Brussels, 19/06/2002 (Agence Europe) - In its latest report on the euro zone in the world economy, adopted on Wednesday, the European Commission asks the four countries whose public deficits "still remain very high" (Germany, France, Italy and Greece) to make "further efforts to reach positions close to a balance in 2004". Furthermore, this report makes a mainly positive assessment of the latest developments in EMU and especially of the introduction of banknotes and coins in euro at the beginning of the year.
In addition to the chapter on budgetary policies, this paper also broaches the following subjects:
The euro zone and coping with the global slowdown: the report stresses that in 2000, growth in GDP fell sharply (due to the slowdown in the global economy), but tat job creation "held up surprisingly well", notably thanks to reforms of the labour market made in preparation for the introduction of banknotes and coins in euro. During the first three years of the single currency, 6 million jobs were created in the euro zone and the level of unemployment fell (from 11.3% in 1997 to 8.3% in 2001), the report stipulates, painting a much less rosy picture as regards inflation (which went from a little over 1% in 1999 to some 2.5% in 2001).
The euro exchange rate and external performance: the recent appreciation of the euro in relation to the dollar has obviously not been taken into account. The Commission recalls that the euro lost over 10% of its value up to the Spring of 2001 and that it then remained relatively stable. This situation has as effect to place manufacturers in the euro zone in a favourable competitive situation vis-à-vis third country suppliers, but at the same time, the inability of the euro to appreciate towards a level more in compliance with economic fundamentals "has hardly allowed for inflation to be contained". You may recall that the Council and Commission have not set an ideal value for the euro on the exchange rate market, but that all agree to say today that a strong euro has the advantage of being able, notably, to contain price rises.
Wage formation in the EMU: the Commission writes that the real wage moderation, of these past few years, has borne fruit by contributing to the dynamism of job-creation, but that reforms progressed in an unequal manner. The Commission also considers that wages within the euro zone must be compatible with global price stability and that there is need for a certain amount of flexibility to reflect the differences in productivity and factors specific to regions or sectors.
The other parts of the report concern investment and the euro zone's growth potential, financial integration, and the euro zone as an international currency. This document is available at the following address:
http: //europa.eu.int/comm/economy_finance/publications/euro_related/eurorelated_communication0602_en.htm