In the external domain, the Commission’s first Annual report on the euro area, published on 12 July 2006, highlights the widening of global imbalances as the key challenge for the euro area and the world economy as a whole.
Although the eurozone’s current account is fairly balanced, the unparalleled size and duration of global imbalances mean that any adjustment carried out in a disorderly manner would necessarily impact negatively on its economy.
The euro area must therefore take leadership on the world economic stage to address these challenges. This will require speaking with one voice, especially in international financial institutions where the euro area so far lacks a strong and coherent representation despite the euro being the world’s second most important currency.
Internally, the report shows that things are looking up, with eurozone GDP forecasted to grow at a rate of 2.1% in 2006, compared to 1.3% the year before, and more than one million new jobs expected to be created.
Nevertheless, stronger economic reforms will be essential as the pace of job creation is still too slow to fulfil the Lisbon objectives and unemployment continued to represent 7.9% of the labour force in May 2006.
The report also warns against recent protectionist trends in the EU, which prevent companies from reaping the full benefits offered by the internal market and the single currency. “One money” must support “one market”, stressed the report.
