Brussels, 28/07/2004 (Agence Europe) - On Tuesday, the Organisation for Economic and Development Co-operation (OECD) published its latest analysis of the situation in the euro zone. A week after the Commission's reports on the first five years of the EMU's life (see EUROPE of 24 July, p.13), the OECD's economic study sums up the current situation, and suggests initiatives to fulfil three priority objectives: promoting non-inflationist growth, furthering economic cohesion, and ensuring the viability of public finances against the ageing populations.
The study predicts an increase in growth for 2005, to 2.5% of GDP, and a drop in the inflation rate to 1.5%. Under these conditions, the macro-economic policy of consolidating public finances and budgetary co-ordination call for a reinforcement of the monitoring instruments to take account also of phases of expansion and the level of indebtedness of a county. "The results obtained thanks to the application of the Stability Pact are, at best, mitigated", says the OECD, which states that efforts at budgetary consolidation dropped off slightly once the euro was in place. The report recommends that the Commission has sufficient resources to makes sure that the stabilisation programmes are correctly implemented, and that the early-warning system becomes "an instrument of prevention in the hands of the Commission and not of the Council, which is both judge and party". The OECD also calls for greater account to be taken of debt in bringing in a little more flexibility for countries with low levels of debt, which need to finance the initial costs of structural reforms, such as pension systems.
With economic cycles differing from one Member State to the next, it would be preferable to concentrate on certain variables between the countries in order to make the single currency more effective. The study stresses the need for greater salary flexibility, depending on inflation and better housing market policy. It also dwells upon elements allowing the regions to be brought closer together within the euro zone, because "the GDP per head of population tends to converge between countries, but convergence between regions is less clear". Reinforcing the policy of innovation and the distribution of new technologies should be based on three things: improving higher education, increasing investment in R&D, and supporting enterprise creation. Several measures were suggested, for instance: harmonised legislation on bankruptcy, better adequacy between public and private funding of higher education.