euro area by acting in a firm and timely manner. let me now explain our assessment in greater detail, starting with the economic analysis. on a quarterly basis, euro area real gdp growth was flat in the first quarter of 2012. available indicators for the second quarter of the year point to a weakening of growth and highlight prevailing uncertainty. looking beyond the short term, we continue to expect the euro area economy to recover gradually. however, ongoing tensions in some euro area sovereign debt markets and their impact on credit conditions, the process of balance sheet adjustment in the financial and non - financial sectors and high unemployment are expected to continue to dampen the underlying growth momentum. the june 2012 eurosystem staff macroeconomic projections for the euro area foresee annual real gdp growth in a range between – 0. 5 % and 0. 3 % for 2012 and between 0. 0 % and 2. 0 % for 2013. compared with the march 2012 ecb staff macroeconomic projections, the range for 2012 remains unchanged, while there is a slight narrowing of the range for 2013. in the governing council ’ s assessment, the economic outlook for the euro area is subject to increased downside risks relating, in particular, to a further increase in the tensions in several euro area financial markets and their potential spillover to the euro area real economy. bis central bankers ’ speeches downside risks also relate to possibly renewed increases in commodity prices over the medium term. euro area annual hicp inflation was 2. 4 % in may 2012, according to eurostat ’ s flash estimate, after 2. 6 % in the previous month. inflation is likely to stay above 2 % for the remainder of the year, mainly owing to developments in energy prices and indirect taxes. however, on the basis of current futures prices for commodities, annual inflation rates should fall below 2 % again in early 2013. looking ahead, in an environment of modest growth in the euro area and well - anchored long - term inflation expectations, underlying price pressures should remain subdued. the june 2012 eurosystem staff macroeconomic projections for the euro area foresee annual hicp inflation in a range between 2. 3 % and 2. 5 % for 2012 and between 1. 0 % and 2. 2 % for 2013. in comparison with the march 2012 ecb staff macroeconomic projections, there is a narrowing of the projection ranges for 2012 and 2013. the governing council continues to view the risks to the medium - term outlook for price developments as broadly balanced. upside risks per

, fragmented power : europe and the global economy, bruegel. 11 see jamet, j. - f. ( 2011 ), “ the optimal assignment of prerogatives to different levels of government in the eu ”, journal of common market studies, 49, pp. 563 – 584. 12 see tilford, s. ( 2017 ), “ crisis of capitalism? perhaps, but don't blame it on globalisation ”, insight, 10 february 2017, centre for european reform. 13 this observation was nicely recalled by rodrik using the example of chartered trading companies in the 17th century. 14 rodrik, d. ( 1998 ), “ why do more open economies have bigger governments? ”, journal of political economy 106, no. 5 : 997 - 1032. 15 see martyn ( 1701 ) as cited in rodrik ( 2011 ). 16 ricardo, d. ( 1817 ) as cited in rodrik ( 2011 ). 17 see e. g. goldberg, p. k. and n. pavcnik ( 2007 ), “ distributional effects of globalisation in developing countries ”, journal of economic literature, 45 ( 1 ) : 39 - 82 ; ebenstein, a., a. harrison, m. mcmillan, and s. phillips. ( 2014 ), “ estimating the impact of trade and offshoring on american workers using the current population surveys ”, review of economics and statistics, 96 ( 3 ) : 581 - 595. 18 one point which is particularly concerning and which has been emphasised by serious globalisation sceptics is that in standard models of international trade the distributional effects can be large relative to the efficiency gains, in particular when tariffs are already low. unlike technology, free trade in the form of tariff reductions encounters diminishing returns. see rodrik, d. ( 2011, pp. 57 ) and rodrik, d. ( 1994 ). the large “ redistributionto - efficiency gains ratio ” might tempt protectionists to argue that with a small increase in tariffs a large redistribution would be achieved at the cost of only small efficiency losses. this seems a plausible argument, provided that the redistribution is politically desirable. but the argument is misleading because more recent research has also shown that gains from trade are large once their causal effects are derived from quasinatural experiments. general equilibrium estimates tend to be somewhat lower. see feyrer, j. ( 2009 ), “ distance, trade