Structural Reform

EMU involves giving up national control of the exchange rate and interest rate instruments of economic adjustment, so it makes achieving strucural economic reform more important. The progress made on budgetary consolidation and price stability in preparing for EMU has provided a sound macro-economic background against which structural reform can be pursued further.

Structural reform entails wide-ranging liberalisation of product, capital and labour markets in order to achieve open and well-functioning markets designed to reduce costs and increase productivity and so improve the pverall competitiveness of an economy.

The Luxembourg Process

As regards labour markets, the European Council meeting in Luxembourg in November 1997 endorsed an ambitious employment strategy. This strategy encompassed the coordination of Member States' employment policies on the basis of commonly-agreed employment guidelines and the continuation and development of a coordinated macro-economic policy. The European Council's Resolution called for National Employment Action Plans to ensure the transposition of the guidelines into national administrative, regulatory or other measures. The National Action Plans set out Member States' policy responses to the EU guidelines and the steps they intend to take to implement them. Ireland's National Action Plan on Employment was published in April 1998.

The Cardiff Process

In May 1998, the European Council meeting in Cardiff welcomed the involvement of ECOFIN in the work of economic reform. The purpose of this work is to reinforce and accelerate the economic reforms necessary for the optimal working of EMU and the Single Market and to integrate economic reform of product and capital markets with macro-economic and labour market issues. While it was accepted that much reform had taken place, it was recognised that further reforms were required.

In line with the Cardiff European Council conclusions, Member States and the Commission prepared reports on product and capital markets. Ireland's progress report on reforming product and capital markets was published in December 1998. Also in line with these conclusions, the Commission prepared two reports looking at various aspects of structural reform. Member States have also produced a synthesis report based on country examinations and the Commission's work.

The Broad Economic Policy Guidelines

The Broad Economic Policy Guidelines are the cornerstone of the coordination of economic policies. The Guidelines are an annual procedure, carried out by the Commission and Member States under Article 103 of the Maastricht Treaty, which monitors progress and makes recommendations on the direction of EU-widemacro-economic policy and on economic reform of product, capital and labour markets. The objective of the Guidelines is to promote policies supportive of sustainable economic and employment growth within the Union.

The 1999 Broad Economic Policy Guidelines, which were agreed by Heads of Government at the European Council meeting in Cologne in June 1999, comprise general guidelines and country-specific guidelines. The general guidelines, which are applicable to all Member States, indicate the required direction of economic policies. Within that broad framework, the country-specific guidelines seek to identify economic policy priorities for each Member State, taking account of its particular circumstances. The work on structural reform described above has fed into the preparation of the Broad Economic Policy Guidelines for 1999.