As a result of relatively weak external demand, continuing financial uncertainty and the contractionary stance of fiscal policy, output fell in the Euro area in 2012. Over the course of 2012 there was a slowdown in some key economies, which has carryover effects into 2013. Even though we anticipate some recovery in confidence in some major economies over the course of this year, the outcome is still likely to be a further limited fall in GDP in 2013 in the Euro Area of 0.3 per cent. For 2014, a recovery in domestic demand within the Euro Area should see a return to significant growth in GDP of around 1.3 per cent. However, this forecast must be considered in the light of the continuing vulnerability to financial shocks of a number of the Euro Area member states. This vulnerability of countries in financial distress is being addressed through a continuing major fiscal adjustment. However, there is also a major fiscal adjustment under way across other members of the Area and this is having a substantial negative effect on growth. Without this fiscal adjustment the Euro area would be looking to growth this year at around 1½ per cent and next year at approximately 2 per cent.