jean - claude trichet : hearing at the economic and monetary affairs committee of the european parliament introductory statement by mr jean - claude trichet, president of the european central bank, at the hearing at the economic and monetary affairs committee of the european parliament, brussels, 25 june 2008. * * * madame la presidente, mesdames et messieurs les membres de la commission economique et monetaire, je me rejouis d'apparaitre devant votre commission aujourd'hui. je commencerai mon intervention par une evaluation de la situation economique et monetaire, en expliquant les raisons sous - jacentes a nos recentes decisions de taux. ensuite, je vous fournirai de plus amples informations sur les operations de politique monetaire de la bce en reaction aux tensions enregistrees sur le marche monetaire. anschließend mochte ich naher auf die ersten zehn jahre der europaischen wirtschafts - und wahrungsunion eingehen. außerdem werde ich die wichtigsten elemente des neuen strukturberichts des eurosystems uber arbeitsangebot und beschaftigung prasentieren. economic and monetary developments since my previous appearance before the european parliament at the end of march, annual hicp inflation has remained high, at levels significantly above 3 %. this mainly owes to strong increases in energy and food prices. moreover, upside risks to price stability over the medium term have intensified further over the past few months, in a context of very vigorous money and credit growth. looking ahead, the governing council expects inflation in the euro area to remain high for some time to come, before moderating only gradually in 2009. in line with this view, the latest eurosystem staff projections foresee average annual inflation between 3. 2 % and 3. 6 % in 2008 and between 1. 8 % and 3. 0 % in 2009. compared with previous staff projections, this represents a significant upward revision, reflecting higher oil and food prices as well as increasing inflationary pressures in the services sector. the governing council remains particularly concerned that current elevated inflation rates, which have proved higher and more persistent than previously foreseen, may become entrenched in private inflation expectations and lead to second - round

. the share of workers with tertiary level education has increased. these are encouraging developments, resulting from the implementation of structural reforms in product and labour markets, increased immigration and wage moderation. nevertheless, progress has been quite uneven across countries and significant challenges remain. from a monetary policy perspective, four conclusions can be drawn. first, there is a need to further increase the labour market participation and employment rate of all groups of society. we have not yet reached the lisbon employment rate target of 70 %. lower labour taxes, stricter work availability requirements and reduced incentives to retire early would contribute to stimulating labour supply. reduced restrictions on labour contracts and well - designed “ work / family reconciliation ” policies would among others support participation further. increasing product market competition would also help support employment creation. second, there is a need for making labour market institutions more flexible to facilitate a better matching of the skills of those who seek a job with the characteristics of labour demand. to help match demand and supply, wage developments should reflect local labour market conditions. third, there is a need to increase knowledge and the transferability of skills. bringing unemployed or inactive people into jobs will, over time, enhance individuals ’ labour productivity and thus real wages. good quality education is of the utmost importance and the recognition and incentives for young people, workers and firms to invest in education and training must be enhanced. the efficiency and service orientation of education institutions should be improved. in addition, the labour market should play a stronger role in signalling to education systems and workers which skills are in short supply. finally, the euro area should make better use of skills from outside the euro area. immigration policy should be closely aligned with the skills needed by the labour market, and ensure the successful integration of immigrants into the active workforce and society as a whole.