The pick-up in growth in the euro area between mid-2003 and mid-2004, while much less vigorous than in the other major regions, benefited significantly from the strength of global growth. Over this period, the recovery was largely driven by export growth, with the contribution of final domestic demand being relatively modest. However, there were significant differences across countries.
Domestic demand grew strongly in France and Spain, while remaining weak in Germany and Italy. In the aggregate, euro area domestic demand growth failed to generate much momentum. This reflected slow wage and employment growth and also continuing uncertainty regarding the implementation of structural reforms, which dampened confidence and held back consumption.