Forex Flash: Structural reform remains in focus in Eurozone – Goldman Sachs

The economic challenges faced by many economies in the aftermath of the financial criis, especially in the Euro area, have brought the concept of ‘structural reforms’ squarely into focus. A combination of factors contribute to the implementation of reforms (such as the political environment and institutional quality), as does the need for reform itself (such as high indebtedness, crisis recovery, low growth and relatively moderate levels of efficiency). According to the Economics Research Team at Goldman Sachs, “Benchmarking countries of the Euro area periphery against these criteria suggests that there is a reasonable likelihood of them successfully undertaking such reform.”

While the expected boost to growth can be substantial, there are nuances in terms of which reforms are more likely to pay off faster and to what extent. “The pending reforms in many DMs are not the kind of low hanging fruit that achieves quick or easy results. Reforms in product and labor markets of the type the Euro area requires will not come easy, and if they do come, their benefits are likely to build only gradually.” notes the Team.