23.5.2023
EN
Official Journal of the European Union
C 180/5
However, there are significant labour market differences across Member States and sectors.
Since 2019, job creation has been the strongest in information technology and professional services while transportation, accommodation and food have recorded job losses.
Demographic change is likely to also play a role in the tightening of euro area labour markets.
Adequate and effective investment in quality education and training at all ages will be key to mitigating current and future skills shortages and supporting the green and digital transition.
Wage growth somewhat increased during 2022, leading to an aggregate increase in unit labour costs.
However, it remained moderate overall and is projected to stay well below inflation.
Real compensation by employee is projected to contract by 2,8 % in 2022 and by a further 0,9 % in 2023 before recouping part of the loss in 2024.
Anchored inflation expectations play a key role in mitigating risks that rapid rises in wage claims push inflation further up.
(11)
Structural reforms, including those carried out as part the European Green Deal or green and digital reforms supported by the ‘Facility’, in particular following the amendments introduced in Regulation (EU) 2021/241 by Regulation (EU) 2023/435 of the European Parliament and of the Council (5) in order to implement the REPowerEU Plan contained in the communication of the Commission of 18 May 2022, are key to strengthen the single market and the resilience of the euro area economies.
In that regard, it is also important to implement the country specific reforms recommended by the Council in 2022 in the context of the European Semester.
Further improving the business environment, including by reducing barriers to investment and to the reallocation of capital, modernising public administrations, speeding up the granting of permits while protecting the environment, and removing restrictive regulatory frameworks can increase productivity and growth.
Reforms, together with investment, are instrumental to accomplishing the green and digital transition, in particular for improving energy efficiency, supporting the transition towards climate neutrality, increasing the supply and deployment of renewable energy, as well as supporting reskilling and upskilling.
The rapid and persistent rise in energy prices has put the business models of energy-intensive industries and small and medium enterprises under pressure, with an impact on jobs and human capital.
Efficient insolvency regimes can support the transition and make it easier to reallocate resources.
Insolvency regimes across the euro area still differ greatly and increasing their effectiveness and harmonisation would support economic adjustment and the single market for capital.
(12)
The banking sector showed overall resilience in 2022.
While the euro area banking sector as a whole is well capitalised and has seen an improvement in profitability since 2021, a sharp deterioration in the macroeconomic outlook, together with higher interest rates raising costs for borrowers, may translate into weaker asset quality.
In a context of tighter access to credit, timely monitoring of risks, proactive engagement with debtors and active management of non-performing loans is important to maintain banks’ ability to finance the economy.
The resilience of credit institutions can be hampered by structural factors, including overcapacity and competition from new financial service providers.
Other risks can also emerge on the financial markets.
In particular, higher risk premiums and tightening liquidity conditions can lead to a fall in asset prices.
Due to margin calls, this can cause further pressures beyond the liquidity stress already experienced by some energy companies.
How the residential and commercial real estate markets react to higher interest rates also requires close monitoring, as lower demand and worsening debt-servicing capacity can exert downward pressure on real estate prices and accentuate cyclical risks, in particular in euro area Member States where household debt is elevated.
Moreover, increased cyber risks call for greater attention, and Regulation (EU) 2022/2554 of the European Parliament and of the Council (6) will strengthen financial firms’ resilience against risks related to information and communication technologies.
In September 2022, the European Systemic Risk Board issued Recommendation ESRB/2022/7 containing a warning asking private sector institutions, market participants and relevant authorities to continue to prepare for tail-risk scenarios.
(5) Regulation (EU) 2023/435 of the European Parliament and of the Council of 27 February 2023 amending Regulation (EU) 2021/241 as regards REPowerEU chapters in recovery and resilience plans and amending Regulations (EU) No 1303/2013, (EU) 2021/1060 and (EU) 2021/1755, and Directive 2003/87/EC (OJ L 63, 28.2.2023, p. 1).
(6) Regulation (EU) 2022/2554 of the European Parliament and of the Council of 14 December 2022 on digital operational resilience for the financial sector and amending Regulations (EC) No 1060/2009, (EU) No 648/2012, (EU) No 600/2014, (EU) No 909/2014 and (EU) 2016/1011 (OJ L 333, 27.12.2022, p. 1).