With the recent adoption of the "Autumn package" (comprising the Annual Growth Survey, Draft Joint Employment Report, Alert Monitoring Report, Euro Area Recommendation and the Commission's opinion on draft budget plans for Euro countries) the European Commission has kicked off the last annual cycle of economic governance coordination before the end of its mandate. This is a good starting point for a tour d'horizon of the current economic policy challenges both at the global level and in Europe.

Amidst current fears of recession and economic stagnation, with lagging activity reflecting public and private sector balance-sheet adjustment and rebalancing needs, this lecture discusses the medium-term growth perspective for Europe. While fully recognising the mountains still to climb, it is claimed that the euro area has a more than fair chance to leave the crisis behind in a much stronger overall position than before, not least vis-à-vis the USA and Japan, and to restore the prosperity triangle of efficiency, fairness and stability. Deep reforms at national and euro area level, including the establishment of a banking union, will allow for significant gains in dynamic allocative efficiency, fostering intra-area convergence and retaining Europe's strong competitive position in the global economy. Our well-developed social systems, smartly recalibrated towards activation, can be an asset in the post-crisis world, paying off in terms of more economic stability and sustained growth. And the strengthened medium-term fiscal framework to put public finances back in order will generate fiscal space to tackle new challenges and enable automatic stabilisers to work – a task yet to be addressed in other advanced economies. The lecture concludes that, provided we stay on course with determined policy action, Europe has what it takes to exit the crisis and pave the way towards sustainable growth and shared prosperity.