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irst of all, we discussed in the Eurogroup today the economic situation in the euro area, on the basis of the recently published Commission winter forecast. Overall, the economic recovery in the eurozone continues and is expected to strengthen this year and next. At the same time, there are increasing downside risks and there is volatility in the markets all around the world.
The euro area is structurally in a much better position now than some years ago. And this is true also for European banks. With Banking Union, we have developed mechanisms in the euro area to bring stability to the financial sector and to reduce the sovereign-banking nexus. Capital buffers have been raised, supervision has been strengthened, and we have clear and common rules for resolution.
So overall, structurally we are now in a better position and we need to continue a gradual recovery. [...]
Secondly, we exchanged views on the quality of public expenditure in the euro area. An important topic from the point of view of fiscal sustainability and the provision of an adequate level of social services and public goods. [..]
We discussed a couple of countries as we always do. This time we discussed Portugal from two angles. The institutions reported back to us on the main findings of the third post-programme surveillance mission and we discussed the Commission's assessment of the Portuguese draft budgetary plan.
On the PPS mission, the institutions informed us that the Portuguese recovery has been underway for three years and the unemployment rate is close to pre-crisis levels. However, the economic recovery continues to be held back by macroeconomic imbalances and rigidities in labour and product markets. And that underlines the importance of continuing of the reform agenda.
On the DBP, we have issued a statement: As you know, the DBP submitted on 22 January showed, according to the Commission, a significant deviation from European fiscal rules. And then the Commission and Portugal entered into a process of fruitful and intense negotiations. The Portuguese authorities submitted additional measures, which help to avoid a significant deviation.
We agree with the Commission's assessment that there still remains at risk of non-compliance with the requirements of the SGP. And therefore and on the basis of tonight's discussions, we welcomed the commitments of the Portuguese authorities to prepare upfront, as of now, additional measures to be implemented when needed to ensure that the 2016 budget will be compliant with the SGP. [...]
We then moved to Greece. We discussed the state of play of the first review of the ESM programme, following the visit of mission chiefs to Athens last week. This important review deals with the key fiscal and structural measures. We were informed that there is good cooperation, a lot of ground has been covered, progress achieved on important issues, but further work is still needed in a number of areas before a staff-level agreement can be reached.
We called on both the Greek authorities and the institutions to pursue the discussions on the review further, in particular on items such as pension reform, the fiscal issues and the privatisation fund, with a view to reaching that staff-level agreement.