Lifting Euro Area Growth: Priorities for Structural Reforms and Governance
IMF Staff Position Notes, November 22, 2010
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Bibliographic details
- Authors: Luc Everaert, Céline Allard
- Published: November 22, 2010
- Series: IMF Staff Position Notes
- DOI: https://doi.org/10.5089/9781462302109.004
Core diagnosis
- The euro area must make better use of its available labor to live up to its growth potential and secure its inclusive social model.
- Boosting growth in the aftermath of the crisis 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.
- Fewer hours worked may partly reflect social choice, but higher unemployment rates and lower participation rates cannot easily be attributed to individual preferences; policies and institutions matter more.
- Relatively low labor productivity is a significant problem in southern Europe and an increasing challenge across the euro area.
Key findings
- Labor utilization and labor productivity shortfalls are central constraints on euro area growth.
- Differences across countries require differentiated policy responses rather than one-size-fits-all prescriptions.
- Harmonization of key labor market features would help address intra-euro area imbalances.
Policy recommendations (short and medium term)
- Implement a comprehensive approach to labor and service market reforms.
- Improve access to the labor market, including through some harmonization of:
- labor taxation,
- unemployment benefit systems,
- employment protection.
- Reduce differences in labor taxation, unemployment benefit systems, and employment protection across countries.
- Improve regulation and reform taxes and social benefits to increase labor utilization.
Country- and region-specific priorities
- Southern Europe:
- Focus on regaining competitiveness.
- Address low labor productivity as a priority.
- Core euro area countries:
- Promote higher labor force participation.
- Open service sector markets further.
Longer-term priorities
- Focus policy efforts on:
- innovation,
- education,
- continuing financial sector reforms.
Metadata (from source)
- Authors: Luc Everaert, Céline Allard
- Publication date: November 22, 2010
- Series: IMF Staff Position Notes
Source: IMF Staff Position Note "Lifting Euro Area Growth: Priorities for Structural Reforms and Governance" (November 22, 2010) by Luc Everaert and Céline Allard.