Is potential growth at risk of falling sharply in the euro zone?

We break down the euro zone’s potential growth into three components: Trend productivity gains, currently 0.6% per year; Growth in the working-age population (aged 20-64), currently 0.2% per year; Growth in the participation rate (the proportion of 20-64 year olds in the labour market), currently 0.8% per year. This gives potential growth of 1.2% per year in the euro zone today. Is there a risk of potential growth falling sharply? The euro zone has increased its investment, innovation and corporate modernisation effort, which ought to prevent productivity gains from falling; Demographics, on the other hand, are negative: over the decade of the 2020 s , the population aged 20 to 64 is going to fall by 0.6% per year on average; The biggest uncertainty concerns the participation rate. If it is stable, the euro zone’s potential growth will be only 0.4% per year. When we compare the euro zone with the United States, the United Kingdom and Japan, we see that the euro zone’s employment rate still has room to rise, especially in the over-60 cohort.