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BUSINESS NEWS JAN 18, 2008
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Average weekly earnings in Irish distribution and business services were up by 4.2 % in September 2007

European Central Bank reports tightening in Eurozone bank lending in the fourth quarter of 2007

Markets News Friday: Shares of leading US bond insurer plunges 51% triggering fears of deepening in credit crisis

Trichet says underlying Eurozone productivity trends are a “disgrace”

Japanese consumer confidence plunges to more than four year low

Friday Newspaper Review - Irish Business News and International Stories

China becomes world's top Gold producer ending South African dominance dating from 1905

Trichet says underlying Eurozone productivity trends are a “disgrace”

Lucas Papademos Vice President and Jean-Claude Trichet President, of the European Central Bank

Jean-Claude Trichet, the European Central Bank President, said on Thursday that recent rises in the Eurozone’s productivity performance were “probably cyclical” rather than long lasting and he called for more structural reforms.

Terming underlying Eurozone productivity trends as a “disgrace”, Trichet warned that structural features of the European economies were undermining investment incentives and impeding the efficient allocation of resources.

His comments were made at a Frankfurt conference on wealth creation that was organised by The Conference Board, to coincide with publication of international productivity trends. Trichet's views on productivity were seen as an attempt to draw a line under the debate by policymakers on whether a pick-up in the Eurozone’s economic fortunes represents a long-term transformation of its prospects. Eurozone growth accelerated to 2.7% in 2006 and fell slightly last year.

Finfacts reports:

Jan 16, 2008: Europe suffered a slowdown in labour productivity in 2007; Rich countries face struggle to achieve rises in living standards

Oct 06, 2005: "It ain’t what you do, it’s the way that you do I.T." - Why US multinationals win the productivity race

ECB: Jean-Claude Trichet:  The creation of economic and corporate wealth in a dynamic economy - Contribution to the panel discussion

"The slowdown in labour productivity growth can be attributed to a large extent to a marked deceleration in total factor productivity. Those countries that have tended to compensate for the positive labour supply shock by increasing investment growth and/or exploiting the potential efficiency gains offered by new technology in particular have enjoyed stronger labour productivity growth.

For instance, over the period 1996-2005 the direct contribution of ICT to labour productivity growth, as measured by the contribution of ICT capital services, has in the United States been roughly double that observed in the euro area (0.63 percentage point in the United States, compared with 0.37 percentage point in the euro area). Similarly, hourly labour productivity growth in ICT manufacturing and service sectors grew by an average of 12.6% and 6.5% in the United States and the euro area respectively over that period," Trichet said.

Trichet said that the “quality” of public finances is very important for growth. It is essential to increase the efficiency of public spending in order to facilitate the redirection of public expenditure towards physical and human capital accumulation with a view to enhancing productivity.

"Indeed, evidence for the EU shows that there is room for improvement in public sector performance and efficiency, with gains possible with a public sector of the same size or even smaller. Moreover, inefficiently high levels of public spending imply high taxes and are likely to inhibit potential growth. The ECB therefore welcomes the emphasis placed by the ECOFIN Council on measures to improve the quality and efficiency of public finances and on the importance of modernising public administrations in order to achieve better “value for money”, provide the public with better services, increase control over government expenditure and enhance competitiveness," the ECB President said.

Also on Thursday, ECB’s Monthly Bulletin, cited labour productivity growth data showing clear acceleration in 2006. But the article concluded: “It would certainly be too early to interpret the recent timid increases in euro-area labour productivity growth as initial signs of a productivity revival.”

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