Forward looking growth accounting exercises show that these adverse demographic developments would reduce average real GDP growth in the period up to 2010 below 2% and in the period up to 2020 further to around 1½% if no compensation is achieved through higher contributions from other supply-side factors.
Taking into account these unfavourable demographic developments, only with ambitious and comprehensive reforms therefore, there is some scope for raising medium to longer-term output growth in the euro area or even simply sustaining the long term growth potential. Structural reforms and future challenges The implementation of appropriate reforms is key for sustaining or even raising medium to longer-term output growth in the euro area.