In marked contrast with the gloom-mongering of the Centre for European Reform (which erroneously questions whether the eurozone will crack), the latest OECD Economic Survey of the euro area, presented on Thursday 4 January, dwells at length on the many challenges still ahead. These include the area's low growth potential and lack of resilience (resistance of economies in case of a shock).

According to the Organisation for Economic Cooperation and Development, 'the early years of monetary union have shown that less flexible economies can have a rough ride, missing out on the full benefits of the single currency'. The problem stems from the 'structural rigidities' of the euro area, which 'tend to reduce growth and make inflation more persistent'.

For OECD economist Boris Cournede, while the question of dropping the euro is obviously not on the agenda (for the medium or longer term), there is nevertheless cause for concern. 'If a number of trends continue (particularly in Portugal), households will pay a heavy price' during a long adjustment period (lower salaries, etc.).

'What we have tried to demonstrate in our study is that this type of adjustment can be avoided through the implementation of structural reforms,' added the OECD expert. The euro countries have already implemented major reforms in the last few years, as recently underlined by the Director General of the International Monetary Fund, 'but our analysis shows that not enough effort is being made', insists Boris Cournede, 'on the labour market or in services (including financial services)'.

Accordingly, the OECD makes a number of recommendations for 1. easing employment protection legislation, 2. boosting wage flexibility, 3. reducing obstacles to labour mobility, 4. stimulating competition, and 5. opening financial markets further.

The OECD report also returns to the need for budgetary consolidation by the member states. Given the...

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