Get the national policies right
During the debate with National Parliaments conducted at the European Parliament last week and attended by the Financial Mirror, Commissioner for Economic and Monetary Affairs Joaquin Almunia said that one of the problems the EU faces is “many citizens consider that European and national institutions have been unable to come up with responses to their call for more jobs.”
Almunia outlined the four main priorities for growth and jobs in the EU over the medium term: education, research and innovation; tackling the consequences of an ageing population; improving the way the EU market works; and a common energy policy for Europe.
However, economists in the debate also highlighted some of the causes of Europe’s slow growth.
National policies to blame for low growth
The OECD’s Chief Economist, Jean-Philippe Cotis, said that “slow growth largely reflects inadequate macroeconomic policies”.
“If employment rates are low in Europe it is to a considerable extent because bad policies have driven people out of the labour market”, he said.
Comparing the euro-area to countries such Australia and Sweden, Otis also asked why the euro-area is “so fragile to external shocks”.
He blamed this vulnerability on “inappropriate fiscal policies”.
Policies have been “pro-cyclical”–meaning spending in the good times and not saving enough for the bad times.
His thoughts were also echoed by Jean Pisani-Ferry of the Bruegel Economic Think Tank, who said “a major policy priority is to improve the quality of public finances”.
The absence of a single market for retail financial services had also meant that low interest rates were not always passed onto the consumer, or in economists’ jargon there have been “weak channels of transmission for monetary policy”.
Europeans not as productive as you think
Otis also pointed to an anomaly which made French and Belgian labour productivity look better than they really are. He said that this was because workers with low productivity are actually employed in the US but are not employed in Europe.
“The less skilled workers are out of the labour market” in these countries, which makes the productivity figures “too flattering for Europe”.
Otis also attacked the “huge sums of money” being thrown away to try to persuade people not to work” through restrictions on hours and locking out older workers.
Competition in services was “key” to the efficient allocation of resources, he said, adding that more competitiveness and more productivity is “good for labour”.
Fiona Mullen
