Coupled with other components of the banking union – the SRM, rules for bail-in of shareholders and creditors, and eventually a deposit guarantee scheme – these reforms put European financial stability on a much sounder footing. Spurring productivity growth and competitiveness Yet improvements in financial system are not a sufficient condition for improved growth prospects.
More needs to be done to spur productivity growth through reforms that foster innovation and competitiveness. A recent, positive aspect has been that stressed euro area countries have taken significant steps in this regard. By reducing unit labour costs relative to euro area partners they have improved competitiveness and adjusted external imbalances.