The effect on both financial conditions and the real economy was significant. Considering all the measures taken since mid-2014, the overall impact on euro area real GDP growth is estimated to have been between 2.5 and 3 percentage points cumulatively until 2019, and the impact on inflation is estimated to have been between 1.7 and 2 percentage points cumulatively over the same period.
In response to these fiscal pressures, European leaders put in place a number of strong measures, including an assistance package for Greece and backstop financing for euro-area countries. And, recently, European banking supervisors released the results of comprehensive stress tests of their banks. 1 On net, these measures appear to have reduced concerns in financial markets about European prospects.