And it decreases the productivity gap with more productive economies. These reforms are, however, more likely to succeed if the stronger economies also do their fair share. Large and persistent trade surpluses often hide underlying problems, such as corporate savings retained for tax reasons, or stagnant wage growth.
Reforms aimed at increasing households’ purchasing power would therefore not only increase welfare in the more competitive member states, but also make life easier for the more vulnerable ones. But let’s be realistic: such reforms will take time. Even with the right policies in place, it will still take decades for many member states to get to where they need to be.