jean - claude trichet : structural reforms in europe speech by mr jean - claude trichet, president of the european central bank, at the oecd forum, paris, 22 may 2006. * * * it ’ s a pleasure for me to be here at the oecd forum to share with you my views on structural reforms in europe. i am particularly honoured to take part in this forum given the leading role played by the oecd in shaping global discussions on economic, financial and, especially, structural issues, which are the topic of my intervention today. i wish also to pay my tribute to the outgoing secretary general donald johnston for his outstanding leadership and, if he permits me to say that, for his deep friendship. let me also welcome the new secretary general angel gurria for whom i have esteem and confidence since 25 years! economic performance of the euro area i would like first to start with a brief assessment of the euro area ’ s economic performance by recalling a few facts. over the last years the euro area witnessed a slight improvement in the utilisation of labour, which increased on average by 0. 2 % per year between 2000 and 2004. 1 this mainly reflects the rise in the euro area employment rate from 61. 5 % in 2000 to 63. 6 % in 2005 2 which corresponds to the creation of more than 11 millions new jobs over the same period and to a decline in the aggregate unemployment rate from 10. 5 % to 8. 6 %. remarkably, employment growth in the euro area showed resilience to the economic slowdown at the beginning of this decade, with employment growing on average by 1. 1 % over the period 2000 - 2005, compared to 0. 9 % in the us. however, the employment rate in the euro area remains low by international standards : for example, the employment rate was 71. 2 % in the us in 2004 3 and the unemployment rate clearly too high compared with, for example, the unemployment rate of about 5. 0 % in the us in 2005 4. furthermore, since the launch in 2000 of the lisbon strategy, the annual growth rate for the euro area has averaged 1. 8 % per year ( compared to 2. 8 % in the us ), thus remaining behind its main competitor. when comparing the euro area ’ s economic performance to the us, there is evidence of increasing disparities in growth. since the beginning of the 1990s, the gap in per capita income growth between the us and the

the euro area over the period 1996 - 2003 compared to 6. 9 % in the us. the euro area hicp index for telecommunications fell by 35 % relative to the overall euro area hicp index in the period 1998 - 2005. the third prerequisite for higher growth in the euro area is the unlocking of business potential by creating an entrepreneurial - friendly economic environment. this includes lowering costs imposed by public sector administrations for existing firms and business start - ups. let me illustrate this with some figures. according to the world bank, in 2004, the average cost of starting a business with up to 50 employees in the euro area ( excluding luxembourg ) is estimated to have been around ten times larger than in the us 12. the policy implication of lowering business regulation is that eu countries can help to raise economic growth by avoiding an excessively restrictive regulatory environment for firms. the immense importance of this issue is increasingly appreciated by european governments and several initiatives at national or eu level have started to implement actions for a “ better regulation ”. in march 2006, the european council called for the establishment of “ one stop ” arrangements in each member which would allow the setting up of company in one week by end 2007. today it takes on average 27 days to set - up a new business in the euro area compared to 5 days in the us. 13 fourth, to fully exploit productivity potential, the labour and product market reforms just mentioned need to be accompanied by policies that help to diffuse innovation and technological change. this includes, inter alia, measures to support innovation by higher investment in research and development ( r & d ). in 2004, roughly 1. 9 % of euro area gdp was spent on r & d compared to 2. 8 % in the us. europe has set itself the target of achieving a share of 3 % of gdp by 2010. analyses made by the european commission 14 show that if the effects of the increased knowledge investment foreseen within the lisbon strategy were added in, the increase in annual eu potential output growth could reach up to three quarters of a percentage point. of course, these are just crude calculations, which can certainly be challenged, but they give a notion of how large the welfare - enhancing potential of implementing structural reforms is. of crucial importance in this strategy are the efforts to improve the labour force ’ s level of education and expertise. the impact of education on growth may be related to innovation, as well as the adoption of new technologies. additionally, better education and training help