ANNUAL REPORT 2008 - Polymer Bank Notes of the World

Chart C Breakdown of employment growthby type of contractChart D Part-time work in the euro area(in percentage points, unless otherwise indicated)(as a percentage of total employment)self-employmentpermanent worktemporary worktotal employment (annual percentage changes)2.52.520202.02.019191.51.518181.01.0171617160.50.515150.00.01414-0.5-0.52001 2002 2003 2004 2005 2006 2007 2008Source: Eurostat.13132000 2001 2002 2003 2004 2005 2006 2007 2008Source: Eurostat.the more detached they become from the labour market. As it becomes increasingly difficult forthese people to find work, long-term unemployment is likely to increase.Under such circumstances, labour market measures need to avoid a structural deterioration inunemployment levels and a reduction in long-term labour force participation. Such measuresshould include policies to support wage flexibility and foster wage moderation, not leastthrough the abolition or overhaul of wage indexation schemes. Such policies would reducecost pressures on firms, enhance competitiveness and support employment. Reforms whichenhance the effectiveness and efficiency of active labour market policies would make it easierfor the unemployed to (re)train and find new jobs. With regard to those in employment, policiespermitting greater flexibility in fine-tuning working hours could give firms some leeway toreduce working hours without losing human capital through lay-offs. Labour market reformsmust be implemented with a view to improving the resilience of the euro area economy to thecrisis and creating a favourable environment for recovery and long-term economic growth andjob creation.2.5 FISCAL DEVELOPMENTSREVERSAL IN BUDGETARY POSITIONS IN 2008The relatively favourable fiscal outcomesachieved in recent years were partly reversedin 2008 as the financial crisis unfolded and themacroeconomic environment deteriorated rapidly.According to the European Commission’s interimforecast of January 2009, the average generalgovernment balance in the euro area worsenedfrom -0.6% of GDP in 2007 to -1.7% in 2008(see Table 5). The deficit increase is accountedfor by lower revenue, also owing to tax cuts, andhigher primary expenditure, in the context of aslowdown in economic activity. The impact ofgovernment interventions to stabilise the financialsystem on the 2008 deficit was negligible.In Ireland, Greece, Spain, France and Malta, thegovernment deficit rose above the 3% of GDPreference value in 2008, whereas in 2007 onlyGreece had a deficit higher than 3% of GDP. TheECBAnnual Report200869