growing industry of macroanalyses that was spawned by their article. samuelson - solow ’ s followers took the phillips curve as literally offering a “ menu ” of combinations of inflation and unemployment from which policymakers could choose at will – that is, an exploitable trade - off. in february 1963, three years after the publication of samuelson and solow ’ s paper, federal reserve chairman william mcchesney martin openly rejected the notion of an exploitable in fact, phillips ’ ( 1958 ) paper was based on annual data, whereas the two top panels of figure 1 are based on monthly data downloaded from the nber macro history database on the web ( see at : www. nber. org ). see samuelson and solow ( 1960 ). trade - off between inflation and unemployment in his statement before the joint economic committee of the u. s. congress. 3 disapprovingly, he pointed out that : “ [ … ] there was even serious discussion of the number of percentage points of inflation we might trade off for a percentage point increase in our growth rate. the underlying fallacy in this approach is that it assumes that we can concentrate on one major goal without considering collateral, and perhaps deleterious, side effects on other objectives. ” in december 1965, two years before milton friedman ’ s presidential address to the american economic association, which ( re - ) introduced the notion of the long - run vertical phillips curve into macroeconomics, 4 chairman martin discussed the role of inflation expectations in shifting the unemployment - inflation equilibrium along the very same lines friedman and edmund phelps 5 would then expound in analytical terms : 6 “ if labor had had reason to fear a persistent substantial rise in the cost of living, it would have felt compelled to seek compensatory increases in wages ; and if management had had reason to expect a general increase in the price level, it would not have felt compelled to resist such demands. in that case, wages would certainly have risen faster than productivity ; prices would have been raised in consequence ; and the feared inflationary spiral would have become actuality. ” 7 subsequent developments are well known. on the theoretical front, 1967 and 1968 saw the independent enunciation of the “ natural rate hypothesis ”, both in friedman ’ s presidential address to the american economic association – which i mentioned already – and in the work that ultimately won edmund phelps the nobel prize. underlying the natural rate hypothesis are two key concepts. • first, monetary neutrality :

yves mersch : competitiveness of europe and european financial markets panel contribution by mr yves mersch, member of the executive board of the european central bank, at the 30th edition of the workshop " the outlook for the economy and finance ", villa d'este, cernobbio, 6 april 2019. * * * to increase competitiveness is the main driver for higher potential growth. member states have to pursue politics and establish institutions that stimulate the dynamics of a competitive private sector. in most euro area countries potential growth has remained too low, however. labour market rigidities and inefficient business environment conditions seem to be major impediments. in particular, labour supply is held back by policies which do not sufficiently motivate to take up jobs and do not tackle skill mismatch or labour shortages. moreover, investment could be strengthened through fostering competition, improve the business environment and reduce uncertainty e. g. through improving the quality and efficiency of public institutions more generally. despite favourable economic and financing conditions, structural reform progress has been rather limited, including in several of the weakest countries. the trend of insufficient structural reform implementation observed in particular since 2014 has continued during the last year. only a few countries have engaged in more far - reaching structural reforms, most notably greece and france. some countries even reversed recent reforms that had been designed to improve the smooth functioning of the economy, most notably in the areas of labour markets and pension systems. overall, reform efforts were not in line with reform needs. these policy areas concern national competencies, but in a single markets cross - border spillover effects are generated. governments therefore need to act at national levels, enhanced through procedures, rules and harmonization at eu level. against the background of limited reform effort and in spite of the robust cyclical upswing, overall risks and vulnerabilities in many cases have only moderately declined since last year. the commission ’ s annual assessment of country specific recommended reforms finds only limited progress. 1 the progress made is evaluated using five categories : “ no progress ”, “ limited progress ”, “ some progress ”, “ substantial progress ” and “ full implementation ”. “ no progress ” means that the member state concerned did not even “ credibly announce ” measures that would aim to address the policy recommendation. out of 73 country specific recommendations ( csrs ), none saw full implementation, and substantial progress was made in only two cases. for the overwhelming majority of csrs ( more