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European View - Volume 1 - Spring 2005 - Europe's Economy and the Challenge of Growth

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    European View - Volume 1 - Spring 2005 - Europe's Economy and the Challenge of Growth European View - Volume 1 - Spring 2005 - Europe's Economy and the Challenge of Growth Document Transcript

    • E UROPEAN V IEW Volume 1 - Spring 2005EUROPE’S ECONOMY AND THE CHALLENGE OF GROWTH Wilfried Martens Editorial • Antonio López-Istúriz Preface • José Manuel Durão Barroso Working Together for Europe’s Future: A New Start for the Lisbon Strategy • Angela Merkel Tapping Germany’s Potential for a Prosperous Europe • José María Aznar Europe’s Challenge for Growth: The Path to Follow • Jacques Barrot Mobility - a Key Element for Growth and Competitiveness • Joe Borg Relaunching the Lisbon Strategy - a Contribution from Fisheries and Maritime Affairs? • Stavros Dimas Creating Growth and Jobs - a Role for Environment and Sustainable Development? • Ján Figel Education and Training – Are We on Target for 2010? • Viviane Reding Towards the Knowledge-based Economy: Information Society • Andris Piebalgs The Lisbon Strategy and Energy: Making the Connection • Ivan Mikloš Commentary: Europe and the Need for Reforms • Alexander Radwan Lisbon - the Scapegoat: How France and Germany Bailed Out from the Stability Pact • John Bruton The Challenge of Lisbon for the European People’s Party • Carl Bildt Accelerating Globalisation - Is Europe Destined for Decline? • Alexander Stubb Efficient Execution of the Lisbon Strategy: The Balance Between the Community and the Open Method of Coordination • Mário David Building Global Growth - Relations Between the European Union and Mercosul • Erhard Busek The Future of Economic Reconstruction, Development and Cooperation in South Eastern Europe • Peter Jungen Entrepreneurs in Europe: A Vision of Prosperity • Bartho Pronk The Lisbon Process - Impossible Dream? A Journal of the Forum of European Studies
    • EUROPEAN VIEW European View is a Journal of the Forum of European Studies, published by the European People’s Party. European View is a biannual publication that tackles the entire spectrum of Europe’s political, economic, social and cultural developments. European View is an open forum for academics, experts and decision-makers across Europe to debate and exchange views and ideas. EDITORIAL BOARD Chairman: Wilfried Martens, President of the European People’s Party, former Prime Minister, Belgium Carl Bildt, former Prime Minister, Sweden Elmar Brok, Member of the European Parliament, Germany John Bruton, Vice-President of the European People’s Party, Ireland Mário David, Member of Parliament, Portugal Vicente Martínez-Pujalte López, Member of Parliament, Spain Loyola de Palacio, former Vice-President of the European Commission, Spain Chris Patten, former Member of the European Commission, United Kingdom Jan Petersen, Foreign Minister, Norway Hans-Gert Poettering, Chairman of the EPP-ED Group in the European Parliament, Germany Alexander Stubb, Member of the European Parliament, Finland József Szájer, Vice-Chairman of the EPP-ED Group in the European Parliament, Hungary Andrej Umek, former Minister for Science and Technology, Slovenia Per Unckel, former Minister of Education and Science, Sweden Yannis Valinakis, Deputy Foreign Minister, Greece ADVISORY BOARD Antonio López-Istúriz, Christian Kremer, Luc Vandeputte, Kostas Sasmatzoglou, Guy Volckaert, Alexandros Sinka EDITOR-IN-CHIEF Tomi Huhtanen Assistant Editors: Ben Priestel, Mélanie Dursin For editorial inquiries please contact: European View Editor-in-Chief Rue d’Arlon 67 1040 Brussels email:thuhtanen@epp-eu.org Tel. +32 2 285 41 49 Fax. +32 2 285 41 41 Url: www.epp-eu.org/europeanview The Forum of European Studies is a think-tank dedicated to Christian Democrat and like-minded political values, which is engaged in open, comprehensive and analytical debate. European View and its publishers assume no responsibility for facts or opinions expressed in this publication. Articles are subject to editing and final approval by the Editorial Board. This publication is partly funded by the European Parliament.2 European View
    • CONTENTS• Preface .............................................................................................................................................................................................................5 Antonio López-Istúriz• Editorial ..........................................................................................................................................................................................................7 Wilfried Martens• Working Together for Europe’s Future: A New Start for the Lisbon Strategy ...................................................9 José Manuel Durão Barroso• Tapping Germany’s Potential for a Prosperous Europe .............................................................................................15 Angela Merkel• Europe’s Challenge for Growth: The Path to Follow .....................................................................................................21 José María Aznar• Mobility - a Key Element for Growth and Competitiveness ......................................................................................29 Jacques Barrot• Relaunching the Lisbon Strategy - a Contribution from Fisheries and Maritime Affairs? .................35 Joe Borg• Creating Growth and Jobs - a Role for Environment and Sustainable Development? .........................41 Stavros Dimas• Education and Training – Are We on Target for 2010?............................................................................................45 Ján Figel• Towards the Knowledge-based Economy: Information Society ............................................................................53 Viviane Reding• The Lisbon Strategy and Energy: Making the Connection .......................................................................................61 Andris Piebalgs• Commentary: Europe and the Need for Reforms ............................................................................................................65 Ivan Mikloš• Lisbon - the Scapegoat: How France and Germany Bailed Out from the Stability Pact.....................67 Alexander Radwan• The Challenge of Lisbon for the European People’s Party .........................................................................................71 John Bruton• Accelerating Globalisation - Is Europe Destined for Decline? ................................................................................79 Carl Bildt• Efficient Execution of the Lisbon Strategy: The Balance Between the Community and the Open Method of Coordination ...........................................................................................................................................83 Alexander Stubb• Building Global Growth - Relations Between the European Union and Mercosul .................................91 Mário David• The Future of Economic Reconstruction, Development and Cooperation in South Eastern Europe ..................................................................................................................................................................95 Erhard Busek• Entrepreneurs in Europe: A Vision of Prosperity .........................................................................................................103 Peter Jungen• The Lisbon Process - Impossible Dream? ............................................................................................................................109 Bartho Pronk 3 Volume 1 - Spring 2005
    • Preface By Antonio López-IstúrizDear Readers,It is with great pleasure that I present to you In economics - the theme of the first edition ofthe ‘European View’, the Journal of the Forum the European View - Europeans are increasinglyof European Studies, which will be published facing more of the same problems and the samebiannually from now on. challenges. Hence, in order to find the right solutions, we need to find a common approachThe European View is a forum for dialogue with a common view, a European View, afor European decision-makers and academics, shared vision that will coordinate our efforts forwhich tackles issues relevant to contemporary the prosperity and well-being of Europe and itsEuropean politics. The Journal is also an open citizens.medium for people debating Christian Democratand like-minded values, ideas and solutions. Looking at the contents of the first edition of the European View, I am convinced that this newThe concept of a shared European view was, just publication is bound to reinforce the dialogue fora few decades ago, only a theoretical possibility common approaches in Europe and, ultimately,argued by a few ‘romantic’ visionaries. help fulfill the vision of a united Europe.Nevertheless, our political family has managed I would like to thank the Authors of this editionto make this vision a reality. From the days of for their valuable contributions, as well as theour founding fathers until today, we have finally Editors, Advisors, and the entire team for theirsucceeded in creating a common identity for all commitment and ideas. Furthermore, for thoseEuropean citizens. who would like to join our efforts, I would like to extend an open invitation for new conceptsIndeed, most Europeans share a common vision and ideas for future editions of the Europeanabout the future of our continent and the world View.in general. For many, this evolution is firmlylinked to the institutional development of theEuropean Union. Undoubtedly, the European Antonio López-IstúrizUnion embodies the shared identity of Europeans Secretary General of the European People’sand, therefore, offers an alternative perspective Party, Member of the European Parliament.in global affairs. 5 Volume 1 - Spring 2005
