Productivity may be about to do for Jean-Claude Trichet what it did for Alan Greenspan. Gains in productivity -- the amount of work per employee, a measure of efficiency -- let the former U.S. Federal Reserve chairman keep interest rates low without feeding inflation as the U.S. economy soared in the 1990s and unemployment was the lowest in 30 years. Now, European workers are catching up to their American counterparts after lagging behind for most of the past decade. One sign of the times: Last month's agreement between Volkswagen AG, Europe's largest carmaker, and union leaders to extend the workweek without additional pay. Europe's rising productivity is helping allay inflation concerns and may allow Trichet, president of the European Central Bank, to limit the current round of interest-rate increases. Along with similar gains in the Japanese economy, it may also cushion the global effects of the slowdown in the U.S., the world's biggest economy. ``Labor productivity, the holy grail of economic welfare and stock-market performance, has significantly accelerated,'' says Eric Chaney, Morgan Stanley's chief European economist in London and a former forecaster at the French Ministry of Finance. Morgan Stanley economists calculate that productivity increased in the dozen euro nations at an annual rate of 2.6 percent in the first half of 2006, double the pace of the prior six years. Improvement can't come fast enough for Trichet, who said in a Sept. 23 speech that productivity has been Europe's ``main, main liability.'' Last week, he told the European Parliament in Brussels that economic growth should remain ``solid'' next year, in part because of ``gains in business efficiency.'' The ECB said in its monthly bulletin last week that a pick- up in productivity ``should help to contain unit labor cost growth'' and that ``inflationary pressures from the labor market have remained subdued.'' Even so, ``it is still hard to tell if productivity is going up on a permanent basis, which argues for caution from the ECB,'' says Jacques Cailloux, chief European economist at Royal Bank of Scotland Plc in London. Inefficiencies remain in most European nations. The Geneva- based World Economic Forum last month ranked Italy below Barbados in its annual survey of competitiveness. New York-based management consultancy McKinsey & Co. this month said France must do more to raise productivity. ``Economic performance in general depends very much on the dynamism of the economy,'' Edmund S. Phelps, this year's Nobel laureate and a professor at Columbia University in New York, said in an interview. ``Not very many'' European countries are doing enough, he said. Still, there are signs of improvement. European growth is the best since 2000 and unemployment in July was at a five-year low of 7.8 percent. ``A decade after the U.S. experienced an upward shift in trend productivity, Europe might be following suit,'' says Stephane Deo, chief European economist at UBS AG in London. At Wolfsburg, Germany-based Volkswagen, workers will put in an additional 4.2 hours a week for no extra pay, and Chief Executive Officer Bernd Pischetsrieder says the company is close to its aim of trimming 20,000 jobs in western Germany. Paris- based Arkema SA, spun off in May from Total SA as the world's eighth-largest chemicals maker, last month forecast its first annual profit in four years after chopping 1,100 jobs and centering production at more efficient plants.