The euro area faces a significant demographic challenge in the coming decades. Reversing the decline in productivity growth and improving labour market outcomes are both required to meet 6/7  BIS central bankers' speeches  this challenge. Without concerted effort on structural reforms, per capita income growth in the euro area is likely to stagnate, and may even decline.
The welfare benefits of structural reforms extend beyond just protecting income per capita. The distributional impacts of lower unemployment and higher participation are positive. Increasing potential output growth provides both monetary and fiscal policy more space to operate in. By breaking down barriers, reforms allow the full benefits of the Single Market to be realised, increasing economic cohesion and strengthening the monetary union.