And in both areas there is considerable scope for the euro area to raise output with determined reform efforts. Raising potential growth In terms of employment, we know that the euro area faces a long-term drag from its unfavourable demographics.
But even accounting for that, I see substantial leeway to lift output in the euro area by exploiting the other margins which determine employment: first, by reducing the trend unemployment rate, which remains too high in many countries; and second, by raising participation rates, which are still short of international norms in several jurisdictions.