    • Editorial By Wilfried MartensThere are many reasons to be optimistic about investments. Both enlargement and the eurothe European economy. 2004 was the best year were two pivotal structural changes that havefor global GDP growth in decades. Most parts increased competition in the European econo-of the world recorded improved growth per- my and added to its productivity.formance. The prospects for 2005 remain favo-rable, although growth is likely to improve at a The changes brought about with the introduc-slower, more sustainable, pace. Global trade has tion of the euro are continuing to bolster the Eu-also recovered strongly since the downturn of ropean economy. They will, in due course, lead2001 and, while it continues to be an important to quite dramatic improvements, but it will takeengine for growth, it is currently expanding at time. Europe has prevailed over many crucialclose to double the rate of GDP world growth1. challenges and, therefore, the potential exists for a new, prosperous chapter in the EuropeanEurope is slowly recovering and the foreseeable economy.future looks brighter for European economies.Nevertheless, we are obligated to openly ad- The fact that the Lisbon Strategy is at the centermit that the European Union is lagging behind of agenda of the new Commission, led by Presi-its competitors. In March 2000, the European dent José Manuel Durão Barroso, gives us newCouncil concluded that a strategy was neces- confidence and new hope. The forming of thesary to ensure that European economies would Lisbon Strategy Commissioners Group and thecontinue to prosper. A major effort was needed launching of the ‘Growth and Jobs’ strategy,by the EU, in order for the continent to perform were strong signs of the Commission’s renewedin a rapidly changing global economy. commitment.The Action and the Strategy were clearly set at There is no denying that the Lisbon Strategy wasthe Lisbon Council. As a result, Europe made a partially based on wrong assumptions on the fu-commitment to itself and its citizens; a commit- ture of economic growth. But limited economicment for prosperity and growth. Unfortunately, growth was, for the most part, just an excuse tothe failure of this commitment is well known sidetrack our actions. Now, our task is to con-and is, therefore, thoroughly debated in this vince European societies that we cannot affordpublication. But nothing is lost yet; all the ele- any more failures or policy deviations. On thements of success are still there. other hand, failure of the Lisbon Process – and the ‘Growth and Jobs’ Strategy - will cost us mil-Europe, today, is the largest economy in the lions of jobs and vital economic growth.world, together with the United States. It is thelargest trading partner in the global economy The ageing of our societies and the overall de-and still one of the largest receivers of foreign mographic changes will create new realities1 International Monetary Fund: Economic Summit, Stanford, California, February 11, 2005 7 Volume 1 - Spring 2005
    • for the European economies in years to come. Globalisation, the emerging economic powers of Asia and changes of employment distribution on a global scale will constantly challenge us and our capacity to find new solutions for the safeguarding of European prosperity. Leadership in the global economy is not only about competitiveness but also about credibil- ity. Abandoning the Lisbon Goals would only undermine our global prestige. Not surprisingly, European decision-makers to- day agree on the need for radical reforms in the economies of EU Member States. However, structural changes are never easy and the posi- tive results of reform never come quickly. Mean- while, many different interests and concerns have to be tackled and citizens reassured. More importantly, we should intensify our ef- forts but, not for the sake of the economy itself -our main concern is the future and well-being of Europeans. The European citizen deserves a prosperous future in a modern society, with bet- ter jobs in a world-class market. This first edition of the European View, the Journal of the Forum of European Studies, is dedicated to the current challenges for growth creation and economic development in Europe. I would, therefore, like to take this opportunity to warmly thank the Authors of this edition for their analytical insights and visions and all those who have worked tirelessly for the success of the European View. Wilfried Martens, former Prime Minister of Bel- gium, is the President of the European People’s Party and the Chairman of the Editorial Board of the European View.8 European View
    • José Manuel Durão Barroso Working Together for Europe’s Future: A New Start for the Lisbon Strategy By José Manuel Durão Barroso Over recent months the Progress has been made, but it has been nei- European Council has ther fast nor far enough presented two impor- tant sets of proposals. Five years ago the European Union launched In January in its pro- an ambitious agenda for reform. It has become posed Strategic Priori- fashionable to argue that nothing has beenties for the Union over the coming five years1, achieved over the intervening years. That, ofit launched the idea of a partnership for the re- course, is not the case.newal of our continent; a partnership for pros-perity, solidarity and security. First, progress has been made in strengthening key parts of the internal market – telecoms andEarly in February, it started to put flesh on the energy markets are more open, a Single Euro-bones of that partnership in presenting its new pean Sky is in the process of being established,Strategy for Growth and Jobs in the European Europe’s trans-European transport networksUnion2. This represents a fresh start for the Lis- are advancing (with renewed support from thebon agenda, launched in March 2000. European Investment Bank). In other areas of the internal market, from public procurement toThe Commission’s starting point is the need to electronic commerce, the necessary legal frame-restore dynamism to our economy and create work has been put in place. These reforms arethe conditions to boost employment. These are starting to deliver lower prices and new oppor-concerns that matter to every citizen. These tunities for jobs and investment.must be the solid foundations of a society builton social justice, quality of life and opportunity Second, reforms are underway in most Memberfor all. States, from a downward trend in income tax levels to the development of active labour mar-The challenge is to spark the renewed European ket policies to pension reforms and investmentgrowth that will allow the Union to reinforce its in childcare.commitment to solidarity and sustainability. Third, we have seen the arrival of the euro inThe Commission’s underlying conviction is one people’s pockets and our recent enlargement isof realistic optimism; the Union possesses all the opening new markets, spreading prosperity andingredients to free Europe’s untapped potential. presenting fresh opportunities for investment.The mid-term review of the Lisbon Strategy issimply the moment to “turn up the heat”. At the same time it is clear that despite substan- tial progress, not enough has been done. TheEurope has a lot to be proud of. It is peaceful, gap with our major competitors is both widen-prosperous and diverse. Today it is the largest ing, if we look across the Atlantic and narrow-economy in the world together with the United ing, as new Asian economies start to catch up.States. It is the world’s largest trading partner Reforms at both the EU and national levels haveand one of the largest recipients of foreign in- neither gone fast nor far enough, with key pro-vestments. It is also attractive; to countries want- posals – such as the patent or the creation of aing to join, to businesses wanting to invest, to single market for services – remaining on thepeople wanting to work or visit. table of Parliament and the Council. Moreover,1 STRATEGIC OBJECTIVES 2005 – 2009, Europe 2010: A Partnership for European Renewal Prosperity, Solidarity and Security, COM(2005) 12, 26.1.20052 Working together for growth and jobs - A new start for the Lisbon Strategy, Communication to the Spring European Council, COM (2005) 24, 2.2.2005 9 Volume 1 - Spring 2005
    • Working Together for Europe’s Future: A New Start for the Lisbon Strategy some Member States have dragged their feet in of business investment. This is particularly implementing rules of reforms already agreed true for the slower adaptation of infor- upon. The result has been that people do not mation and communication technologies yet feel “the Lisbon factor” in their daily lives. throughout the economy. This difference is estimated to account for around half The urgent need for change of the EU-US productivity growth gap. Yet the case for change, in the face of global • Finally, enlargement is also creating a competition and an ageing population is, if any- major challenge for social cohesion and thing, even stronger today than it was in 2000 for the convergence of our economies. when the Lisbon reforms were launched: Nonetheless, this is not about facts and figures, • Today Europe’s potential growth aver- this is about real lives. Already, far too many ages only 2%. This is a decline of one people in Europe who are looking for a job full percentage point in just one genera- cannot find one. There is widespread denial of tion. During the same period, the United opportunity, particularly to women and young States has increased its potential growth to people. Furthermore, we are, as of now, strug- 3.5%, and the dramatic rise of new econ- gling to pay for under-funded pensions and omies like India and China continues. costly health care. • Globalization. It is a crucial and inevi- To meet these challenges, we need to take ur- table development that no government gent action. We must catch up for lost time. can control because globalization is, to Only by pulling together and working along the a large extent, shaped by technologi- same lines can we maximize EU’s potential. cal progress, which fortunately cannot be brought to a halt by individual governments. The refocused Lisbon Strategy must provide growth and jobs As a result of globalization, global com- petitiveness has been increasing since While maintaining stability-oriented macro-eco- 2000. New global partners have emerged nomic policies, which have delivered low infla- more rapidly (China in the industrial sec- tion and low interest rates, we need to modern- tor, India in the services sector), while ize our economies to ensure that the European the US and Japanese economies have Union can sustain and develop its unique model recovered more quickly than Europe. of society. • Our ageing population will have far reaching The Lisbon Strategy provides the right response consequences, some of which are already to meet these challenges. strongly felt on our labour markets, health spending and pension systems; this car- • Foremost, it is Europe’s response for Eu- ries with it the risk of weakening our social rope’s challenges. The Union does not wish model. One consequence of ageing is that to import the American model, nor to de- our population, particularly, our working regulate to compete with China and India. age population is shrinking. Some estimates, The current pressures of competition should suggest that the Italian population will by force us to see what is happening in the 2040 have fallen from 52 million in 1990 to world and adjust to realities, notably by re- just 38 million. Change on this scale calls viewing and adapting our Social Model. into question future growth and our abil- ity to maintain high rates of employment. • The Lisbon Strategy quite rightly empha- sizes the need for growth and employment • Moreover, our growth potential has suf- through greater competitiveness. Those el- fered because our productivity has not ements are vital if the EU wishes to be a grown as rapidly as that of our competi- world leader and continue to progress. tors; this has been compounded by a lack10 European View
