Italian productivity lower than that of Barbados - Europe looks to productivity to boost growth without inflation - by Simon Kennedy
PRODUCTIVITY may be about to do for Jean-Claude Trichet what it did for Alan Greenspan. Gains in productivity — the amount of work per employee, a measure of efficiency — let the former US Federal Reserve chairman keep interest rates low without feeding inflation as the US economy soared in the 1990s and unemployment was the lowest in 30 years. Now, European workers are catching up to their American counterparts after lagging behind for most of the past decade. Last month’s agreement between Europe’s largest car manufacturer, Volkswagen, and union leaders to extend the working week without additional pay, is a sign of the times.
Europe’s rising productivity is helping allay inflation concerns and may allow Trichet, president of the European Central Bank (ECB), to limit the latest round of interest rate increases. The Geneva-based World Economic Forum last month ranked Italy below Barbados in its annual survey of competitiveness. New York-based management consultancy McKinsey said this month that France must do more to raise productivity. European growth is the best since 2000 and unemployment in July was at a five-year low of 7,8%.
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