Progress with structural reforms across the euro area and their possible impacts

Structural reforms have the potential to substantially boost productivity and employment and to reinvigorate growth in the euro area, while also improving the ability of countries to rapidly adjust to shocks, reallocate resources and restructure their economies. This article illustrates the effects of structural reforms on key macroeconomic variables, describes the recent progress of product and labour market reforms, and suggests that further structural reforms could be a powerful tool to restore growth and competitiveness in the euro area. There are signs that reforms undertaken since the start of the crisis have already had a positive impact; wages and prices appear to be more flexible and have helped the adjustment process, while export performance also seems to have improved in countries which have adopted reforms. Even though some euro area countries have made significant progress, indicators show that there is still ample room for further reforms across the euro area. This is necessary to support long-term sustainable growth, to increase the adjustment capacities of the euro area countries and to support the smooth functioning of the Monetary Union.

ECB: Publications: Economic Bulletin https://www.ecb.europa.eu/pub/economic-bulletin/html/index.en.html

---