European governments must speed up reforms in order to reverse a decline in productivity growth that has left Europe far behind the US, the Governor of the Central Bank John Hurley said today.
'The failure of productivity levels to catch up with those in the US represents a crucial challenge for European policy makers,' Hurley said in a speech to the Leinster Society of Chartered Accountants in Dublin.
The Central Bank Governor said it was clear that many goals set out in the Lisbon Agenda, which aims to turn the European Union into the world's most competitive and knowledge based economy, would be difficult to meet by a deadline of 2010.
'The failure to meet the Lisbon targets has been partly due to the weaker global economic environment during the first half of the decade but also partly due to a lack of urgency among member states in implementing the necessary reforms to improve the functioning of markets,' he said.
'If the Lisbon Agenda is to get back on track and the EU is to realise its full growth potential, the pace of reform has to be stepped up at both European and national levels,' he added.
Addressing a recent slip in the country's traditionally relatively high productivity levels, Mr Hurley said he hoped data over the course of the rest of the year would paint a clearer picture of what was happening to the high-growth economy.
'The extent of the productivity slowdown during the first half was surprising and is being analysed by the Bank,' he added.
The Governor said that while research and development activity had picked up in Ireland in recent years, it was still well below the European Union average. 'In order to remain competitive and move the economy up the value-added chain, it will be essential to increase further the amount of R&D carried out in this country and improve the innovative capacity of the economy,' he said.
