the growth and efficiency of the tax system".
