By Luke Baker
BRUSSELS (Reuters) - European Central Bank President Mario Draghi gave EU leaders a crash course in macroeconomics late on Thursday, emphasising his concerns about low productivity and high labour 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 labour 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 labour 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 labour costs at home and asked the Portuguese prime minister to talk about his experiences with tackling the problem."
After the meeting, Merkel said she had found it helpful.
"We had very interesting reports from Mario Draghi. They mainly concentrated on the question: How can we improve our competitiveness," she said.
"In some countries the course for productivity and wages is responsible for the high unemployment today."
Draghi, a former head of the Italian central bank and a former professor at the University of Florence, gave a shortened version of his presentation to all 27 EU leaders earlier on Thursday, and the president of the European Commission, Jose Manuel Barroso, also talked to leaders about low productivity.
In his address, Barroso emphasised how cutting labour costs and raising productivity can help stimulate exports, and showed how countries such as Ireland, Portugal and Spain had turned current account deficits into surpluses in the past year.
Another official briefed on Draghi's presentation, which took place on the 8th floor of the summit building, with the leaders each given a packet of A4 graphs and charts to consult, described it as aiming to hitting three points.
"His main message was about the importance of, as he called it, competitiveness, confidence and credit, or the ‘three cs'," the banking official said.
Draghi also talked about the problem of monetary policy transmission - getting lending going again in the real economies of all corners of the euro zone - and in particular how changes to bank rules had created an uneven playing field between Europe and the United States.
(Additional reporting by Andreas Rinke and John O'Donnell; writing by Luke Baker, editing by Mike Peacock)