Table of contents; Basic statistics of the euro area, 2012; Executive summary; Main findings; Key recommendations; Ensuring a sustained recovery; Towards a banking union; Fiscal governance is being strengthened; Assessment and recommendations; Figure 1. EuroBarometer; Fostering economic recovery; Figure 2. Banking and government risk measures; Figure 3. Bank deposits have bottomed out; Figure 4. Current account balances; Figure 5. Evolution of price competitiveness; Figure 6. Net international investment position and sovereign risk spread. Growth in the euro area remains weak and non-inclusiveTable 1. Macroeconomic indicators and projections; Figure 7. Low and uneven productivity growth; Figure 8. Structural unemployment in the euro area is high and growing; Figure 9. Inequality is increasing in some euro area countries; Table 2. Long-term growth scenario for the euro area; Monetary policy has been highly accommodative; Figure 10. Change in responsiveness to Going for Growth recommendations from 2009-10 to 2011-12; Figure 11. Key ECB interest rates; Figure 12. Total central bank liabilities. Figure 13. Growth of bank credit to the private sectorFigure 14. The cost of credit in euro area countries; Recommendations on monetary policy; Stronger bank balance sheets are key to recovery; Figure 15. Banks' non-performing loans; Figure 16. Cross-border bank penetration in Europe; Figure 17. Banks' holdings of general government securities; Figure 18. Capital ratios and leverage ratios; Strengthening banks' balance sheets and completing the banking union; Recommendations on regulation of the banking sector; Remaining fiscal challenges. Figure 19. Primary budget estimates in a stylised scenario for reducing public debt over the medium termThe pace of consolidation is set to slow; A fiscal capacity to enhance incentives for structural reforms; Fiscal governance is being strengthened; Recommendations on fiscal consolidation; Bibliography; Thematic chapter; Chapter 1. Making the euro area function better -- the banking union and fiscal framework; Towards a banking union; Common bank supervision has been set on track; Figure 1.1. Cross-border bank penetration in Europe; Strengthening the European resolution framework. Bail-in rules for resolution funding have been establishedBox 1.1. Recognition of non-performing loans and bank restructuring matter: Some international experience; Figure 1.2. Bank equity issuances in the EU and the United States; Table 1.1. State aid to the financial sector in the EU, 2008-12; Establishing a fiscal backstop; Ensuring adequate bank capitalisation; Box 1.2. Capital requirements according to the Capital Requirements Regulation (CRR) and Capital Requirements Directive IV (CRD IV); Figure 1.3. Banks' holdings of general government securities.