These are in turn manifestations of a bigger problem, “the premature welfare state”, which is weighing heavily on potential growth on the one hand, and is a source of a chronic fiscal imbalance on the other. Our fiscal and labour market weaknesses are deeply interconnected and we have to address them together in a wide-ranging structural reform.
Scaling back the overly generous welfare state is painful and the political willingness to do so is not so strong, so when this structural reform will take place is rather uncertain. The question is, can we afford to enter the eurozone if this reform is not yet completed?