Publication

As unemployment climbs to new heights, Europe’s policy-makers are desperately casting about for the few instruments to foster growth. However, this paper finds that the North and the South of the euro area are diverging so much that they need very different policy prescriptions. It points out that the two EU instruments to address structural problems in the South (the EIB and the Structural Funds) are unlikely to be effective. Nevertheless, the paper concludes that deep service-sector reforms in Germany would be helpful to unlock the country’s productivity potential and open its market for the export of services from southern Europe.