While this scenario is very unlikely to materialise, it shows that current rates of productivity growth are barely sufficient to offset the demographic drag on per capita income. Structural reforms are therefore urgently needed to raise productivity growth and unlock unused labour potential and thereby avoid stagnation in per capita income.
But the benefits of structural reforms to the welfare of people in the euro area extend beyond increasing aggregate incomes and offsetting the demographic drag. They also empower other policies. 2/7  BIS central bankers' speeches  Stronger potential output growth aids monetary policy by increasing the equilibrium real interest rate.