The July 2011 issue of the Quarterly Report focuses on the EU's new integrated policy surveillance, which is centred upon the recently-completed European Semester.  The report starts with an assessment of the latest batch of euro-area Member States' Stability Programmes. Member States plan sizeable frontloaded fiscal consolidation that is mainly expenditure-based. However, planned measures will need to be fully implemented in order to reach the 2012 fiscal targets set out in the Stability Programmes. Further measures are needed to improve longer-term debt sustainability in the face of population ageing. A further topic examines fiscal governance frameworks in euro-area Member States. It assesses the latest update of a database on national fiscal rules and institutions, concluding that fiscal governance remains weak in some Member States. The report also explains and reviews the economic adjustment programmes devised for Greece, Ireland and Portugal, whose purpose is to ensure rapid fiscal consolidation, raise growth potential and limit risks of contagion.

Further topics in this edition examine potential risk factors surrounding the euro area's ongoing recovery. Simulations using the Commission's QUEST model show that demand-driven oil price shocks are typically less harmful for economic activity than supply-side shocks. Recent oil price rises appear to stem from a combination of both lower supply and higher demand. Finally, private-sector balance sheets in the euro area have strengthened since the onset of the crisis. However, in the corporate sector some adjustment still lies ahead that is likely to affect business investment going forward.

>> Press release - 13/07/2011 - Quarterly Report on the Euro Area: The European Semester helps to tackle the ongoing debt crisis