The euro area economy contracted 15% in the first half of the year. Rapid and powerful economic policy measures have mitigated the damage caused by the pandemic, but there is still substantial uncertainty and recovery will take time.
Is the euro area drifting into a liquidity trap (a combination of low interest rates and low inflation) as a consequence of the corona crisis? There is a heightened risk of this, but the policy measures taken are preventing negative trends.
The corona pandemic has seriously weakened the euro area economy and the outlook remains uncertain. Recovery will be affected by e.g. how successful the balance between the virus and the economy turns out to be, and how quickly confidence improves.
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