jean - claude trichet : economic reform in europe contribution by mr jean - claude trichet, president of the european central bank, at the panel on eu / us cooperation at the advancing enterprise conference, london, 26 january 2004. * * * mr chancellor, ministers members of the ecofin, ladies and gentlemen, the european central bank ( ecb ) very much welcomes and supports the economic reform process in europe and it is a great pleasure and honour for me to participate in this very distinguished panel. well - designed structural reforms in capital, labour and product markets will increase the flexibility of the euro area economy, enhance its resilience against economic shocks and ultimately result in a higher long - term growth rate potential which should be our first priority in europe. 1. the ecb contribution to long term sustainable growth the ecb provides important contributions to the economic reform process by helping to ensure a stable macroeconomic environment in the euro area. in particular the ecb maintains price stability in the euro area and helps to ensure financial stability. maintaining price stability contributes to an economic environment favouring growth and job creation. four main reasons can be mentioned in this respect. first, it preserves and bolsters consumers ’ purchasing power and enhances the efficiency of the market at allocating resources. second, price stability paves the way for lower uncertainty and risk premia in financial markets : this ultimately implies lower medium and long - term interest rates. third, price stability provides markets with an indispensable nominal anchor for adjusting changes in wages consistently with productivity growth, thereby contributing to preserve competitiveness. and fourth and not the least, price stability prevents the economically and politically undesirable arbitrary redistribution of wealth and income that arises in inflationary as well as deflationary environments. ensuring price stability and ensuring the credibility of price stability over the long term is the most important contribution of the ecb and the eurosystem to growth and job creation in europe. the ecb makes also an important contribution to safeguarding financial stability in the euro area. this should not be underestimated, given that a well - developed and stable financial system improves the efficiency of financing decisions and ultimately fosters economic growth. over the last five years, the ecb ’ s stability - oriented monetary policy has resulted in low and stable inflation and has ensured that medium and long - run inflation expectations have been well anchored. furthermore, the euro area has enjoyed a high degree of financial stability. however, a monetary authority such

as of the european union as a whole should be to increase substantially our growth potential. this is crucial and calls upon increasing very significantly in particular our rate of employment, our labour productivity progress and our technological and scientific basis. second, as regards methodology, it is clear that we have to work out an appropriate concept for the actual, precise, to the point implementation of the reforms. the lisbon agenda is excellent in terms of diagnosis. it is not associated with a precise and efficient decision making process, with a powerful delivery concept, which is absolutely indispensable. i was very encouraged to hear clearly mr mc creevy stressing to the governing council of the ecb that the irish presidency will put the lisbon agenda implementation on top of its priorities. the ecb will very warmly back initiatives of the presidency in that domain. it is urgent. third, as regards prioritization of structural reforms, i would personally particularly mention four points which seem to me of utmost importance in the eurozone : youth unemployment which is attaining unacceptable levels in some economies ; unsatisfactory functioning of the single market in the service sector ; insufficient labour productivity progress in the economy as a whole ; and, lastly, consequences to be drawn from ageing in the management of the social protection schemes. fourth, as regards public opinion, i trust that we have all to exert maximum efforts to improve explanations, pedagogy, communication with the public at large. we are living in very vivid and exemplary national democracies and in a european union where the ultimate judge is the people. we have to convince our public opinion at large that each individual would be better off - with more growth and more jobs - if we could deliver the reforms of the lisbon agenda. the ecb will do all what it can to help improving pedagogy in this respect. and five, i confirm here that we, in the governing council of the ecb, know that structural reforms are not easy to work out, that it needs much courage and determination from governments, parliaments and social partners. we will back in the future as we have in the past this courage and this determination.