distortions arising from high and volatile inflation, the development of growth and employment are ultimately determined by the structural features of an economy. well - designed structural policies promoting flexibility in product and labour markets, enhancing education and training and fostering research and development are, therefore, crucial for the long - run performance and smooth functioning of an economy. this holds particularly true in a monetary union like the euro area, where national monetary and exchange rate policies are no longer available as adjustment mechanisms. recognising the need for sound structural policies, the member states have established a comprehensive reform agenda in the context of the lisbon strategy aiming at enhancing the growth and employment potential of the euro area countries. yet, while there have been some remarkable improvements, reflected, in particular, in the creation of 15 million new jobs in the euro area since the start of economic and monetary union ( emu ) compared to only around three million new jobs in the nine preceding years, in many countries, structural reform efforts have not sufficiently enhanced the flexibility and efficiency of product and labour markets. this is evidenced by the still unacceptably high unemployment rate in some regions or segments of the labour market, and the very low level of labour productivity growth in the euro area. 1 implementing and carrying out structural reforms is undoubtedly a challenging and arduous task. however, it is particularly important to resolutely pursue such reforms in the current environment, where the euro area economy is facing a number of important challenges, including rapid technological change, accelerating globalisation forces and ageing populations. the experience of those european countries, which have undertaken courageous and successful reforms in the past, shows that they pay off. 2 the netherlands is one such country, and is now characterised by a flexible labour market with the lowest unemployment rate in the euro area at 3. 2 % in 2007. in addition, with a total participation rate of 78. 5 % in 2007, the highest in the eu, and a female participation of 72. 2 %, two of the lisbon objectives have already been met. the annual growth rate of real gdp per hour worked in the euro area averaged only 1. 3 % over the period 1999 - 2006. see a. annett ( 2006 ) “ lessons from successful labour market reformers in europe ”, imf euro area policies : selected issues, august 2006. i would like to turn now to some of the reform policies pursued in the netherlands that led to the remarkable performance of the dutch labour market over the last quarter

it is crucial to understand this link between structural features and the dynamism of the economy, on the one hand, and the optimal monetary policy response to a downturn, on the other hand. here in the euro area we did not benefit from an economic structure and dynamism favourable to strong productivity enhancements, and we face labour and product market rigidities that stand in the way of a quick downward adjustment of price and wage cost inflation in response to an economic slowdown. this is most evident from the fact that during the three - year period from mid - 2001 to mid - 2004 unit labour costs in the euro area increased on average by around 2 % per annum, while they slightly decreased in the us over the same period ( after having increased substantially in 2000 ). i regard this as an important message, not least for those who argue that we should have lowered rates more aggressively, and almost at the same time, defend an extensive interpretation of the socalled european social model with all its implied rigidities and inflexibilities that make such a response so difficult, if not impossible. given the dynamics of shocks and the structure of the euro area economy, the policy easing that the ecb started in 2001 and the low policy rates that prevailed over recent years represented a rather accommodative policy stance over an extended period of time. policy rates over most of the last years were closer to the lower end of the range prescribed by the majority of policy benchmarks which one can estimate on the basis of the past policy conduct of the ecb and our legacy central banks. ( this is particularly true if one takes into account the build - up of excess liquidity over recent years. ) with the benefit of hindsight, we can now say that our stance was key in preventing a recession and ultimately facilitated the recovery. let me sum up. it is of course too early to draw firm conclusions on the conduct of monetary policy over the more than seven years since the ecb was set up. nevertheless, the following points can be made. first, the lower volatility of the policy rate in the euro area than in the us seems to mainly emerge from differences in the underlying economic structure and developments rather than fundamentally dissimilar monetary policy objectives and strategies. as you know, we would very much welcome structural reforms which enhance competition and flexibility in goods and labour markets. such reforms would not only support productivity and employment, they would normally also make it possible for the ecb