October 21, 2015 / 12:17 PM / 4 years ago

EU executive calls for competitiveness boards in euro zone states

BRUSSELS, Oct 21 (Reuters) - The European Commission called on Wednesday for euro zone countries to set up special institutions that would monitor how competitive their economies are and how quickly wages can grow.

The so-called Competitiveness Board would be independent and consider competitiveness in the broad sense — looking not only at cost, but also at productivity, skills, the attractiveness of the business environment, and innovation.

The call for competitiveness boards is part of a broader plan to further integrate the euro zone, which can only function well as a single currency area if its 19 members do not widely differ in terms of economic performance.

“Productivity is key for competitiveness, growth and jobs. A general slowdown in productivity has taken place in euro area member states. This represents a key challenge,” the Commission said in a statement.

The Netherlands and Belgium already have such boards. Germany has institutions for analyses or recommendations on matters related to competitiveness.

“Competitiveness is also essential to address sizeable divergences and imbalances that require difficult adjustment, such as those that build up before the crises. This is particularly important in common currency areas, since countries which share a currency cannot use the exchange rate to adjust imbalances,” the Commission said.

Greece, Ireland, Portugal, Cyprus and Spain all had to embark on painful reforms to boost their competitiveness as a result of the sovereign debt crisis, since devaluation of the currency — the euro — was not possible.

Addressing negative trends in productivity early on would make adjustments much less painful, the Commission argues.

But the European Trade Union Confederation criticised the idea, saying it put too much emphasis on wages and labour costs without mentioning education, public infrastructure or the quality of products and services.

“The euro area is suffering from a lack of investment and a lack of internal demand,” Veronica Nilsson, Deputy General Secretary of the ETUC, said in a statement.

“Setting up competitiveness boards that focus mainly on wages will not help. My fear is that the long-term aim is to influence wage settlements more strongly, and that’s a no-no for trade unions,” she said. (Reporting by Jan Strupczewski; Editing by Mark Heinrich)

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