As well as its own actual mandate of keeping prices stable, some people seem to be under the impression that it should be used to strengthen growth, lower unemployment, safeguard the financial system and guarantee citizens adequate interest rates”3. Yet, monetary policy can only buy time for structural reforms in the short run, while tensions are accumulating in the background. One major source of tensions refers to the wage policy. Chapter 2 of REO discusses in much detail the “European wage dynamics and labour market integration”. The main messages of this 2/5  BIS central bankers' speeches  part can be summarized as follows: a) in EU 15 wages are subdued because they respond very slowly to changes in unemployment and are closely related to inflation and inflation expectations, which are unusually low; b) in NMS wage growth responds very quickly to changes in unemployment, and inflation expectations play a lesser role; c.) average wage increases in NMS were much higher since 2012 than in EU-15; d.) about one quarter of wage growth in Europe can be explained by EU-wide and group-level factors; e.) there was a decrease in unemployment, but also an increase in involuntary part-time employment; f) migration plays a role in the faster increase in wages in the countries of origin. One hot debate topic in Europe these days –reflected in the report- is the flattening of the Philips curve.
Liviu Voinea: Europe - managing the upswing in uncertain times Speech by Mr Liviu Voinea, Deputy Governor of the National Bank of Romania, at the Conference CEPS-IMF Spring 2018 Regional Economic Outlook, Brussels, 15 May 2018. * * * Dear Governor Smets, Dear Director of the IMF’s European Department Thomsen, Dear CEPS Director Gros, Thank you for having me here. It is an honor for me to speak at the launch of the IMF Regional Economic Outlook for Europe. This report is remarkable in many respects: it is comprehensive, well-documented and clearly written, with strong messages and judicious policy recommendations. It comes in times of uncertainty, when the European economy is rebounding, but challenges remain; in particular, the business and financial cycles of advanced economies are so dissimilar to those of the new member states that a distinct analysis is warranted. The first chapter of the report is entitled “Managing the upswing in uncertain times”. The report shows that growth has recovered in advanced European economies and even picked up in the new member states, some of which are now having large positive output gaps. Moreover, growth forecasts are strong in 2018, but growth is not taken advantage of to advance with fiscal consolidation and structural reforms. This recovery has created more than 12 million jobs in the EU since 2013, exceeding pre-crisis peaks. Consequently, unemployment fell by a total of 5 percentage points in NMS and 3 percentage points in EU-15 over the same period.