Economic and monetary developments in 2012 Last year we were faced with a very challenging environment for monetary policy in the euro area. The sovereign debt crisis kept financial market stress high. This confidence crisis has adversely affected growth and employment. Following two years of growth, GDP declined by 0.6% in 2012. Private consumption declined and investment faltered. Unemployment increased to unprecedented levels.
In this context, monetary and loan dynamics have been subdued. M3 growth strengthened moderately to 3.0% in 2012. But it essentially de-linked from credit creation, which instead became increasingly weak, with annual loan growth to the private sector turning negative over the course of the year to stand at –0.2% in December. Annual HICP inflation reached an average of 2.5% in 2012.