This is why we have defined a second “pillar” for our monetary policy strategy, consisting of a broad range of variables that are referred to as indicators for the euro area price outlook. The relatively low yields on long-term euro-denominated bonds confirm investors’ confidence in the new currency. This was not the case four or five years ago. At that time, financial markets were convinced that the euro would be the weighted arithmetic mean of its legacy currencies and would not inherit the level of confidence and credibility of the strongest of these. The euro has actually been founded on a benchmarking principle, not on a convergence towards an average. This may explain why the interest rates of the euro were the lowest in Europe from the outset. To sum up, we consider the maintenance of price stability over the medium term to be the Eurosystem’s greatest contribution to fostering an environment which is conducive to sustainable growth and employment. And, it is also its greatest contribution to limiting unnecessary volatility of output and employment in the short run. The success, thus far, of our strategy does not mean that our current monetary policy strategy is engraved in the marble. With the benefit of hindsight, 2003 seems the appropriate point in time to take stock of our experience thus far and to reflect on the various elements of the strategy. This issue is actively dealt with our Eurosystem’s staff and we plan to complete this evaluation in the course of the spring and to publish it.
An important objective consists in raising the potential output growth of the European economy If France and Europe seek to secure sustainable growth at levels that are as high as possible, the key variable is potential output growth. There are three ways of raising the level of potential output growth: First, to boost investment: the more we invest and the lower inflationary pressures, the stronger potential output growth. For example, a two-point increase in the productive investment ratio (productive investment / GDP, 11,4 % during the last five years in France) over the next decade would bring about an average acceleration of more than 0,5 point in potential output growth over the same period. The second way of raising potential output growth is to increase the quantity of actual labour: The European Council of Lisbon set as a central objective the rise of the employment rate of our populations from 60 to 70 % in 10 years. The Council also fixed two sub objectives: to raise the employment rate of women to 60 % and employment rate of older workers (from 55 to 64 years old) to 50 %. As a comparison, the same overall employment rate stands at 75 % in the USA. Although some progress has been achieved in this area, the lack of substantive change and the tendency in some member states to continue to use early retirement schemes remain causes for concern.