For the Eurozone, the current economic prospects "are the best in the last seven years". Nonetheless, the growth potential of the euro area as a whole is now below 1%, and this means "that a significant part of the losses suffered during the crisis would become permanent, with structural unemployment remaining above 10 per cent and high youth unemployment". The president of the ECB said today, Mario Draghi, in his speech in Sintra, Portugal, where the second ECB Forum is underway. The number one of Eurotower then underlined that monetary policy "is making itself felt on the economy" and that "growth is recovering", since also "inflation expectations have risen from the lows", but this "does not mean by no means that there are no more challenges to face: the cyclical recovery does not by itself solve all of Europe's problems”.
WITH RECOVERY THERE ARE CONDITIONS FOR GREATER COMMITMENT ON REFORMS
On the other hand, the same cyclical recovery “gives us almost perfect conditions – he added – for Governments to commit themselves in an even more systematic way to those structural reforms which will give a stable basis to growth. Monetary policy can bring the economy back to its potential. Structural reforms can raise this potential and it is the mix between these two types of interventions that will lead to lasting stability and well-being”.
THE STATES COLLECT THE GOVERNANCE ON STRUCTURAL REFORMS TO EUROPE
“I think there are many things that speak in favor of governance of structural reforms exercised jointly at the Eurozone level – continued Draghi -. Since structural reforms in each country of the area are a legitimate interest of the entire union, c 'strong collegiality is needed in reforms not only at the national level, but also at the European level. In any case, the whole discussion on the importance of structural reforms leads to only one conclusion: the sooner they are done, the better”.
SPAIN AND ITALY: STEPS FORWARD WITH LABOR AND PRODUCT MARKET REFORMS
“Several countries have made significant progress on structural reforms during the crisis and, in particular, there is evidence that inflation has become more sensitive to cyclical conditions in those countries that have made labor and product market reforms, such as Spain and Italy".
FLEXIBLE ECONOMY IS PART OF EUROPEAN DNA
According to the head of the ECB, an adequate level of flexibility of national economies in the euro area “should be part of our common DNA. As in any political union, the level of cohesion within the euro area depends on whether each country is better off in the union than outside. The convergence of economic performances is essential to keep the union together while continuous divergences due to structural non-homogeneity have the opposite effect”.
Furthermore, for Draghi, labor market reforms in Europe must leverage the intensity of work itself, i.e. flexibility of hours and wages, rather than layoffs and redundancies, if their positive benefits are to be maximized already in the short term .
