Against the backdrop of the ongoing crisis in the Eurozone, the project has two objectives. First, the impact on the potential volume of work and thus on the potential output in the European crisis countries will be investigated. Our research questions are whether crises (generally) have a long term negative impact on potential output over the channel of labor supply, the strength of this effect and whether it can be mitigated by specific labor market measures. A special attention will be given to the non-optimal use of human capital in the form of a "skill mismatch", which may arise due to a necessary reallocation of production factors in the crisis countries. Second, alternative methods of potential output estimation are developed by using information about the financial market cycle in the estimation. The credit-driven boom in crisis countries has made clear that (disadvantageous) financial markets conditions may result in structural and long-term real economic distortions that are not yet taken into account in conventional methods for the estimation of potential output and the output gap. Both questions about the long-term crisis effects will be studied with two different methodological approaches.