The low labour participation rates in the euro area are significantly influenced by structural distortions like the legal and regulatory environment, the tax systems and social institutions. For example, marginal tax rates that are too high discourage labour market entry and have a downward effect on average hours worked.
So our banks haven’t had to deal with substantial credit losses that have impinged so heavily on the profits of many overseas banks following the global financial crisis. This profitability has also meant that the banks have found it relatively easy to build capital in response to international moves to improve the resilience of the banking system worldwide.