|
The adoption of the euro by 12 European Union (EU) countries represented a major step forward in the pursuit of economic integration: financial markets have deepened and competition has been stimulated. Business cycles have become more synchronised and structural unemployment has declined. However, the protracted period of sub potential growth since 2001 has exposed major policy challenges. Policy should focus on boosting non inflationary growth and strengthening resilience to shocks, fostering cohesion and putting the public finances on a sustainable basis:
-
Growth and resilience against shocks. Income per capita is lower in the euro area than in the best performing OECD countries and the gap is widening. Moreover, although the epicentre of many of the adverse shocks that prompted the global downturn since 2001 was in the United States, slack has been more persistent in the euro area. Key challenges are to reduce the persistent underutilisation of labour resources, to boost productivity growth and to bolster the area’s resilience against shocks.
-
Cohesion. Differences in economic performance across euro area countries and regions have remained large. With labour mobility in the euro area low, a key challenge is to reap the benefits of further economic integration amid concerns that the resulting gains in activity may not spread evenly across countries and regions. The policies that influence convergence in living standards across the area are largely the same that shape the economic performance of the area as a whole.
-
Public finances. Ensuring the sustainability of public finances in the face of ageing populations is another key challenge, not least because it also impinges on growth, resilience and cohesion. Bringing fiscal policies on to a sound footing, while avoiding a rise in the already high tax burden, is vital for confidence and economic efficiency.
These challenges have become even more pertinent with the accession of ten new EU members on 1 May 2004. Although the economic weight of the new members is relatively small, their entry into the Union has substantially raised its diversity. Rapid nominal and real convergence must be secured in the run up towards their entry into the euro area.
-------------------------------------------------------
The full edition of the OECD Economic Survey for the Euro area is available from:
-
SourceOECD for subscribing institutions and many libraries
-
Government officials with OLISnet accounts
-
-
Return to the OECD Economic Survey - Euro area 2004 homepage
A printer-friendly Policy Brief (pdf format) may also be downloaded. The Policy Brief contains the OECD assessment and recommendations, but does not include all of the charts available from the above pages
|
