The Euro area is on the edge of a recession. While activity slowed more gradually than expected and consumer spending has shown resilience during the summer, especially in the South, producers have started to reduce output—particularly in gas-intensive sectors such as chemicals. The resilience of the European economy requires to follow a narrow path between persistently elevated natural gas prices and sustained inflation. Rising interest rates will slow the recovery and weaken consumption in the short run, but capital expenditure and investment can build up the recovery in the medium run.