However, stock disequilibria — such as the high public debt, the high burden of NPLs and high unemployment — persist or have even increased during the years of the crisis, acting as a drag on long-term growth. Furthermore, a large number of legislated reforms need to be fully implemented and the fiscal policy mix is not supportive of growth.
The high level of public debt reduces long-term growth prospects because it increases the cost of capital and generates expectations that future taxes will remain high in order for the sovereign to service the debt, lowering investment.