According to the IMF and the OECD, around 80% of this unemployment level appears to be structural, that is, generated by our own burdensome rules and regulations. EMU certainly stimulates structural reforms in the labour market. With increased capital mobility and a better functioning single market, firms will become more and more sensitive to overall labour cost differentials and business regulations in choosing a particular location in the euro area. They will therefore exert a considerable pressure for appropriate reforms. b/ In addition to structural reforms, a strong emphasis will continue to be put on competitiveness. Pre-euro economic policy meant monitoring the balance of payments and the foreign exchange and interest-rate markets. The authorities thus received constant feedback on key indicators affecting national economic performance and could react accordingly. These indicators were sensitive, multiple and very reactive. In contrast to the pre-euro period, a loss of competitiveness will not show up quickly on radar screens like foreign exchange markets, interest-rate markets or the external accounts. As a result, economic managers must monitor the relevant competitiveness indicators with even greater vigilance. The sanctions for economic policy errors could come more slowly and insidiously via rising unemployment and weak growth. The rules of a market economy, especially competition, continue to apply to each economy. Jobs are created by consumers when they choose the goods and services they feel are the best value for money. Businessmen allocate these jobs to various possible locations in various countries according to the relative competitiveness of these locations.

Other objections raised were the absence of instruments to respond to any asymmetric shocks, and the European economies' lack of flexibility and real mobility in the labour force. The conclusion was that the euro would never exist ! The facts have disproved this conclusion. But the very same arguments are sometimes deployed to suggest that the euro-area economy contains some inconsistencies that could endanger its prosperity. What can we say, from an economic standpoint, on this very important question? Firstly, that monetary union per se, and wherever it takes place, does not necessarily imply that, at any given point in time, all the participating countries will experience the same rate of inflation or of growth, even though the move to the euro was based on the successful completion of a convergence process. Let us focus, for example, on inflation. Present differentials do not appear to be very large, in comparison with the experience of the United States, a long-established monetary union of comparable size. Data on major cities of the US shows that inflation differentials have been at times very substantial, with divergences of 7 percentage points being recorded in the early 1980s. In the euro area, long-term convergence to a common level of prices gives naturally rise to differences in inflation rates across EMU countries. The convergence of productivity and living standards creates a trend towards price convergence, as a consequence of the commonly known Balassa-Samuelson effect.