According to a recent growth projection by the European Commission, potential output growth in Europe would amount to 1½% per annum on average in the period 2011–20 – significantly below the rates observed in the EU in last 20 years and much below those recorded in the United States.
11 The projected potential growth for euro area over this period is worse still, amounting to 1¼% per annum on average. These weak growth prospects are the consequence of two interrelated phenomena.   First, population ageing is expected to result in a contraction of labour supply and to increase the fiscal burden of age-related expenditure.