    • José Manuel Durão Barroso• The Lisbon Strategy offers intelligent solu- • making Europe an attractive place to invest tions and innovative action that can lead to and work, growth and job creation. The proposed syn- • placing knowledge and innovation at the ergies (for example, between education and heart of European growth, and research, or between environment policies • shaping the policies that allow EU business- and innovative industries) and the central es to create more and better jobs. place given to knowledge, are the keys to our development. It should be underlined A more attractive place to invest and work that China, Brazil and Russia are consider- If Europe is to prosper it needs to become a ing strategies similar, in many points, to the more attractive location for businesses of all Lisbon Strategy. sizes across the Union.The Commission has set out a new, more focusedapproach to reforms in order to get things done. This approach recognises the value of the EU’s industrial base, as well as, the particular impor-In setting out at the beginning of February the tance of Europe’s small and medium-sized busi-contours of a revised Lisbon Strategy and by nesses (SMEs). They represent 99% of our busi-placing the priority on growth and jobs, the nesses and two thirds of employment. ThereCommission was responding to past criticisms are simply too many obstacles to becoming anof Lisbon. This had been confirmed in the Re- entrepreneur or starting a business. The Unionport of the High Level Group3, chaired by the cannot afford to miss these opportunities.former Dutch Prime Minister, Wim Kok, whichreported to the European Commission last No- This is why we continue to stress actions tovember. make the Internal Market work better, partic- ularly in the area of services and of financialCriticisms ranged from the lack of delivery in markets. But responsibility lies primarily withthe field, to the use of the so-called “Lisbon” Member States to apply the rules approved bymethod: there is a lack of commitment from the European Parliament and the Council. ThereMember States to implement agreed changes, it must not be anymore “feet-dragging” in keyis too complex, there are too many goals, there areas of reform.is no clear sense of direction, there is too muchemphasis on Brussels, the open method of co- Another area will be actions to ensure a fairordination or benchmarking is inherently weak, competitive environment and implementing theetc... right approach for regulations at the national, as well as, at the European level. Competition rulesHowever, making a realistic assessment does not will continue to be applied proactively, whilemean being pessimistic: quite the contrary ! in March the Commission will bring forward a new initiative on better regulations. One of theEurope has a long-established capability – 1992, elements of this initiative will be to ensure thatthe euro, the recent Constitution - to roll up its the Commission draws on external technical ex-sleeves and do better. The renewed Lisbon Stra- pertise to help design impact assessments fortegy retains the main objectives and means of specific proposals.delivery not out of idealism, but because thesegoals are vital to preserve and develop a Euro- Finally, open markets at home must be matchedpean answer to the challenges facing the Un- by open and competitive markets abroad. Busi-ion. nesses in the Union need to take full advantage of global markets. This requires the support ofThe renewed Lisbon Strategy injects a new public authorities, both through the bilateral re-and stronger focus, aiming to deliver jobs and lations that the Commission negotiates on be-growth by: half of the Union, and, in particular, through the successful conclusion and implementation of3 Facing the challenge, Report from the High Level Group chaired by Wim Kok, 3 November 2004 11 Volume 1 - Spring 2005
    • Working Together for Europe’s Future: A New Start for the Lisbon Strategy the Doha Development Round, which includes innovation from biotechnology and the in- a new package of global trade measures. formation society to promoting eco-innova- tion; a new generation of technologies that Knowledge and innovation can help address the current challenges of society such as climate change, the search Europe has some of the best minds and the for alternative energy sources and energy ef- most innovative companies in the world. Eu- ficiency. rope’s citizens only have to look at Airbus or listen to their mobile phones to feel this in their More and better jobs daily lives. Europeans can be proud of their in- dustrial base and of the many millions of inno- Higher levels of employment are a key driver vative small and medium-sized businesses that for sustained growth, but also a crucial element are the backbone of our economy; small busi- in improving cohesion throughout the Union. nesses that nevertheless need the opportunity A job is the best weapon against poverty. By to grow. helping to create the conditions for higher rates of employment the renewed Lisbon Strategy is Member States also need to increase their sup- spreading prosperity and reducing the risks of port to EU schools and universities. They are social exclusion. an investment in the success of tomorrow, and a guarantee of a more inclusive, fairer society • For this reason, the renewed Lisbon Stra- today. tegy places emphasis on national reforms to modernise labour and social policies. The renewed Lisbon Strategy attempts to rein- force the Union’s knowledge base to boost fu- Such reforms are also the first step to ad- ture growth: dressing the EU demographic challenges. The Commission will soon be launching a • Member States must speed up efforts to broad debate on the impact of an ageing meet the 3% research spending target. population with a Green Paper. Similarly, a Green Paper on legal migration4 launched • As a result of future reform on state aid rules, in January 2005 will help the Union develop Member States and regional and local actors long-term solutions to filling gaps, particu- should be able to use new ways of support- larly skills gaps, in its labour markets. ing research and innovation, particularly by the EU’s SMEs. One idea, for instance, could • Bolstering employment means equipping be the creation of “Innovation Poles”, partly people throughout their lives with the skills drawing on EU funding to bring together the they need to adapt to change and ensuring Union’s best scientific and business minds. that the national tax and benefit systems help people to enter the workforce and of- • The EU universities should be a world ref- fer the right incentives for them to remain erence for high standards, but this requires there. better and more modern management within a European Area of Education. The renewed • But it is important to recognise that this is an Strategy also proposes the setting up of a area where primary responsibility for change flagship “European Institute of Technology”. lies with Member State authorities and the It can build on the Union’s strong track social partners. This will be reflected in the record in technology, but also attract good approach of the new Social Agenda for the ideas and people from around the world. Union, which was just presented. • Also highlighted is the need to keep the Union at the cutting edge of science and Of course, the social partners have a particu- 4 Green Paper on an EU approach to managing economic migration, COM(2004) 811 final, 11.1.200512 European View
    • José Manuel Durão Barrosolar role to play in taking Lisbon forward in this by Member States only after broad consul-area. The Union’s tradition of social dialogue, tation of stakeholders and their Parliaments.backed up by appropriate action at the EU level, • Member States to identify a “Mr or Ms Lis-has been an important factor for economic and bon” at the government level to drive thissocial progress. process forward. • Simpler reporting – in the future, there willThe social partners are well-placed at the Euro- be only one Lisbon report at the EU levelpean - but also at the national level - to help de- and only one report at the national level.liver lasting growth and quality jobs. The Com-mission has invited them to lead by example Finally, we need to reach beyond governments;in identifying concrete actions at their Tripar- we need to convince the social partners, othertite Summit ahead of the March 2005 European institutions, national parliaments, and citizens.Council. Their support needs to be secured for our goals of growth, job creation and reform. This meansWhy will Lisbon deliver this time around? communicating regularly why Lisbon matters and how it makes a difference. This is a sharedThe key to success in this second phase of the responsibility between all the EU and nationalLisbon Strategy depends on people understand- institutions.ing the message of urgency and by presentinga more focused approach. Success will be criti- Ultimately, making a success of the Lisbon Strat-cally linked to ensuring real ownership of the egy is crucial for the future of the Union, butLisbon Strategy at a national, regional and local also for our credibility.level. Lisbon’s objectives must become part ofnational political debate.The Commission will, of course, play its role José Manuel Durão Barroso is the President ofas guide and facilitator, contributing to develop- the European Commission.ments at the EU and national level. However,the renewed Lisbon Strategy also proposes tosimplify Lisbon “governance” to make it clearerwho is responsible for doing what and to makeit easier for Heads of State, Governments andthe European Parliament to provide strategicguidance on what needs to be done.This is essential as nothing can be done un-less we have greater political will and a strong-er commitment from Member States, since somuch of the Lisbon Strategy depends on actionby them.To help to build this ownership, the Commis-sion has proposed:• A more integrated approach to macro-eco- nomic and employment policy co-ordina- tion within an integrated Lisbon cycle.• A clear role for the Commission, European Council and Parliament.• A Community Lisbon Action Programme to focus the work that is needed, to be complemented by National Lisbon Action Programmes. These should be developed 13 Volume 1 - Spring 2005
