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Press release

Juncker tells MEPs euro area is in good shape, but unemployment still too high

Economic and monetary affairs - 22-11-2006 - 15:31
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Jean-Claude Juncker gave an upbeat assessment of prospects for the euro area to MEPs on Wednesday morning. Speaking to the Economic and Monetary Affairs Committee, the chairman of the Eurogroup and Prime Minister of Luxembourg stressed the extent of structural reforms already undertaken and that Member States were using increased tax revenues to consolidate their budgetary positions. He warned, however, that unemployment was still unacceptably high.

Mr Juncker spoke of accelerating growth and a recovery which was widening and solidifying.  Inflation was approaching the ECB's definition of price stability, but he warned against the idea that the current 8 per cent unemployment rate was acceptable or indeed the natural minimum, calling such a stance "reactionary". "If people think we are happy with this level, we will lose all credibility with citizens, especially those on lower incomes," he said.
Euro area governments were taking account of the revised Stability and Growth Pact's insistence that "good times" should be used to lower debts and deficits - this was, he said, notably the case in Germany.  "The Treaty speaks of the 3 per cent [of GDP limit on government budget deficits] not as a goal, but as a ceiling. When the deficit is below 3 per cent, the aim should be to get to the medium term objective."
On oil prices, while stressing that it could not be assumed that the recent fall in prices would be sustained, he said that they had come down a lot in recent weeks and "those who have responsibility for the euro area whether economic or monetary cannot close their eyes to the likely impact of this."
Turning to the Lisbon Agenda, he expressed the hope that the next Spring European Council would adopt much more specific recommendations for the euro area countries than in the past. He stressed the "impressive" extent of reforms already undertaken, noting the external view from the IMF that Europe was not stuck in "immobilism".
Asked by Margarita Starkevičiūtė (ALDE, LT) about global economic imbalances and whether these might be exaggerated, especially for a transition economy such as China, Mr Juncker said that an upward revaluation of the Chinese currency would help to resolve some imbalances. Chinese monetary policy was evolving, he said, though not yet far enough. 
Wolf Klinz (ALDE, DE) asked about the downgrading of Italian government's credit rating. Mr Juncker suggesting this might relate to the past rather than the short term future, since the new Italian government was making real effort at consolidating its budget.
Ieke van den Burg (PES, NL) was pleased to hear Mr Juncker's comments on reducing unemployment and praised his recent statements on the importance of a social dimension to European policy.  Mr Juncker said he regretted that the development of the EU's employment guidelines had become too formalised, so there was no longer thorough political debate on employment issues at the European Council.   He stressed his view that in a big single market there also needed to be minimum social standards, such as minimum wages. It was not about setting the same rate for all countries, but about having a minimum level to help fight poverty.
Responding to Harald Ettl (PES, AT) about hedge funds, Mr Juncker said he was also concerned, and said "we do need rules for supervision - that is essential."  Ivo Strejček (EPP-ED, CZ) raised the issue of demographic change.  Mr Juncker said this was often discussed by the Eurogroup, and that the reform of the Stability Pact had been undertaken with this in mind: "Demographic change will lead us to a brick wall in the next twenty years unless we prepare the public finances for it.  But it is hard to strike the right balance, adjusting social benefits while also being socially fair."
Committee on Economic and Monetary Affairs
Chair : Pervenche Berès (PES, FR)
REF.: 20061120IPR00046