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Needs to press economic, labor reforms in Europe

EU Economic and Monetary Affairs Commissioner Joaquin Almunia said Tuesday, Europe has to sharpen its competitive edge by pressing for labor market and economic reforms.

„Far more remains to be achieved,” he said. „While the pickup in productivity is indeed reassuring, there is still large room for improvement.” He said labor output per hour was poor in some sectors, singling out retail and financial services. „This reflects the pressing need to stimulate competition in services, especially given that this area now accounts for 70% of modern economic activity,” he told a Brussels conference organized by the Institute for Economic Research at the University of Munich, Germany. „There is also scope for countries to make labor markets more flexible. For example, benefit systems in many member states still create disincentives to work. And unemployment is still relatively high, especially among young people,” he said. National governments were still not doing enough to invest in skills and education that would support future economic expansion, he said.

The European Union economy grew three per cent last year, creating almost 3.5 million new jobs and bringing jobless rates down to just above seven per cent - the lowest level in 15 years. The EU's executive arm expects new jobs to be added this year and next to cut this rate further. But Almunia said it was not clear that economic reforms had contributed to better labor productivity and it was possible the recent acceleration is a return to a normal growth trend after a period of low growth.

„The key to improving Europe's competitiveness is improving productivity. Much of Europe's disappointing growth performance in past years is the result of a poor productivity performance,” he said. Workers in the United States accelerated how much wealth they produced per hour after 1995 while the 13 nations that use the euro suffered „a trend decline” that worsened sharply after 2001, he said. Hourly output in the euro zone fell to 88.5% of the US level in 2005, he said. (brandonsun.com)