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Lifting Euro Area Growth: Priorities for Structural Reforms and Governance

Author

Listed:
  • Céline Allard
  • Mr. Luc Everaert

Abstract

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.

Suggested Citation

  • Céline Allard & Mr. Luc Everaert, 2010. "Lifting Euro Area Growth: Priorities for Structural Reforms and Governance," IMF Staff Position Notes 2010/019, International Monetary Fund.
  • Handle: RePEc:imf:imfspn:2010/019
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    Citations

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    Cited by:

    1. Constantinos Alexiou & Joseph Nellis, 2013. "Is There Life After ‘Death' for the Greek Economy," International Journal of Economics and Financial Issues, Econjournals, vol. 3(4), pages 861-873.
    2. Jean-Paul Fitoussi & Francesco Saraceno, 2013. "European economic governance: the Berlin–Washington Consensus," Cambridge Journal of Economics, Oxford University Press, vol. 37(3), pages 479-496.
    3. repec:jes:wpaper:y:2011:v:3:p:579-591 is not listed on IDEAS
    4. Brian Micallef, 2013. "Measuring the effects of structural reforms in Malta: an analysis using the EAGLE model," CBM Working Papers WP/01/2013, Central Bank of Malta.
    5. International Monetary Fund, 2015. "Euro Area Policies: Selected Issues," IMF Staff Country Reports 2015/205, International Monetary Fund.
    6. Cristina Puiu, 2011. "Labour Mobility As An Adjustment Mechanism In The Euro Area," CES Working Papers, Centre for European Studies, Alexandru Ioan Cuza University, vol. 3(4), pages 579-591, December.
    7. Anderson, Derek & Hunt, Benjamin & Snudden, Stephen, 2014. "Fiscal consolidation in the euro area: How much pain can structural reforms ease?," Journal of Policy Modeling, Elsevier, vol. 36(5), pages 785-799.
    8. repec:spo:wpecon:info:hdl:2441/53r60a8s3kup1vc9k2c8h4u2h is not listed on IDEAS
    9. International Monetary Fund, 2015. "Finland: Selected Issues," IMF Staff Country Reports 2015/312, International Monetary Fund.
    10. Mr. James A John & Angana Banerji & Ms. Bergljot B Barkbu & Mr. Tidiane Kinda & Mr. Tao Wu & Mr. Sergejs Saksonovs & Hanni Schoelermann, 2015. "Building a Better Union: Incentivizing Structural Reforms in the Euro Area," IMF Working Papers 2015/201, International Monetary Fund.

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