The economic impact of selected structural reform measures in Italy, France, Spain and Portugal

Structural reforms launched in Italy, Spain, Portugal and France could have significant economic benefits and raise GDP, new estimates from the European Commission show. By 2020, the selected reforms modelled in this focus section are expected to raise GDP by some 1º % in Italy and Spain and some 2% in Portugal, with the benefits increasing over time. In France, where only the most recently launched reforms were modelled, the increase in GDP is expected to be close to Ω%. This could imply a boost to GDP growth of between 0.1 and 0.3 pps. on average over five years. The projected gains in output are seen coming from improvements in productivity and/or higher employment rates. The reforms are also generally seen as beneficial to public finances as the higher growth associated with them should boost tax revenues. Although these effects are sizeable and provide a welcome boost to growth, they also show that more could be done when compared to best performers. It is also important to stress upfront that the positive short term impact of product and labour market reforms on output and employment can be maximised through complementary measures that support demand (such as measures to boost investment), especially under the current conditions of slow growth and very low inflation prevalent in the euro area, reduce the costs of some of these reforms (e.g. through stronger corporate insolvency frameworks), and the appropriate sequencing of the specific reform measures. The analysis in this report is based on selected reforms reviewed in the 2013, 2014 and 2015 National Reform Programmes of Italy, Spain and Portugal, and the 2015 National Reform Plan of France. These include measures covering product markets (including network industries), labour markets (including. education), as well as pension system and tax reforms. Crucially, our methodology focusses on the structural component of reform measures by assuming revenue neutrality, and hence excludes the direct fiscal impact. The methodology aims to provide a first impact assessment of reforms actually implemented or planned in selected Member States, but it must be acknowledged that all estimates are surrounded by large uncertainties and should be interpreted with caution.(