jean - claude trichet : structural reforms in the euro area lecture by mr jean - claude trichet, president of the european central bank, on the occasion of the receipt of the efr - business week award 2004, organised by economische faculteitsvereniging rotterdam, rotterdam, 20 april 2004. * * * introduction the conclusions at the recent european council regarding the implementation of the lisbon agenda in eu countries have been both encouraging. while some modest progress has been made in the first years, the pace of reform needs to be very significantly stepped up if the targets are to be achieved. and it is encouraging that the european council is therefore committed to a more forceful implementation. the implementation of the lisbon agenda is all the more pressing as some countries have shown how an ambitious reform agenda can bear the expected fruits for long - term employment and output growth. in the netherlands, for instance, reforms in social security and the development of part - time and flex - time employment have contributed to a substantial increase of the employment rate and the integration of an increasing number of women in the labour market. several countries have now started to implement reform agendas. this has led observers to conclude that european countries are likely to get back on a more dynamic track over the medium run. while these advancements should be acknowledged, there are still important areas of economic reforms that have been barely touched upon but that are of vivid importance shall the euro area find again a more vigorous economic growth path. part of the problems in introducing and carrying these structural reforms may lie with the lack of communication of the importance of an ambitious reform agenda. in particular, the introduction of the euro has constituted a major change for euro area economies and can rightly be considered a structural reform itself that should trigger further changes and a more forceful removal of rigidities on labour and product markets. structural reforms in the euro area importance of structural reforms for output and employment growth let me, first of all, stress again the importance structural reforms have for output and employment growth. while the objective of higher potential growth rates and the importance of the intermediate targets, namely productivity growth and employment creation are by and large consensual view, there still remains some misunderstanding as to how these objectives can be reached. as the ecb has stressed, what is needed for these objectives to be achieved are economic reforms that ensure that capital, labour and product market rigidities will be substantially lowered. structural reforms in capital, labour and product markets and in social security

of south africa ’ s export commodities weakened during the second half of the year and the federal reserve raised its main policy rate in december 2015. perceptions of south african risk were also important, with the rand depreciating abruptly on news that finance minister nhlanhla nene had been removed from his post. bond prices and credit default swaps on south african government debt also spiked, signalling investor concern about the reliability of the south african government as a borrower. research suggests that markets were pricing government bonds as if south africa had already lost its investment grade credit rating. conditions deteriorated further early in the new year, when china ’ s economy experienced a period of stress. the shanghai stock market index fell sharply and the renminbi was allowed to depreciate abruptly against the us dollar, triggering a bout of capital flight from china. in an atmosphere of market fear and risk aversion, the rand depreciated further, in line with many of its peer currencies. this sell - off in emerging market currencies went too far – an excellent example of the wellknown phenomenon of overshooting in exchange rate markets. as a result, emerging market currencies were primed for a rebound episode. world economic conditions began to move back in their favour in the second quarter of the year. china ’ s growth stabilised with help from stimulus policies, and commodity prices stopped falling and even registered gains. meanwhile, risks emanating from the brexit convinced the world ’ s largest central banks to either ease policy or delay further tightening. the net result was an appreciating trend in emerging market currencies. in line with the overshooting diagnosis, the countries which experienced the largest depreciations during the sell - off phase enjoyed the biggest rebounds. south africa joined this rally : the rand strengthened through june and july, reaching a recent high of r13, 23 in early august. the south african currency benefitted from commodity movements, including from a higher gold price following the brexit. we also saw the effects of a renewed search for yield by investors looking for something better than negative interest rates on advanced economy government bonds. in addition, domestic factors were supportive of the rand. the major ratings agencies reaffirmed south africa ’ s sovereign investment grade credit rating in june. the local elections in august demonstrated the vitality and competence of our democratic institutions. but the rand ’ s appreciation phase would be short - lived.