Pension reform in Euroland could spur on Europe’s economy, enabling it to catch up with the US within the next six years, says a report by consultants PricewaterhouseCooper (PwC).
In European Economic Outloook October 2003, John Hawksworth, head of the macroeconomics unit at PwC, says that although US growth is likely to exceed average EU growth for at least the next 12 months, the relative performance of the US and EU economies is much less clear beyond 2004.
The most optimistic scenario envisages a soft landing for the US with significant progress on structural reforms in Euroland.
Hawksworth says in this scenario the key requirement in Euroland is to keep the labour reform programme on track. Recent progress by the German government in winning support for its Agenda 2010 programme of labour market reforms is encouraging, he says.
“We assume in this scenario that the German government does not rest on its laurels, but instead uses this as a springboard for further moves towards flexible labour markets and a fresh round of reforms to boost private pensions, which in turn should boost German equity markets.
Germany’s pace-setting will provide a favourable environment for governments in France, Italy and Spain to overcome local political barriers to further labour market and pension reform, he says
“There is no guarantee that the EU will catch up with the US over the period to 2010 but the potential is there to start making progress towards this objective through a combination of a relaxed pro-growth macroeconomic policy stance and steady and determined progress on labour market and pension reform in particular.”