    • Angela Merkel Tapping Germany’s Potential for a Prosperous Europe By Angela Merkel Germany is a country Quite a lot has to change in Germany, to enable full of opportunities, the country with its economic and social system but it must once again to survive in the future, in the tougher interna- utilise them better. An tional competitive environment, and to make it economically strong attractive for companies at home and abroad to Germany is also good invest and produce in Germany. Reforms arefor Europe and for the implementation of the also required to enable Germany to tackle theLisbon Strategy, which is to be resurrected. most serious problem it’s currently facing: its ex-Europe’s largest economy has to become again cessive level of unemployment.what it used to be in days gone by: an engine ofgrowth for the entire continent. Unemployment is the gravest source of in- justice in GermanyWhere does Germany stand today? Unemployment in Germany passed the 5 millionGermany’s economy is not growing enough. mark for the first time at the start of FebruaryThe economy grew by 114% in the first decade 2005, and in the meantime it has actually risenfollowing the establishment of the Federal Re- to 5.2 million. To this figure we must add manypublic. The talk was of an economic miracle, more people who are undertaking retraining orand not without reason, even though this mira- further education, or who no longer register ascle had been achieved through people’s hard unemployed, because they see no chance ofwork. Another 54% of growth was achieved in finding a job.the next decade. Growth was still around 23%in the eighties. A good 50% of the unemployed have been out of work for more than 12 months. In GermanyActual growth in the German economy in the only 18% of the unemployed find a new jobyears between 1993 and 2003 came to 13.6% within six months. Comparatively, in Denmarkoverall. In the same period, the other 14 EU for example, 60% of the unemployed return tostates were able to demonstrate actual growth the labour market within six months.amounting to an average of 26.9% - almosttwice that of the German results! In addition to serving the purpose of securing a person’s livelihood, work also makes a con-The CDU has some clear ideas about how our siderable contribution to that person’s sensecountry can be guided to more growth, and of identity and self-worth. For that reason, thehence to more employment and prosperity for problem of unemployment is not an exclusivelyits people. Just like the other successful econo- financial problem. For many people, produc-mies in Europe, we must tap into our potential. tive work and contact with other people, is a key part of their social life; unemployment, andItaly, for example, has managed to create over particularly long-term unemployment, leads toa million new jobs in the last three years; Fin- a loss of satisfaction with life, to a drop in self-land takes first place in the PISA test; Ireland esteem and to a disheartening feeling of beingis recording economic growth of 5.2%; France excluded from society.provides a nursery school place for every child;Denmark has almost halved its unemployment; Nor, for that reason, can high unemploymentunemployment is below 5% in the Netherlands; be viewed as an exclusively fiscal problem. Theand Sweden has the highest level of research much larger economic cost factor lies in theinvestment in Europe. waste of many people’s capacity for work. A so- 15 Volume 1 - Spring 2005
    • Tapping Germany’s Potential for a Prosperous Europe ciety that permits unemployment to any signifi- staff. In this area too, we are prepared to learn cant extent is wasting knowledge and skills. The from the positive experiences of some of our available potential for employment is, in part, European neighbours. allowed to lie fallow. Experts estimate the cost to the national economy of under-employment Germany needs a new start to achieve pros- in the form of the loss of goods and services to perity for all be 15% of GDP. People, once again, need hope and prospects. The CDU expressly rejects the assumption that Only a clear course, coupled with decisive ac- unemployment is the result of not enough tion, will restore confidence. For that reason we work. From caring for people, through to envi- must remember the core aims of stable econom- ronmental protection, there are plenty of exam- ic policy: ples of work that is useful and desirable, but is not undertaken because there is no demand for • Rising personal income, growing employ- workers at wages and levels of remuneration ment and stable national budgets require that exceed the market value of the work done. annual growth of at least 2.5 to 3%. This, in fact, is one of the essential reasons for • Full employment must, again, be defined as underemployment in Germany. The above as- a realistic objective. Germany can achieve sumption is also discredited by the fact that this target just as other national economies around 17% of Gross Domestic Product is cur- can. rently earned in the ‘shadow’ economy. As a • The CDU stands for a stable currency and result of this, € 370 billion bypass the fiscal au- hence, adherence to the Maastricht criteria, thorities untaxed every year. because this represents the most important factor for safeguarding the purchasing pow- One further reason for this development is the er of all citizens. extension of the welfare state with a system of • The foreign trade balance is an important social security payments, in which false stimuli commodity, which can only be maintained and false guidance are inherent in the system. in the long term if our national economy as This has turned the welfare state into a competi- a whole becomes more competitive. tor of private industry, acting in some cases as an alternative to employment. In some circum- The CDU orients its actions on the Christian stances, the wages offered in the employment view of the individual, which gives it an ethi- market may not be an adequate incentive to cal basis for responsible politics. We also place work, when compared with the social security great importance on the basic values of liberty, payments, particularly if these are supplement- solidarity and justice, as well as the principle of ed by illicit work. subsidiarity. Our view of humanity obliges us to adhere to the model of a society based on In the course of the expansion of the welfare employment. If one is to take responsibility for state, numerous provisions for the protection of the conduct of ones own life, one must be em- employees were established in law. Yet, as a re- powered to do so, by means of an income from sult of these regulations, companies will arrange employment, which opens up the opportunity for overtime hours to cover a rush of orders, to do just that. rather than take on new employees. Thus, many regulations that were originally created for the We are sure that with a joint effort we can re- protection of employees have now developed turn our country to the elite group of the most unwanted side effects, in that they frequently successful nations in Europe within ten years. prevent more employment. We will strengthen the forces of growth and so create significantly more employment once Germany needs a structural reform of its labour again. In this way, we will secure prosperity for market, leading to a fundamental simplification everyone. and debureaucratisation of employment law and creating more flexibility in work schedules This all depends, however, on the rigorous im- in order to facilitate the employment of new plementation of some necessary reforms. Only16 European View
    • Angela Merkelthen will we be able to continue to guaran- who returns to employment becomes a taxpayertee social security in the future. The profound and social security contributor, thus contributingchanges to the economy and society that we to the financial recovery of the community.are experiencing at the start of the 21st. centurydemand courage for change and renewal. Ways must be found to reduce labour costs, so that employment growth can take off again. AsFirstly, we are rapidly developing into a knowl- long as we hold one of the top positions world-edge-based society, demanding new solutions wide in terms of labour costs, we will continuefrom politicians. The volume of knowledge to see a loss of jobs in our country. The hope ofavailable worldwide is growing explosively, and more employment can only be fulfilled if thereat the same time new knowledge is going out is a clampdown on labour costs.of date ever more quickly. The significance ofknowledge as a competitive factor for compa- For this reason we need a social reform policynies and national economies, and as a very per- that distances itself from earnings-related contri-sonal resource for the future of each individual, butions, and places the financing of social secu-can by no means be underestimated. We must rity systems on a new basis, such as the reformhelp to create the right conditions to ensure that of the health service provided by the solidarity-everyone finds a place in society with his or based health premium model of the CDU andher talents and abilities. Our success depends CSU. We need longer and more flexible work-crucially on making sure that all talents – those ing hours, because this will also lead to a fall inof the craftsman, the scientist, the engineer, etc. labour costs. We need major tax reform, which– are called upon and encouraged. will make tax rates simpler, lower and fairer. The success of Germany