Brussels, 04/06/2007 (Agence Europe) - At a conference organised by the Lisbon Council on Monday, the president of the European Central Bank (ECB), Jean-Claude Trichet, called for structural reforms in member states to be continued. Despite the creation of jobs (12 million in the EMU's eight-year existence), and the fall in unemployment rates (from 10.7% in 1996 to 7.9% in 2006), the “structural weaknesses of labour markets” remain, he said. He feels that there is still much to do to improve our potential, since, while growth in the euro area has reached its highest level since 2000 (2.8% of GDP), over the last ten years, it remains far lower than the growth enjoyed by the United States.
Since 1996, the annual growth rate has been 2.1% of GDP on average in the euro area, and 3.3% in the US. This growth differential can be explained, firstly, by the diverging trend in hourly labour productivity growth between the two zones. While hourly labour productivity growth has been increasing in the US since the middle of the 1990s, in the euro area it has decelerated, because, for example, of the stress laid on policies to increase employment among unskilled workers. Another reason for this difference, according to Mr Trichet, is that “the European economy does not take advantage as does the US economy of all the opportunities offered in particular by the advances of science and technology”, including in the information and communication technology (ICT) sector. Over the last ten years, R&D investment has been 1.8% of GDP in the euro area, with 20% of this being spent on ICT, while, in the US, R&D investment accounted for 2.6% of GDP, with 30% being spent on ICT. “The lack of sufficient structural reform in Europe is however, in my view, a major cause of the difference in the growth potential …,” Mr Trichet added, citing four main areas for reform: getting more people into work; increasing competition; unlocking business potential; and supporting an innovative environment. When questioned by press, Mr Trichet gave no indication of what the ECB intended to do on interest rates. Most observers expect a further increase in interest rates at the meeting of the Governing Council this Wednesday (see EUROPE 9424). (ab)