First, the euro area needs a permanent macroeconomic stabilisation mechanism – with revenue-raising and borrowing capacity – to complement the single monetary policy. Second, it is imperative that the banking union be completed with the establishment of a European deposit guarantee scheme. A common fund, with risk-pooling, would ease the sovereign-bank nexus that proved so damaging in the European sovereign debt crisis and would align financial responsibility with centralised decision-making in banking supervision 4  Such as the important projects of common European interest, which include the development of batteries, microelectronics, hydrogen technologies and cloud services. 7  and resolution matters. It is also essential that the regulatory barriers that are hindering the emergence of a fully-fledged European banking market be lifted. Third, headway must be made in the construction of the capital markets union, so as to boost the euro area’s resilience to macro-financial shocks, better distribute the costs of asymmetric or idiosyncratic shocks, reduce the risks of financial fragmentation and provide an environment more conducive to private investment. At present, the relatively small size of equity markets and the considerable home bias of asset portfolios limit risk sharing in the euro area. Moreover, a deeper capital markets union could help channel high aggregate savings towards investment in infrastructure, energy and innovation, where private investment is crucial.5 Lastly, a key feature for a genuine, more integrated and deeper European capital market would be the existence of pan-European safe assets on a significant scale.

In the construction industry, it has declined slightly, but remains at a very high level. Narrow profit margins and mounting concerns over the international outlook held companies’ demand for labour in check. The introduction of the minimum exchange rate has corrected the massive overvaluation of the Swiss franc and has given companies a sounder basis for their investment planning. This notwithstanding, the situation for a big part of the economy remains difficult. Waning global demand will continue to hold back export growth. Economic uncertainty, coupled with a difficult earnings situation for many companies, will curb corporate investment. Moreover, since October, the seasonally adjusted unemployment figure has risen again slightly. The deterioration in the labour market should constrain both consumer spending and investment in residential construction. It is likely that the Swiss economy will stagnate in the fourth quarter. For 2011 as a whole, real GDP growth of 1.5–2.0% can be expected. This is only because of the favourable economic development in the first half of the year. For 2012, the SNB is expecting economic growth in the order of 0.5%. Monetary and financial conditions In October and November, inflation turned negative, a development largely driven by the strong appreciation of the Swiss franc during the summer. Prices for a large number of tradable goods fell markedly. Following the introduction of the minimum exchange rate, the SNB is expecting temporarily negative inflation rates, but not a sustained decline in the general price level. Moreover, surveys also show that medium-term inflation expectations are still positive.