depends crucially onThe second major change is the fact that, in light the replacement of the existing complicated taxof globalisation, Germany is today involved in system, with its excessive number of special ar-an international competitive environment of rangements and tax structure options, by taxan entirely new nature, from which our coun- laws that are based on simplicity and transpar-try cannot disengage itself. As a country that is ency and provide incentives to work.short of raw materials, Germany depends on itsability to assert itself in global trade by means of Germany is a highly developed country, whichthe development and marketing of state-of-the- is particularly dependent on the development ofart products and services. The only raw material new products. This will require a significantlythat we have in good measure is the diligence greater effort to raise the level of education andand intelligence of our people. We must exploit training in our country. In order to be competi-this potential to the fullest. tive internationally, our focus will have to be on sectors of the economy with high added value.Demographic trends represent a third signifi- Our future lies in innovation, research and de-cant change. Whereas the global population is velopment of new processes and better productsgrowing, in Europe, and above all in Germany, and services that are relevant to customers.a massive drop in population figures is antici-pated. This will have a considerable impact on We must push open the door to the knowledge-the ability of the social security system to cope, based society, because economic success will inon the number of people of working age and future be even more dependent on high-qualitythe structures of the employment market, as research and good education and training sys-well as on the need for additional homes and tems. We must do more than ever before, tocare institutions for the elderly. ensure that key technologies are not just devel- oped in our country but, also converted hereThe many different changes in the world are into profitable products. We must also see to itforcing us to question and - where necessary that we become flexible enough in our employ-– to rearrange the priorities of our political ac- ment structures that we can survive with thetions. Our welfare state will only endure in the entirety of our potential in worldwide competi-long term if we can overcome the problem of tion.underemployment. Every recipient of state aid 17 Volume 1 - Spring 2005
    • Tapping Germany’s Potential for a Prosperous Europe Nothing threatens our prosperity and our social modern products and processes and the most security more so than inertia and resignation. effective production methods, our country has There is no alternative but to embark on sup- indeed numerous options for action and pros- porting the modern, knowledge-based society. pects for success. The CDU is convinced that However, this support goes way beyond what there can be positive developments for people is technologically feasible. We Christian Demo- in Germany, even in the age of globalisation. crats place the individual at the centre of our politics. Our range of policies is directed at the Germany can win in global competition if it is strong, just as much as, at those who are too prepared to subject outdated regulations on in- weak to help themselves. Solidarity remains a dustry, commerce and employment to inspec- core element of our politics. tion. The telecommunications industry has in the past undergone an enormous structural change, For this reason, economic and social policy are, and in doing so, it has made a significant contri- for us, linked in an indissoluble combination. bution to the creation of new jobs. We have to An economic policy without social justice will recognise where our business structures are no not achieve social peace and will undoubtedly longer relevant, under changed circumstances, lead to losses to the national economy. On the and where new regulations are required. other hand, a social policy that does not take into account economic profitability, robs itself In comparable European countries, it is possible from its source of income. The social market to see that there are effective strategies to coun- economy combines economic performance and ter unemployment. A report by the EU Commis- social responsibility to create an orderly politi- sion describes, for example, the labour market cal whole. in Denmark as the “most flexible and effective in Europe”. Denmark underwent a comprehen- The social market economy has formed the core sive reform of the tools of labour market policy. competence of the CDU for over 50 years. All Business taxes have been cut. This removed a the great social legislation in Germany has been burden from companies and set the economy developed and legislated in Parliament by the in motion. Additional dynamism resulted from CDU. Thanks to the social market economy, our moderate wage settlements. They have made country has an impressive economic and social the creation of new jobs affordable once more. order. The CDU intends to reinvigorate this or- At the same time, protection against wrongful der under changed circumstances. dismissal has been cut back and as a counter- move, they pushed up redundancy payments. What used to be a common assumption: If the company is doing well, the workers are doing An added factor is that additional wage costs are well too, is frequently no longer valid today. comparatively low in Denmark, as the system of People feel insecure. We are faced with a new social security is financed to a greater degree, social question: How can we succeed in secur- out of taxes. Furthermore, the rule that the un- ing employment and welfare under globalised employed must accept a job within one year, conditions? provided they are offered one, has proved to be particularly effective. Denmark managed to We are convinced that solid answers can only halve its unemployment rate from around 10% be found if we succeed in permanently combin- in 1993 to 5.6% in 2003. In Ireland, where they ing market and humanity in a new Social Market have comprehensively restructured the labour Economy. Our vision is one of the ‘We’ society, market in recent years, the unemployment rate which leaves no one behind and looks to the fell from 15.4% in 1993 to just 4.6% in 2003. future together, with self-confidence and curi- osity. Projections have shown that labour cost reduc- tions, wage restraints and longer working hours, We can win the future – we have options for would lead to significant successes in Germany, action! as well. The effect of this would be to largely eliminate unemployment in our country, with- Germany must remember its strengths and ex- out any resulting drop in the income of work- pand on them. In the competition for the most ers.18 European View
    • Angela MerkelTapping PotentialGermany is standing at crossroads. The chal-lenge is to set a new course for the years ahead.At its party conference in Leipzig in 2003, theCDU passed plans for the future of the socialsecurity system and for the restructuring of in-come tax law in Germany. The party confer-ence in Düsseldorf in 2004 passed a plan foreconomic upturn and for more jobs. The CDU,thus, has a comprehensive programme that putsit in a position to succeed in taking over po-litical responsibility in the Federal Republic by2006 at the latest.Economic growth cannot be ordained by gov-ernment. But governments have the opportunityand the duty to act in those situations wheregrowth is fettered and obstructed by outdatedregulations, which were once useful to protectemployees from arbitrary actions and exploita-tion, but which today impede new attitudes.Politicians have the opportunity and the duty toput people in a position, by means of a goodeducation and training, where they can eachcontribute their talents and abilities to this soci-ety, for the benefit of all.Politicians have the opportunity and the duty toremove entirely any decrepit, bureaucratic regu-lations, or to replace them with flexible regula-tions.Germany has every opportunity to survive inglobal competition, provided that the basic con-ditions are set correctly. Our programme showsthe way to achieve this aim.Angela Merkel is the President of the CDU ofGermany. 19 Volume 1 - Spring 2005
    • José María Aznar Europe’s Challenge for Growth: The Path to Follow By José María Aznar In April 1999, British in every year but one; in contrast, in that same Prime Minister Tony period the EU economy grew by less than 3% in Blair and I issued a joint every year but one. declaration at Chequers on economic reform Since the early 1980s, the process of rapid con- and employment. We vergence that had begun in the post-war periodproposed that the future Portuguese Presidency had come to a halt. European GDP per capitashould hold a meeting of heads of state and was stuck at around 70% of the US figure. Andgovernment to reformulate the European Un- in the second half of the 1990s this process ap-ion’s economic strategy. peared to have worsened: during the period from 1995 to 2001, the US accounted for 60% of total growth in the world economy, whereas theThe Portuguese Prime Minister, António Gu- EU, with an economy of a roughly similar size,terres, received the idea favourably and began contributed barely 10%.working on it with enthusiasm and intelligence.In March 2000, the European Council approved The US had been capable of achieving full em-a broad programme of economic reforms in ployment. Yet in Europe, millions were on theEurope, the “Lisbon Agenda”, about which so dole queues. For those of us who believed thatmuch has since been written. the best social policy is employment, the ex- istence of millions of unemployed and, moreThe agenda was certainly ambitious in its aim: worryingly, the apparently structural nature ofto make the European Union, over the first dec- unemployment, suggested that there was clearade of the twenty-first century, into the most room for improvement to the so-called “Euro-competitive and dynamic economy in the world, pean social model”, for all its undeniably posi-capable of sustained growth, job creation and tive features.enhanced social cohesion. It was fundamentally important then, to capital-It was a goal born out of a time of optimism. In ise on that moment of optimism to propose aMarch 2000, let us not forget, the general percep- structural reform of the European economic sys-tion of the potential of the European economy tem. Europe needed to ensure greater growth,was favourable. We had successfully completed without which it would quite simply be impos-a process of nominal convergence, culminat- sible to meet the high social and environmentaling in May 1998 with the decision to launch the demands of European citizens.third phase of Economic and Monetary Union,and the introduction of the euro lay ahead. The These, then, were the ambitions of Lisbon.problems of fiscal consolidation seemed to bea thing of the past; even the leading economic Time to take stockorganisations predicted that Europe would bethe area of greatest growth in the two following Five years have passed. We are now halfwayyears, 2001 and 2002. through the decade, and as decided in 1999, the time has come to make a “halfway review” ofFor many people, however, this climate of hope the Lisbon agenda.did not dissipate a serious concern with theunderlying problems of the European econo- We must be honest with ourselves. Europe hasmy—the problems that the initiative I had the been incapable of keeping up with the Unitedhonour to co-propose sought to address. During States as a driving force in the world economy.the 1990s, the US economy grew by over 3% 21 Volume 1 - Spring 2005
