From average annual growth of 2.9 percentage points (pp) during the 2005-08 period, the recession brought average EU28 annual GDP growth down to 0.1pp in the years 2009-12. The drop was also significant for other global players, with growth slowing down in all major economies. The debt to GDP ratio increased in all European Union Member States, leading to the revision of the Excessive Deficit Procedure. This is used to monitor those euro area countries which, as established by Article 126 of the Treaty on the Functioning of the European Union, either fail to keep their deficit below the 3% of GDP limit or allow their government debt to rise above 60% of GDP. In 2012 the European Stability Mechanism was set up as a primary support for debt sustainability. This paper looks at the impact of these financial developments on the real economy and their diverse effects on labour markets, consumer prices and industrial sectors across Member States.

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