Policy responses in the euro area In the euro area, although the slowdown of the economy is mainly the consequence of the impact of the significant past increases in oil and other commodity prices and of the direct and indirect effects of the ongoing financial turmoil, the growth performance of its economy over the medium and longer run will fundamentally depend on the implementation of further reforms that can raise trend productivity growth, by increasing investment in innovation and education, and raising the utilisation of labour, by enhancing the flexibility and adaptability of labour markets.
First, we have to acknowledge that in the world we live in, macroprudential policy can never be perfectly effective – for instance because safeguarding financial stability is complicated by having to achieve multiple targets all at the same time.