It is therefore widely recognised that structural reforms in capital, labour and product markets are needed to improve the prospects of the euro area. In this respect, the ECB very much welcomes and supports the impetus given by the Lisbon European Council to the economic reform process.
Structural reforms that are designed to increase the flexibility of markets permit a higher level of sustainable long-run growth and employment. They furthermore enhance the capacity of the participating countries to cushion macroeconomic shocks. The more rigid labour, product and financial markets are, the higher will be employment and income losses experienced in response to changing domestic and global economic conditions.