Substantial structural reforms have been taken on labour and product markets by stressed euro area countries since 2008 – more than is generally acknowledged in Germany. These reforms have the potential to raise the growth potential in the respective countries and to improve the functioning of EMU. In the context of the optimum currency area debate it is argued that structural reforms have reduced the heterogeneity between euro area countries in terms of market rigidities. Moreover, wage and price flexibility – which are needed to better adjust to exogenous economic shocks – will be enhanced. In fact, first signs can be detected that wage flexibility has already increased in southern euro area countries.

An assessment of structural reforms in the stressed euro area countries and their relevance for growth and for EMU
IW policy paper
German Economic Institute

Jürgen Matthes: An assessment of structural reforms in the stressed euro area countries and their relevance for growth and for EMU
IW policy paper
German Economic Institute
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