OESO waarschuwt voor stagnatie tot 2020 als Europa geen economische hervormingen doorvoert (en) - Main contents

EUOBSERVER / BRUSSELS - The OECD has voiced concerns about the economic prospects of the eurozone if structural reforms are delayed further.

The Paris-based club of the world's 30 richest countries published its regular report on the development in the 12 member states of the European monetary union on Tuesday (12 July).

The paper argues that economic growth in the area will be half of its current level in two decades if the countries' governments fail to implement necessary reforms.

It spells out lack of integration in the services market - still "largely segmented by country" - as one of the main reasons why important growth opportunities in the eurozone are still unexploited.

Greater labour market flexibility would also widen the room for monetary policy action, as it could reduce the output cost of controlling inflation, the OECD suggested.

Concerning budgetary practices, the group has indicated that the failure of several countries to abide by the eurozone rules results from "blurred incentives, and weak surveillance and enforcement", adding that governments should show "greater ownership of the fiscal rules", underpinned by solid budget institutions.

The EU's finance ministers approved a disciplinary action against Italy and Portugal at their meeting on Tuesday, and warned Germany and France that they will breach the 3 percent deficit limit set this year, with Germany heading for 3.7 percent in 2005 and 3.4 percent in 2006.

The Ecofin council will have to decide later on whether to reopen infringement proceedings against both countries, after they were suspended in 2003.

Brown urges reforms

The OECD report has indicated that "Improving the framework conditions for innovation is also important for boosting growth".

A similar message was spelled out by UK finance minister Gordon Brown as he addressed the European Parliament's economic and monetary committee on Tuesday (12 July).

The chancellor pointed out that the EU's economies have been failing to bring the unemployed back to work, as about half of the block's 20 million jobless have been redundant for more than a year.

He therefore suggested that both national and European spending should be focused on improving education, research, innovation and life-long training in order to make citizens better prepared to change jobs in case of restructuring in various spheres.

"Only if we invest in education, infrastructure and science will we be able to compete with other emerging global players other than on lower pay", he said.

The UK presidency will try to push for a boost in re-directing European funding later on this year when the talks on the 2007-2013 budget resume.