Turning now to labour markets, also here progress has been rather uneven across areas. A number of countries have lowered marginal tax rates in order to make their tax systems more employment friendly. Some progress has generally also been made with the introduction of more flexibility in working contracts and practices. In many other areas, however, important reforms have not yet got off the ground. For instance, few changes have been made regarding employment protection policies in euro area countries, which remain among the strictest in the industrial countries. Also, reforms aiming to simplify and limit unemployment benefit systems and thereby enhance employment growth have only slowly progressed in almost all euro area countries. The emergence of skill shortages and tight labour markets in several euro area countries shows that structural problems still remain and need to be solved. The euro area could use its potential much better, as is illustrated by its relatively low labour force participation. Whereas, in the euro area, the labour force participation rate was 67% in 1999, it amounted to 77% in the US. BIS Review 61/2001  3  All in all, we see that some traditional hurdles to market flexibility and competition are slowly being removed, but as regards the current state of affairs in the euro area there is certainly still plenty of scope and urgent need for improvement. Structural reforms are of paramount importance not only for raising the growth potential of the economy but, most importantly, for increasing employment prospects in the euro area.
From an economic point of view, the relevant question is whether the political and institutional framework which governs the euro area is designed in such a way as to ensure bright long-term prospects for the euro area in terms of employment, real growth and, more generally, living standards of its citizens? In this respect, while I see an urgent need for further structural reforms in the euro area, let me emphasise at the outset that I am rather optimistic as concerns the long-term growth and employment prospects of the euro area. Not least as the euro, together with healthy competition among differing policy designs of national authorities, will act as a catalyst for further reform and integration. In my presentation today, I will first briefly address the political and institutional structure underlying the euro area. Secondly, I will discuss some features of the ECB, the institution responsible for an area in which full integration has been achieved, namely monetary policy. Thirdly, I will discuss some of the challenges which need to be addressed to fully grasp the opportunities offered by the single currency, thereby further improving the economic prospects of the euro area. Finally, I shall argue that the unique institutional choice for the euro area brings many advantages and opportunities and thus, if properly handled and carefully further developed, is a very solid fundament for a substantially more dynamic long-term development of the euro area than most observers currently appear to expect.