    • Europe’s Challenge for Growth: The Path to Follow Generally speaking, the European economy has Worse still, there may be some who simply re- gone through a period of great weakness. With sign themselves to this situation; or even those millions on the dole queues, “social Europe” has who turn it into theory. Some may say that this feet of clay. behaviour is part of an alternative “European model”, in which economic dynamism is un- True, there have been certain notable excep- necessary, since our collective preferences are tions. Countries such as Ireland have given an different. example of how to achieve high growth rates and prosperity. Many of us do not agree. On the contrary, we believe that structural reforms are unavoid- In seeking to explain the poor European results, able, however difficult they may be, and that one might resort to the excuse of adverse eco- we should not relinquish the pole position the nomic events. The financial crisis and the sharp European economy deserves. And the inescap- rise in oil prices in 2000, 2003 and 2004; the ability of reform derives precisely from the fact accounting and financial scandals; the effects of that without it the “European social model” will the terrorists attack of September 11, 2001; and end up falling apart. It will be incapable of with- the definitive entry into the global economy of standing phenomena that are inevitably bound heavyweight competitors such as China and In- to happen, such as the retirement of the “baby dia, to mention only the two most important. boom” generations, putting extraordinary pres- sure on the pension and health systems. Pre- But these economic incidents have not only af- serving the social system, which has taken so fected the EU; indeed, many of them had a more much common effort to build requires sustained direct impact on the American economy, which, growth, full employment and reform. nonetheless, has reacted with resilience. I do not, however, agree with those who view Since 2000 the European Union has failed to Lisbon as a complete failure. This seems to me achieve its forecast growth rate of 3%. It has to be an excessively harsh judgement. In simple scarcely managed to grow at over 1%, in con- terms, we have made progress, but, not much trast to the much faster rate of the United States. and not enough. What is even more worrying is that this differ- ential is forecast to remain unchanged in the I would like to cite just a few examples, starting years to come. from the text approved at the European Council in Barcelona in March 2002. The meeting set out At this point, in undertaking a review of the Lis- a specific calendar of targets. Today, more than bon agenda, we need to reflect on the reasons two years on: why the European economy has been growing at a slower rate for nearly twenty years, both • it has been agreed to completely open up during periods of expansion and moments of the electricity and gas markets, which will greatest weakness. And, naturally, we need to bring direct benefits to consumers and com- ask why Europe appears incapable of creating panies. It is worth remembering that this the same jobs as the American economy. would have been unthinkable at the time of the Lisbon Council; Some may consider it to be inevitable, as if it were somehow a natural phenomenon. Some • the essential part of the financial services ac- may think that it doesn’t really matter whether tion plan has been completed, which will Europe’s growth rate continues to lag behind make it possible to provide our common America’s, not to mention China’s or India’s; currency with an integrated financial mar- that it’s not worth the effort required to approve ket and increase competition; moreover, the the necessary reforms; that it’s not so serious Lamfalussy process is yielding good results, if Europe continues to be less competitive be- with notable reductions in the time taken to cause of high taxes, rigid employment markets approve the necessary directives; and the fragmentation of its national markets.22 European View
    • José María Aznar• a new regulatory framework has been • The second reason is related to the method adopted for telecommunications; of decision. Lisbon saw the establishment of the “open coordination” method, an instru-• the “single sky” package has been com- ment which seemed promising for areas in pleted, allowing greater efficiency, capac- which there are no clear community powers ity, transparency and safety in air travel and and where the classic community method benefiting millions of users; was not applicable.• progress has been made towards the lib- Five years down the line, experience has eralisation of rail transport, a step which is shown that this method has been useful in highly relevant for encouraging sustainable many regards, but its limitations have also development. become clear. Indeed, throughout this pe- riod, it is difficult to identify a single eco-It is true that it has been necessary to arrive nomic reform of any importance that hasat rather unambitious - or frankly unsatisfactory been adopted using “open coordination”.- compromises on certain specific issues. I toowould have liked to take many of them much On the contrary, I think it is significant thatfurther. Yet it is not true that the process of re- the most important advances of Lisbonforms has come to a complete halt. - some examples of which I have already cited - have all been based on the classicWhat we do have to ask ourselves is why, de- community approach, with both the Com-spite these objective advances, the general pub- mission and the European Parliament in alic has been left with the impression that, as a position of political leadership.whole, the Lisbon Strategy is not working. This coincides with the experience of theThe fact is that European citizens do not feel 1980s. At that time, the reaction to whatthat the Lisbon Strategy has benefited them. was termed “eurosclerosis” (a phenomenonThis should be a central consideration in the which has sadly remained with us for morereview now beginning. than twenty years) was the “single market” programme - essentially a raft of directivesIn my opinion, there are three fundamental rea- intended to achieve integration and open upsons for this situation: national markets. The programme was un- questionably successful.• First, from the outset, the central message of European strategy (which, it should be This does not mean that I am an uncondi- remembered, involved economic reform tional supporter of the legislative approach. and employment) was diluted by being ex- I am well aware that on many occasions tended to other issues; issues which were what is needed is not more regulation, but no doubt valuable, but which had nothing better regulation; on other occasions, what to do with that strategy. As a result, as the is needed is to deregulate, eliminating su- years go by, the term “Lisbon” has ended up perfluous rules. being a cover-all, used on any occasion by all kinds of people. In the political debate - What I do believe, however, is that in areas and we have all experienced this - the word in which the barriers are clearly identified, is used in arguments both for and against. the legislative approach is a very powerful instrument for opening up markets, and we This confusion has undoubtedly been capi- should not be afraid to use it. And I also de- talised on - someone might even say caused fend the central role of the European Com- - by those who are least in favour of the mission in initiating the reforms and ensur- reforms. In my opinion, this is one of the ing that they are applied in their entirety. fundamental reasons why it has been un- fairly discredited in the press and among the • The third reason lies in political will. I know political class itself. very well, from my own experience, that 23 Volume 1 - Spring 2005
