The importance of extreme (financial and counterparty) risks in long-term financial contracts is demonstrated by the fact that in a number of countries guarantee arrangements are in place to protect benefits against the insolvency of the DB plan sponsor; for a worker, moving from a DB plan to a DC plan implies abandoning dual protection (the sponsor’s capital and the guarantee arrangement) in favour of no protection at all.
Overall, the euro area has a high private saving rate and sound fiscal fundamentals, with deficit and debt ratios that are much lower than in the US, the UK or Japan. Its workforce is industrious and highly skilled; its firms are innovative and do not fear global competition.