MUCH more flexible jobs markets will be essential after EU monetary union to allow member states to adjust to economic shocks, according to Mr Peter Sutherland. Speaking at the European Finance Convention, he said that EU governments will have to introduce wide ranging changes in their citizens' attitudes to labour markets.

Mr Sutherland, former head of GATT and now chairman and managing director of Goldman Sachs, pointed out that after monetary union member state governments will have limited autonomy in adjusting their budgets and will no longer be able to use monetary and exchange rate policy to manage their economies.

"In the short term flexible wages and a high degree of labour mobility are the only alternative adjustment mechanisms if Member States are to be able to adjust rapidly" to specific economic "shocks," he pointed out.

Europe's labour market is relatively immobile at the moment, he said, and in many states wages are largely unresponsive to changes in productivity and unemployment.

Mr Sutherland reiterated his strong support for monetary union, saying it was arguably "the single most important project in the history of European integration since the signing of the Treaty of Rome 45 years ago." In addition to political considerations, monetary union would also bring economic advantages through securing the advantages of the single market, as well as leading to lower inflation and lower interest rates.