    • Europe’s Challenge for Growth: The Path to Follow economic and social reforms have a political areas (with the exception of Japan), while our cost. Public interest requires us to undertake generous public health and pensions systems them, even if there is a political price to be offer unquestionably broad coverage. We are all paid. The lack of political will is decisive to aware of the pressures on spending that this will understanding the limited progress made by cause in the not too distant future. the Lisbon agenda. In this context, I do not think that anyone can For me, the lack of priorities and the dilution argue that it is wise to maintain a permanent of the initial purpose; an unsuitable method of deficit. Ultimately, all deficits have to be paid governance, which has reduced the visibility of for, either through higher taxes, higher interest the achievements made; and a lack of political rates or by passing them on to future genera- will are the three main reasons why the Lisbon tions. This is why I consider the central rule of agenda did not attain the scope it sought. the Stability Pact to be so sensible when it says that, except in conditions of grave economic re- A framework of stability cession, government budgets must be “close to balance or in surplus”. The greatest success of this period has been the introduction of the euro. I would go so far as There are many people who, while not ques- to say that the euro is perhaps the greatest ad- tioning this rule, think that the pact needs to be vance in the European Union’s 50-year history. more flexible in applying it. This might seem And to use Schuman’s term, it is the greatest reasonable, but it ignores the fact that the Pact, “concrete realization” of the European Union in as it was initially approved, already contained the last two decades, alongside the enlargement broad elements of flexibility. to 25 members. There are always features of any rule that can be In my opinion, the euro constitutes a categorical improved upon (such as ensuring greater fiscal success, inter alia because it founded a mon- consolidation in the upper phases of the cycle), etary union among 11 (and not 8) members, but I am afraid this is not the heart of the issue. and above all, because this union has two solid We should not allow ourselves to be deceived foundations: the independence of the Europe- as to the nature of this debate. an Central Bank and the Stability and Growth Pact. What is at stake is whether we want solid and credible fiscal rules for our monetary union, The slow growth rate of the European economy and, above all, whether we are prepared to as- over the last twenty years is due to structural sume the obligations these involve; or whether, causes, not inappropriate macroeconomic poli- on the contrary, Europe wants to play at “cheat- cies. There have always been those who defend ing at solitaire” and moreover, to send out the monetary or fiscal expansion as a way of solv- message that European commitments and insti- ing lack of growth; they were around in 2000 tutions are not credible. and they are still around today. Now those same voices are defending the need to dispense with For this reason, although it is not a particularly the Stability and Growth Pact, or at least to alter popular view at this time, I would like to state it in such a way as to make it meaningless. I my defence of the current version of the Stabil- do not agree; I think we need to consider seri- ity and Growth Pact. Despite all that has been ously whether this is the right direction for the written, nobody has come up with convincing future of the monetary union and the European reasons for believing that the current problems economy. have arisen out of defects in the pact itself. Rath- er, they appear to have derived from the lack of The European Union continues to have the a real will to implement it. highest rate of public spending as a percentage of GDP of all the major economic areas of the I therefore think it would be a mistake to relax world. Furthermore, the aging of our popula- its central features. Before doing so, we would tion is more worrying than in other developed have to be quite sure that we could provide a24 European View
    • José María Aznarbetter alternative, one that is compatible with main political families in the European Parlia-the treaty and that does not lower our present ment; not out of ideological conviction or partyand future demands. Quite frankly, such an al- opportunism, but as the only way of ensuringternative does not exist at this moment in time. the sustained job creation the European UnionI, therefore, think we should reflect carefully be- needs. The experience of the spring Councilsfore taking any decision that might prove to be since 2000 are proof of this.the wrong one, in a few years time. I believe the recommendations for the futureLooking forward contained in the Commission’s report are good ones. Indeed, there are three features that I thinkEurope cannot resign itself. It cannot content are particularly important and which might setitself with remaining as the area in the OECD the structure of the new working agenda for thiswith the lowest growth rates for another ten or second phase:fifteen years. Coupled with the disturbing de-mographic trends, this would place us in a po- • Firstly, a large-scale raft of legislative reformssition of increasing irrelevance on the interna- is needed. As I have already said, the legisla-tional stage, even if we continued to be a giant tive approach is not always the best one, butin terms of our economic size. This is not an in certain areas I think it is essential. Natu-agreeable panorama, but, unfortunately, if we rally, this will only be possible if there is thedo nothing to prevent it, it is a relatively likely political will to undertake such reforms.prospect. I would like to mention just a few of these.In my opinion, the two central arguments thatled to the Lisbon agenda are still valid: the eco- 1) The services sector accounts for 70% of anomic need and the political will. Five years lat- developed economy, but nonetheless thereer, the debate on economic reforms in Europe are still too many barriers to the single mar-needs a fresh impetus. ket in this area. Financial services, and in particular, the retail sector strike me as beingThe President of the European Commission, a clear example.José Manuel Durão Barroso, issued an excellent 2) We also need a new reinforcement of thereport on the second stage of the Lisbon agen- policy on competition, and in particular ada. I feel that his experience and his capacity review of state aid. I am one of those peo-make him the right person to put forward this ple who think that the EU needs to have anew impetus. strong industrial sector, but I do not believe public subsidies are the right way of achiev-But in addition to the courage of his ideas, he ing this goal.has offered us a very relevant and clear-sighted 3) Labour reforms are quite simply essential.analysis of everything that has been done since The rigidity of many labour markets is theLisbon, its strengths and its weaknesses, as well chief obstacle to employment. Flexibility inas its evident problems of governance. this field inevitably results in more and bet- ter jobs.Someone has criticised his proposals for having 4) I think a commitment to improving the qual-a certain ideological bias. I think this is deeply ity of educational systems at all levels is alsounfair. essential. The value of hard work deserves to be extolled. Having long ago attained theFirstly, because his contribution arose out of a target of universality, the priority of educa-widely shared reflection, as the “Kok Report” - tion must now be quality.from which it takes its main features - shows. 5) The reinforcement of policies on research and development is also essential. The com-Secondly, because the commitment to struc- mitment cannot and must not simply be totural reforms in the EU has always superseded spend more. Above all, it must be to spendconventional barriers. The promoters of the Lis- better; prioritising excellence, specialisationbon Strategy include representatives of all the and reinforcement of the science/technol- 25 Volume 1 - Spring 2005
    • Europe’s Challenge for Growth: The Path to Follow ogy/business system. EU - and even more intensely the countries 6) Encouraging innovation must be a priority. in the euro zone - were also to make an The innovation deficit takes its toll in terms in-depth examination of each economy at of productivity, competitiveness and em- certain intervals, in greater detail than the ployment. Europe needs more innovation simple annual review contained in the an- in its companies. Tax incentives can be a nual reports. This idea might pose problems good way of achieving this, but they must of different kinds, and will certainly require be complemented by cultural changes in greater resources; but we have to be pre- business. pared to accept change if we really want to 7) In the same way, a balance must be struck give a strong boost to reform. between legitimate environmental and health demands and the demands of competitive- • Finally, we should not forget that the EU is ness: proposals such as REACH should be fully integrated into the global economy. assessed from this perspective. EU-25 is the largest trading power in the world, and we also lead the way in flows of A new set of laws would increase the im- direct investment. We cannot have a strategy pact and visibility of the reform process. Evi- of internal economic reform without, at the dently, in this terrain, the leadership of the same time, promoting an external opening- Commission and the European Parliament is up. I am pleased to see that the Barroso re- irreplaceable. port highlights this point. • Secondly, we must find a better system European efforts in favour of the new Doha for promoting reforms in areas in which Development Agenda (which the EU was the member states have exclusive powers. so involved in launching) will be of fun- I think the idea of demanding a single an- damental importance. But it appears to me nual “Lisbon action plan” from each member that these are, and must be, fully compatible state is a very good one, cutting through as with a particular strengthening of Trans- it does the current tangle of different kinds Atlantic economic links. of “progress reports”. Today, the Atlantic unites the worlds two Although these are exclusive national pow- great economic powers. The United States ers, we all can and must offer our own opin- and the EU are now the most developed ions. Sometimes I think that we are not fully and most technologically advanced eco- aware of the true meaning of the term “mat- nomic areas in the world. The commercial ter of common concern” in the Treaty. and financial links between the EU and the United States are deeper and more intense The Commission should also work intensive- than ever. However, barriers remain in the ly to provide stimuli and recommendations Trans-Atlantic economy, which result in lost in this field through these “Action Plans”. opportunities for growth and employment Each member state could decide whether or on either side of the Atlantic. The remaining not to accept its recommendations (perhaps barriers are no longer the traditional ones, using the “Obey or Explain” method), and but rather obstacles of a regulatory nature. in all cases, it should involve its respective This is evident in areas such as financial national parliament very closely in this dis- services, competition, air travel and IT serv- cussion. The result of this exercise would ices. We must do something to tear down subsequently be subjected to a detailed peer those barriers. It would not only be good for review. business on either side of the Atlantic, but also, and perhaps to an even greater extent, The OECD and the IMF carry out a regular it would be good for developing countries. in-depth examination of each economy. This For this reason I have proposed the creation is a good idea; and from my own experience of a Trans-Atlantic Economic Area, a Trans- I know the importance of this examination Atlantic Area of Prosperity, which I believe for formulating national economic policies. would not only be compatible with multilat- I think it would not be a bad idea if the eral order, but would be an essential com-26 European View
