Finally, differences in productivity growth largely explain the divergences in price and costs dynamics experienced within the euro area over the last decade. These divergences do not have a direct impact on monetary policy, since the latter is targeted to the euro area as a whole, but rather on the ability of some countries to sustain economic growth over time.
Countries accumulating losses of competitiveness, because of lower productivity growth, will have to catch up over time either through a relative pick up in productivity or through lower rates of growth of wages, which will have a negative impact on growth. In this respect, structural reforms may help to reduce cross-country differences in key regulations and institutions, and thus align adjustment processes across countries.