The failure of the euro zone’s expansionary policies: They have not raised potential growth

Since 2008, the euro zone has conducted expansionary economic policies, primarily fiscal policy initially and then primarily monetary policy. These policies boosted growth and the solvency of indebted economic agents. But the main idea was to boost demand until structural reform policies had succeeded in lifting growth, with the risk that, initially, the structural reforms (e.g. labour market policies) would weaken demand, while the demand stimulus would have a positive effect on investment. From this viewpoint, the use of expansionary economic policies has been a failure: despite the fact that these policies have been in place for a long time and are now nearing an end, there is no sign of an increase in the euro zone’s potential growth. The demand-stimulus policies that have been conducted in the euro zone have left behind no residual positive effect .