The Quarterly Report on the Euro Area (QREA) first assesses recent economic developments and short-term prospects in the euro area. It highlights the fact that despite the sound economic fundamentals of the euro area, the strong headwinds, which include persistent uncertainties about the duration and the ultimate cost of the financial turmoil, a weakening US economy and surging commodity prices, have begun to take a toll on euro-area GDP growth. Indeed, GDP growth decelerated from 2.6% year-on-year in the third quarter of last year to 2.2% year-on-year in the fourth quarter.

In its focus section, the QREA looks at possible lessons of European economic and monetary integration for the process of regional integration in Asia. It argues that, although East Asia and Europe are very different, the European experience shows that further monetary integration in Asia will require important structural reforms, stronger political commitment and effective surveillance mechanisms.

The Report also proposes three shorter analytical sections. The first assesses the causes of the Great Moderation in the euro area, concluding that improvements in economic policies have played an important role. The second reviews the characteristics of recent labour market reforms in the euro area and shows that these reforms have paid off. The third section analyses differences in Member States' responses to recent surges in oil and food prices arguing that they can be traced back to a number of factors including differences in the weights of these goods in consumption baskets and in the degree of competition in the retail sector.