Exclusive: Draghi lectures euro zone leaders about labor costs

Fri Mar 15, 2013 8:44am EDT
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By Luke Baker

BRUSSELS (Reuters) - European Central Bank President Mario Draghi gave EU leaders a crash course in macroeconomics late on Thursday, emphasizing his concerns about low productivity and high labor costs hurting the euro zone's prospects, officials said.

In a two-hour session with the euro zone's 17 heads of state and government, Draghi, a former professor of economics and political science, took his audience through a range of slides and charts depicting the region's divergences.

The presentation and discussion, which diplomats said was well received by the leaders despite starting at 11 p.m., focused on the growing gap in several member states between how much labor costs and how productive workers are.

"It was a very comprehensive presentation that underlined the growing gap, particularly in countries like Italy and France," said one euro zone diplomat briefed on the meeting.

"Draghi effectively said, 'there are two ways to close this gap, either reduce labor costs or raise productivity', and he said that the bigger the gap in a particular country, the less room there was to act to close it."

Another EU official briefed on the presentation described it as "sobering" for some of those present, but he said there was no arguing over the facts. Instead, a discussion ensued that several leaders said they found useful.

"It was a very calm and open meeting," the official said.

"At one point one of the prime ministers mentioned his concerns about rising unit labor costs at home and asked the Portuguese prime minister to talk about his experiences with tackling the problem."   Continued...

Mario Draghi, President of the European Central Bank (ECB), listens to reporter's questions during his monthly news conference in Frankfurt, March 7, 2013. REUTERS/Kai Pfaffenbach