By Peter OBIORA InvestAdvocate
Lagos (INVESTADVOCATE)-There is the need for a more skilled and educated labour force to sustain economic recovery in euro zone, according to Christine Lagarde, managing director (MD) of the International Monetary Fund (IMF).
Lagarde said this on Friday in her speech ‘’Supporting the European Recovery in a Rapidly Changing World’’ at the Robert Schuman Foundation in Paris, France.
She said the Euro Zone dependency ratio is expected to rise 60 percent in 2060 from 30 percent today. ‘’Life expectancy in the EU has increased by about 15 years since the 1950s. And the dependency ratio—that is the proportion of those not participating in the work force compared to those that are—is set to rise from around 30 percent today to about 60 percent in 2060,’’ she said.
‘’First, it is imperative to maintain a highly educated labor force that is mobile across borders. The global competition for skilled labour is steep, and the euro area cannot afford to let its talent go to waste,’’ Lagarde said.
She affirmed that to sustain economic recovery in Europe, all the euro area economies would close 10 to 20 percent of the gap in product and labour markets relative to best practices in the OECD.
‘’Our estimate is that euro area GDP could be 3½ percent higher in 2019 than we currently forecast today.
From this perspective, the fact that youth unemployment is so high—an average of 24 percent across the region—is nothing short of a catastrophe. If you are unemployed at this age, acquired skills tend to languish, and it is difficult to acquire new ones. As importantly, the capacity to learn and future employability also decline rapidly,’’ the IMF chief said.
She further affirmed as a rapidly ageing society, Europe is becoming ever more reliant on its younger workers to support the economy and sustain its social safety net.
‘’Let me just say this very clearly: Europe depends on this generation of workers, both to hold its own in an ever more competitive world economy, and to carry the burden of the retiring baby boomers,’’ Lagarde said.
Apart from having a sustainable labour force, the IMF boss said more developed and diversified regional capital markets can support innovation, investment, and long-term growth.
She said the securitization of lending to SMEs could reduce reliance on bank funding, and alleviate credit constraints for firms.’’ It would help cross-border investment and boost the growth of other types of funding,’’ the IMF chief said.
Lagarde advised on the importance of reversing financial fragmentation, allowing liquidity to flow across borders. According to her, the Single Supervisory Mechanism (SSM), to be introduced later this year, should help in this respect.
She stressed that banking union really means irrespective of the fact where banks are located in Europe—they should be able to lend anywhere at competitive terms, subject to the same prudential norms as other banks operating in the same market.
