This economic weakness was driven by declining private consumption and faltering investment, in an environment of weak business and consumer confidence and financial market tensions. We expect a gradual recovery in euro area economic activity for the second half of this year. But this scenario is subject to downside risks.
In 2012, headline HICP inflation in the euro area was 2.5%, reflecting elevated energy prices and increases in indirect taxes and administered prices. Annual inflation rates have since declined to 1.7% in March this year. The Governing Council remains firmly committed to its price stability mandate.