As agreed in Berlin, taking advantage of the favourable cyclical conditions would enable most euro area countries to achieve their medium-term objectives in 2008 or 2009, and all of them should aim for 2010 at the latest. These pledges should be reflected in the 2008 budget plans so as to avoid repeating governments’ past failure to adjust fiscal balances in economic “good times”.
The question then would be why productivity slowed so much. One hypothesis we hear from time to time is that average productivity might be reduced by adding the workers with the lowest productivity after a long expansion.