- The ETUC report explains that the surprising upturn beginning in 2006 is not so much the result of ‘stability-oriented' policies but of ‘growth-supporting' aggregate demand policies.
- The trade union analysis also finds that structural unemployment in the euro area has fallen and is now below 8%. This provides policy-makers with the opportunity to trigger a cycle of high, domestic demand-led growth, similar to the one experienced over the 1997-2000 period.
- A return to annual growth rates of between 2.5-3% is possible, provided macro-economic policy-makers continue to support growth with expansionary demand policy instead of withdrawing demand from the economy.
- To this end, the ETUC urges the European Central Bank (ECB) to stop hiking interest rates and to prepare for a possible fall of the dollar by drawing up a regime for a growth-friendly exchange rate policy. Finance ministers need to adjust the pace of fiscal consolidation, taking the economic situation and the investment needs of a modern labour market into account.
Says ETUC General Secretary John Monks: “The 2006 upturn proves that the euro area economy is constrained from the demand side and not from the supply side. What macro-economic policy-makers need to do right now is not to withdraw demand from the recovery but to get the economy back into a cycle of high growth similar to the one the euro area had over the second half of the nineties. ”
Annex: ETUC report: Turning the upturn into a cycle of strong and continuing growth