This would be greatly facilitated if individual member countries were to make convincing progress in the structural reform of the labour and product markets, which, over the medium term, would enhance the euro area’s production potential and thereby curb upward pressure on prices as the recovery proceeds.
Together with fiscal consolidation in the context of the Stability and Growth Pact and the necessary moderate wage developments, such reforms could make a crucial contribution towards transforming the current cyclical upswing into a process of longer-term non-inflationary growth.