Get your macro-economics right before labour reforms

In an economic environment marked by the rationalisation of workflows and by global competition, good macro-economic figures are a necessary condition for creating jobs, but not a sufficient one, experts at a Brussels conference agreed. 

More than thirty speakers came together in Brussels at a two-day conference organised by the European Trade Union Congress [ETUC] on 20 – 21 March 2006 entitled “Labour market reforms and macro-economic policies in the Lisbon agenda“.  

The final session of the conference was under the theme of “Labour market reform and macro-economic policies: How do they fit together?”. In this session, Pervenche Berès (PSE, France), the Chairwoman of the Parliament’s Committee on Economic and Monetary Affairs, said that a pro-active approach to monetary and budgetary policies, the two main components of macro-economic politics, is essential for creating jobs and reforming the labour markets. Lots of questions arise as to the actual reform capacity: how do you spur reform and how do you promote research and development if more public spending may result in missing the targets of the Stability and Growth Pact? Where do you cut spending? 

Ms Berès said the European Central Bank’s policy was still marked by that institution’s young age and its efforts to try to establish its authority. She expressed her hopes that one day the Central Bank might start serving other objectives besides price stability. This would, she said, be in line with the Bank’s Statute, which says: “Without prejudice to the objective of price stability, [the Bank] shall support the general economic policies in the Community with a view to contributing to the achievement of the objectives of the Community[…].” 

In contrast to that, UNICE general adviser Jean-Paul Mingasson stressed enterprises’ natural interest in price stability. He said that lots of today’s problems, and most importantly, labour market problems, have a macro-economic dimension and that macro-economics can therefore help to solve them. “There is a whole host of reforms that can be implemented,” he insisted. The problem was, however that “the countries most in need of reforms are also closest to their budgetary limits”. 

Economic and Financial Affairs Commissioner Joaquín Almunia agreed: “You better get your macro-economics right, because if you make an error in macro-economics, you create a disaster”.  For this reason, he said, macro-economics do matter a lot, but they are not sufficient for creating growth. “Even with good macro-economic figures, we will not necessarily  be able to raise employment,” the Commissioner said. 

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