1. Design of the adverse scenario
This appendix describes the adverse global macroeconomic scenario to be used for the 2011 EU-wide stress test exercise. The scenario covers the horizon 2011-12, and the assumptions used and the main results are presented in terms of deviation of macroeconomic variables from a given baseline (as in previous occasions the latter will be based on the latest available EC forecasts, and in the case at hand, the Autumn 2010 vintage).
This adverse scenario is similar to those developed for EU-wide stress tests in 2009 and 2010. It is composed of three elements: a set of EU shocks – mostly tied to the persistence of the ongoing sovereign debt crisis, a global negative demand shock originating in the US and a USD depreciation vis-à-vis all currencies