After years of low and erratic growth, the economies of the Eurozone, including those most affected by the crisis, appear to have reached a turning point. This is what the OECD noted in its latest report on the area, presented today in Brussels, which notes how "confidence has improved and progress has been made in reducing fiscal and current account imbalances" as well as " in improving competitiveness in many vulnerable countries”.
Even structural reforms in these countries, the report reads, "have made strong progress". However, economic activity remains erratic and fragile, unemployment rates continue to be high in many countries and in most of these youth unemployment is more than double the general rate.
Furthermore, due to the crisis, "inequalities have widened further". On the one hand, the impressive fiscal consolidation underway, made necessary by the high public debt, and on the other, the weakness of the private sector balance sheets continue to weigh on growth.
The impact of accommodative monetary policy is weakened by financial fragmentation in a context which has seen inflation fall to around 1%. While on the one hand the cost of money at current levels provides support to economic activities, on the other "if maintained for a long period, it could generate asset price booms in some countries and slow down the process of cleaning up bank balance sheets".
Among the 'vulnerable' countries (Greece, Ireland, Italy, Portugal and Spain), the OECD beats Italy on labor costs. THE costs of work units “have substantially decreased, with the notable exception of Italy”. Referring to the five countries, the OECD explains that the price adjustment was "less than that of wages, which limited the effect of the fall in labor unit costs on price competitiveness".
