Euro Area Productivity Lag Threatens Growth and Stability, Reform Needed to Boost Technology Adoption and Competition
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The euro area has fallen behind the U.S. in productivity growth due to failure to adopt information and communication technologies as effectively. This threatens Europe's competitiveness and growth.
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Lack of competition, rigid regulations, and barriers to firm entry and expansion have inhibited technology diffusion and adoption in Europe.
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Full implementation of commitments under the EU's Recovery and Resilience Facility is critical to boost euro area productivity through public investment.
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Further economic integration and capital markets union is needed to foster technology diffusion by improving access to finance and enabling firms to scale.
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Productivity-enhancing reforms would support price stability by raising potential growth and the neutral rate of interest, giving monetary policy more space.