since the early 1990s. between 1995 and 2003, real annual gdp growth in the u. s. has averaged 3. 3 % compared to 2. 2 % in the eu - 13. this sustained growth gap suggests that there is a structural dimension to the seemingly cyclical question of why the eu recovery is so weak. measurement discrepancies account for some of the gap between official growth statistics in europe and the united states. these discrepancies emanate from different sources of data, from differences in the scope of measurement and from different ways in which prices and hence price deflators are measured. price measurement differences exist in the quality adjustment of prices ( hedonic pricing ) and in the pricing of services in trade and finance as well as in non - market sectors like education and health. in addition, the measurement scope itself can vary. an example is the treatment of military expenses which are categorized as investments in the u. s. and as current expenses in the eu. finally, data source issues are particularly relevant in the technology sector. in the eu, software investments are derived from typically conservative corporate accounts. in the u. s., software investments are estimated directly from software expenses. these measurement issues are well known amongst economists on both sides of the atlantic. nonetheless, i am struck by how little attention they receive in comparative economic discussions. with increasing focus on data measurement synchronization, measurement differences are fortunately on the decline in cross - country comparisons of national income accounts. nonetheless, such see e. g. imf world economic outlook april 2005, chapter iii. measurement issues currently explain between 0. 5 and at most 1 percentage point of the growth differential between the eu and the united states. 2 we should consider the upper limit of this range as a litmus test to the question of whether there is a structural growth differential between the eu and the united states. in addition to various measurement differences, about one percentage point of the difference in real gdp growth rates between the eu and the u. s. can be attributed to the higher growth rate of labour input in the u. s. for the period between 1980 and 1995. this is attributable to a stronger increase in the working population in the u. s. and a marked relative decline of effective working hours in the eu. factors causing this decline in individual labour input can be divided into two categories : first, numerous rigidities in european labour markets were introduced over the past decades : working hour restrictions

time and temporary employment in germany are boosting labour input. in line with this positive albeit hesitant trend of bringing more workers back into the economy, productivity growth rates have begun to recede in europe. the primary challenge for the european economy is to compensate this natural initial decline in productivity as a result of higher labour input. product markets must be further liberalized in order to unleash the full productivity potential of the new information and communication technologies. this will in turn further enhance ict enabled capital deepening by european businesses. such a virtuous cycle may well be enhanced by an insufficiently understood productivity lag effect from ict investments which could further benefit european businesses in the years to come. mervyn king, “ foreword ”, in : james proudman und stephen redding ( ed. ), “ openness and growth ”, bank of england, 1998. this virtuous process can be initiated. indeed, many european countries are well on their way. germany, for example, has steadily increased its competitiveness and is the only g7 country with a growing global export share over the last 5 years. by the same token, we must recognize that the process creates uncertainty for many european citizens. such heightened levels of uncertainty may impede consumer confidence. increasing overall labour input decreases labour productivity at least in the short - run and leads to downward pressure on wages. it seems to me of vital political and economic importance to counteract this pressure along two lines. first, as i have already indicated, we have to ensure that by way of product market reforms these productivity gains find their way through to consumers in the form of lower prices thereby dampening the downward pressure on real wages. in switzerland, where we face similar issues in the framework of the bilateral treaties, we have introduced an instrument package called “ accompanying measures ” to ensure an orderly transition. the officially fixed transition periods offer a time window within which the corresponding reforms on product markets can offset an eventual decline in nominal wages. second, european policy makers should focus on educational efforts to efficiently integrate the workers that are being brought back into productive activities through labour market reforms. we must not forget that many of these men and women have been unproductive for many years due to exclusionary labour market practices. their skills are unlikely to be state of the art when they return to work. continuing education and on the job training will therefore be crucial elements in bringing up their skills to a level commensurate with the new technologies they are likely to encounter in