8  See, for example, Genre, V., R. Gomez-Salvador and A. Lamo (2005): “European Women: Why do(n’t) they work”, ECB Working Paper Series, No 454, March 2005. 9  For a further extension of this topic see European Commission (2004), “The link between product market reforms and productivity: direct and indirect impacts”, the EU Economy: 2004 Review. 10  See for example G. Nicoletti and S. Scarpetta (2003): “Regulation, Productivity and Growth: OECD Evidence”, OECD Economics Department Working Paper No 347, P. Cavelaars (2003), “Does Competition Enhancement Have Permanent Inflation Effects?”, Kyklos, 56 (1) and M. Przybyla and M. Roma (2005), “Does product market competition reduce inflation? Evidence from EU countries and sectors”, ECB Working Paper No 453. BIS Review 44/2006  3  changes in some services sectors and thus temporarily on aggregate inflation. Overall, a higher level of competition in the services sector would tend to support more efficient and flexible services markets, facilitate adjustment processes and increase the resilience of the euro area to economic shocks 11 . In this context, an internal market for services and the adoption of the Services Directive would constitute an important step forward. It would remove barriers to cross-border provision of services and make it easier to set up services businesses in other Member States. In the EU, some progress has already been made in improving the functioning of product markets. For example, several network industries, like telecommunications and air transport, are now fully or largely open to competition.
In the EU we have about 5.3 scientists and researchers per 1000 workers, which compares to the US figure of 9 per 1000. 17 In addition, ICT investment, which is an indicator of the diffusion of innovation, represented 6% of GDP in the US over the period 2000-2004 compared to only 3% in the euro area. ICT diffusion appears to be particularly relevant in the services sector given the higher potential for employment creation in that sector combined with the evidence that there is no apparent trade-off in the medium term between labour productivity and employment growth at the level of the sector as a whole. As a result, the key issue for the larger euro area countries is how to increase their future capacity to promote the diffusion of innovation and, in particular, technological changes in the service sectors, a field in which the Nordic EU countries have performed particularly well 18 . The state of structural reforms If euro area countries would now summon up their strength and ambitiously push forward with structural reform, this will support and broaden the improvement in economic activity in the euro area. This is why the ECB has always encouraged the implementation of structural reform within the Lisbon strategy. Five years later, progress has been made in some areas - as also indicated by an increase in the euro area employment rate. Still, all in all the reforms have not been far-reaching enough 19 .