The Euro Area will experience a deep and relatively protracted recession. In the third quarter of 2008 Euro Area GDP fell by 0.2 per cent on a quarterly basis and we estimate that in the fourth quarter it dropped by a further 1 per cent. In 2009, the European Monetary Union is expected to suffer the sharpest downturn it has ever experienced, and it is expected to be sharper than the downturns experienced by member countries in the early 1990s and 1980s as well as the mid 1970s — see figure 17. The economy is expected to contract by 2 per cent year-on-year. In 2010 the Euro Area economy is expected to show no growth at all in annual terms, before it slowly returns to its potential growth path in the medium term. In the longer term there may be scarring from the crisis on the level of output, but we suggest that it will be noticeably less than in the UK and the US as they economies have been more dependent on financial services.