The same applies to goods markets and the general business environment – here too, strict rules or excessive red tape reduce flexibility. All of this is important for the countries in crisis. But the problem goes beyond those countries. Take productivity growth. Put simply, productivity measures how much a worker can produce in a given period of time.
When productivity rises it means that each worker produces more than before. A good 20 years ago productivity in the euro area was growing steadily – in 1995 productivity growth was around 2% per year, as in the rest of the world. Today, however, we are a long way behind. Productivity in the euro area is 0.5%.