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 .
5  See OECD (2005) and (2006) “Going for Growth” and OECD (2005) “Economic Surveys: Euro Area”. 6  See Economic Policy Committee of the EU (2005), “Responding to the challenges of globalization”, Brussels. 2  BIS Review 44/2006  Without aiming to be exhaustive, I should like to highlight some of the key priorities for reform in four main areas, namely getting people into work, increasing competition, unlocking business potential and supporting an innovative environment. First of all, well-functioning labour markets are extremely important in fostering high economic growth. The divergent pattern displayed by growth and labour utilisation in the US and in Europe has prompted some economists to suggest the existence of a ‘European model’ and a ‘US model’, related to the trade-off between labour use and productivity. 7 One view is that the lower levels of GDP per capita in Europe reflect European preferences for more leisure. However, we should bear in mind that lower participation rates are not necessarily solely associated with personal preferences, but are also triggered by the legal and regulatory environment, tax systems and social institutions. Benefit systems that are too generous discourage job search, early retirement schemes encourage early withdrawal from the labour market - employment rates for older workers aged 55-64 stood at just 40.2% in the euro area in 2005 and, according to the OECD, at around 60% in the US - and marginal tax rates that are too high discourage labour market entry and have a downward effect on average hours worked.