"I think the gains to be achieved by a combination of reforms and labor market adjustments are going to be more permanent and will provide a basis for reducing unemployment and improving export performance, and sustaining growth, in a way that is more sound and permanent"

Lucas Papademos highlights the crucial interplay between structural reforms and labor market adjustments as a means to secure lasting economic improvement. He suggests that rather than relying on short-term fixes or temporary measures, economies should pursue deeper, more fundamental changes, particularly those that alter the underlying framework of labor relations and market operation. Through this approach, Papademos foresees more enduring benefits, both for employment levels and a country’s position in global trade.

Sustainable reduction in unemployment requires not just putting people back to work in the short run but creating conditions where job creation is steady and resilient to external shocks. Labor market reforms might involve increased flexibility for hiring and firing, the reduction of regulatory burdens, or enhancements in training and education to match labor supply with modern business demands. When coupled with broader economic reforms, such as improving regulatory efficiency, combating corruption, and fostering innovation, the result is a healthier economic ecosystem. Such comprehensive adjustments enable companies to compete more effectively abroad, thereby boosting export performance.

Papademos also underscores the importance of permanence. Temporary increases in employment or exports, perhaps created through subsidies or short-lived stimulus programs, provide only fleeting relief. In contrast, adjustments at a structural level embed stability and adaptability into the economic system. This robustness is what sustains growth through cycles of boom and bust, insulating the economy from volatility.

Overall, Papademos advocates for a strategic vision in economic policy: combining labor market flexibility with institutional reform to achieve a sound and lasting foundation for prosperity. The notion is to lay the groundwork for self-sustaining progress, reducing dependency on external aid or one-off interventions, and building an economy capable of consistent growth and competitiveness on the world stage.