Eurozone needs strong economic governance to prosper

28 January 2008

Inappropriate mechanisms and governance may be frustrating the performance of the Eurozone economy, says a new briefing paper published today by Chatham House.

Created ten years ago, the euro is now the second reserve currency after the dollar. However the weaknesses of the EMU (European Monetary Union) are now becoming as visible as its strengths. A serious assessment of EU policies and performance is therefore required to ensure that policy targets and policy instruments do not conflict - both at a national and EU level.

Economic governance must promote internal cohesion and ensure coordination between current and future EMU members. The rise of emerging market economies and the enlargement of the global economy's playing field pose serious challenges to the competitiveness of the EU.

The most viable option now for Europe - a mature economy in a competitive global environment - is to focus on improving productivity. Europe should shed its low value added sectors and gradually transfer its workforce into high-value sectors if it is to maintain GDP growth above 2% in the long run.

Click here to read Exploiting Europe's Strong Potential: Governance, Institutions and Policies

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