IMF Staff Position Notes

Lifting Euro Area Growth: Priorities for Structural Reforms and Governance

By Luc Everaert, Céline Allard

November 22, 2010

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Luc Everaert, and Céline Allard. Lifting Euro Area Growth: Priorities for Structural Reforms and Governance, (USA: International Monetary Fund, 2010) accessed November 3, 2024

Summary

To live up to its growth potential and secure its inclusive social model, the euro area must make better use of its available labor. In the aftermath of the crisis, boosting growth is essential to prevent unemployment from becoming a long-term problem and to facilitate the return to fiscal sustainability. Labor utilization in the euro area has been lagging considerably behind its best performing peers. While fewer hours worked may, to some extent, reflect a social choice, higher unemployment rates and lower participation rates, on the other hand, cannot easily be attributed to individual preferences. Here, policies and institutions matter more. And there is little excuse for relatively low labor productivity, a particular bane in southern Europe and an increasing challenge everywhere. Kick-starting growth requires a comprehensive approach to labor and service market reforms. Different circumstances call for different approaches across countries. Countries in southern Europe need to focus on regaining competitiveness, while some in the core should promote higher labor force participation or more open service sector markets. Improving access to the labor market should be high on the priority list everywhere—including through some harmonization of key features of the labor market, which will help deal with intra-euro area imbalances. Differences in labor taxation, unemployment benefit systems, and employment protection will need to be reduced. Improving regulation and reforming taxes and social benefits will be essential to make inroads. For the longer term, focus should be on innovation, education, and on continuing financial sector reforms.

Subject: Economic sectors, Labor, Labor market reforms, Labor markets, Labor policy, Macrostructural analysis, Services sector, Structural reforms

Keywords: Address labor market dualism, Convergence process, EU transfer, EU transfer rule, Euro, Euro area, Euro area economy, GDP, Labor market, Labor market feature, Labor market model, Labor market reforms, Labor markets, Labor policy, Making labor market, Northern Europe, Professional service, Services sector, SPN, Structural reforms

Publication Details

  • Pages:

    24

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Staff Position Note No. 2010/019

  • Stock No:

    SPNEA2010019

  • ISBN:

    9781462302109

  • ISSN:

    2617-6742