Editor Pick – Euro Area Policies: 2007 Article IV Consultation
There was broad agreement between staff and authorities on most issues. The main points areas follows:
• The outlook is the best in years. The economy is poised for a sustained upswing, partly because of cyclical considerations, but also because of policies, which have up t now had a forward-looking cast. The area’s external position and the real effective exchange rate of the euro are within range of medium-term equilibrium.
• Stabilizing inflation below 2 percent might well require a further gradual tightening of
• Fiscal outturns and policies have been strong, and intentions are for this to continue; but there are concerns that past accomplishments together with benign prospects will prompt some letting down of the guard, particularly in countries still some distancefrom their medium-term objectives.
• With structural policies representing the area’s main contribution to an orderly
resolution of global imbalances, staff welcomed the renewed impetus behind the
Lisbon Agenda. Labor market developments continue to surprise on the upside, but
much remains to be done to increase participation rates. Product market policies have
been moving into higher gear, but 50 years after the signing of the Treaty of Rome,
contestability in sheltered sectors remains problematic and is central to reversing the
weak performance of productivity.
• Increased contestability and integration in the financial sector is also key to improving performance, and significant initiatives to strengthen markets and the stability framework to that end are underway, but how to proceed is controversial.
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