The need for and impacts of structural policy in the euro area

Abstract

Structural reforms will boost long-term economic prosperity in the euro area. In the short term, reforms could weaken economic performance. Nevertheless, on the whole, both an empirical and a theoretical examination of structural policy in the euro area strongly suggest there is an urgent need for structural reforms. These provide the only way to boost the potential output of the economy in a situation in which the long-term prospects for many euro area economies and the outlook for general government sustainability look bleak.