    • José María Aznar plement for more open international trade.ConclusionFive years ago, in Lisbon, we reached what Ihave sometimes termed a “new consensus”:Economic dynamism and social cohesion aregoals that can be attained simultaneously; theyare not opposing concepts. To be sustainable,the “European model” requires reforms andeconomic growth.We have made some progress over this peri-od. It would be unfair to argue otherwise. Butwe have also made mistakes: on occasions, wehave not known how to focus on the right pri-orities and, essentially, there has been a lack ofpolitical will.Now the time has come for a new impetus,which will bring together the best lessons wehave learnt in this time, and correct our course,wherever necessary.In his recent address to the European Parlia-ment, Commission President Barroso arguedthat Lisbon: “[...] must work, because it repre-sents the right diagnosis and the right cure, andthere is no credible alternative”. These are ideasthat many of us share, and they indicate that theprocess of economic reform is in good hands.José María Aznar is former Prime Ministerof Spain, President of Centrist DemocratInternational (CDI) and President of theFAES Foundation. 27 Volume 1 - Spring 2005
    • Jacques Barrot Mobility - a Key Element for Growth and Competitiveness By Jacques Barrot Great strategists con- an important effect in technological develop- sider that the two key ment, in the creation of jobs and in the improve- elements to win battles ment of European competitiveness. Therefore, are fire power and mo- I consider that transport will play a paramount bility. This is true for role in at least four main action areas of the any strategy, including Lisbon Strategy:the one presented for the European Commis-sion to revitalise the so-called Lisbon Agenda, • Internal market, both in general, and in thewhich should boost European GDP by at least transport sector,3% by 2010. The fire power of economic reform • Infrastructure investment, particularlycannot do much without a healthy and efficient through the Trans-European Transport net-transport system that guarantees its mobility. In works (TEN-T),a way, the transport sector is the “carrier” of • Industrial base (Galileo, Sesame, ERTMS)the Lisbon Strategy, but, at the same time, as andan economic sector, it is important enough to • External projection (Aviation Internationalgenerate growth and competitiveness. Agreements).Transport costs represent almost 10% of the Completion of the internal market in theEuropean GDP and the sector employs more transport sectorthan 10 million people. It has proven to be theshop window of many of the most spectacular Opening markets creates new opportunities forachievements of European industry, like the new growth, investment and jobs and brings benefitsAirbus 380, the biggest commercial airplane of to the consumers in tearms of greater choicethe world. Advanced technology and big invest- and lower prices. This is certainly the experi-ments that produce real economic benefits and ence in the transport sector. Among the manycreate jobs are present in other big industrial factors that explain the strong growth and dom-projects like Galileo, that is also being promoted inance of road freight transport and the highby the European Community. growth rates of air transport, is the fact that they opened their markets to competition earlier thanCertainly, the transport system has its own prob- the other modes of transport.lems and the whole European economy suffersthe consequences. Congestion costs are estimat- According to the 2001 White Paper on Euro-ed at more than 1% of GDP, CO2 pollution adds pean Transport Policy, rail transport is the sec-to the warming of the atmosphere, while road tor on which the success of the efforts to shiftaccidents take some 50,000 human lives every the modal balance depends; since rail, togetheryear in EU-25. Two major factors contribute to with short sea shipping, offer a real alternativethese problems: the imbalance between modes to road haulage. Nevertheless, the railway sectorof transport and the persistence of a number of cannot compete on equal terms, fragmented asbottlenecks in the European transport network. it is in 25 national markets and networks, while road transport and aviation enjoy the benefits ofSolving the problems of the transport system is a single market and a single network.essential in any sound economic strategy, but, atthe same time, investing in this sector will have We had to wait for the approval of the first 29 Volume 1 - Spring 2005
    • Mobility - a Key Element for Growth and Competitiveness “railway package” in 20011 to allow interna- therefore, there is a need for market opening tional railway services to operate freely within in all transport sectors and services where the the trans-European networks between Member corresponding regulations should be duly en- States. This measure has subsequently been forced. Air transport is a good example of this reinforced by the “second railway package”2, endeavour. After the opening of the aviation which establishes the freedom of international market, it was recognised that other support- operations in all networks from 2006 and, in ad- ing services at airports providing air navigation dition, the freedom to provide domestic services services required a Community framework, in from 2007. The second package also took mea- order for this to benefit the aviation sector as sures in the crucial domain of safety, including a whole. the creation of an Agency, which is already op- erational from its base in Valenciennes. In the case of air transport, the need to over- come the large fragmentation of European Air Market opening in the railway sector will be Traffic Management has led policy makers and culminated by the opening of international pas- economic operators to develop a real Single senger services in 2010 according to a proposal European Sky. The benefits expected are con- from the Commission in its third railway pack- siderable. It is, for example, anticipated that a age. This package also included measures to better organisation of air traffic can reduce kero- ensure the quality of services in freight and pas- sene consumption by 6% to 12%. We have to senger transport. praise the efforts of the many different actors involved in reaching such an agreement which, Now that the measures are there, they need because of its military aspects, was of interest to to be implemented. The first railway package, national sovereignty. for instance, has not yet been fully transposed by all Member States. In 2003, the Commission The process of opening markets has not disre- opened infringement procedures against eight garded the need to: Member States in order to push them to imple- ment this important piece of European rail leg- • maintain or even increase the quality of trans- islation swiftly and thoroughly. port services, in terms of safety and punctual- ity, Since the Lisbon Council, a number of Member • guarantee adequate social conditions for States have allowed open access to rail freight workers in this sector, and networks for domestic services to railway un- • reinforce passenger rights. dertakings other than the national operator. A number of smaller competitors to the national In parallel to the opening of air transport mar- rail freight operators have entered the market in kets, the Commission sought to reinforce air pas- these countries, with encouraging results. senger rights. On 17 February, a regulation that improves the compensation for the victims of Unfortunately, the other measures proposed overbooking, flight cancellations or unjustified by the Commission to achieve the completion delays came into force. In the communication of the internal market were not as successful that accompanies the regulation, the Commis- as those concerning railways. For instance, the sion envisages to enlarge this approach to other proposals concerning airport slot allocation, the transport modes, in particular to international sea port services directive, and the regulation coach and railway transport. for the award of public services did not achieve the results sought by the Commission. The White Paper set out to boost the quality in the road sector by improving working conditions The internal market also needs the different and road safety through different measures con- modes to operate on a level playing field and cerning working time, driving and resting time, third country driver attestations and obligatory 1 Directives 2001/12/EC on the development of the Community’s railway, 2001/13/EC on the licensing of railway undertaking, 2001/14/EC on the allocation of railway infrastructure capacity and the levying of charges for the use of railway infrastructure and safety certification 2 Directives 2004/49/EC on safety on the Community’s railways, 2004/50/EC amending Directives 96/48/EC and 2001/16/EC and regulation (EC) 881/2004 establishing a European Railway Agency30 European View
    • Jacques Barrotprofessional training. frastructure projects financially feasible. Public subsidies should make up for the large socio-Nevertheless, the competitiveness of the whole economic benefits and deferred profitability oftransport sector depends on high standards of these projects. And when those benefits materi-safety and security and I am going to devote alise at the European level (cross border transit,some time to these two aspects. For instance, key bottlenecks, peripheral regions accessibil-concerning maritime safety, I will soon present ity, network effects) then European subsidiesthe third “Erika” package. Furthermore, we are are needed.considering the possibility of reinforcing thetasks of the European Maritime Safety Agency This is the reason why the Commission has pro-(EMSA), in order to improve its control missions posed increasing the budget available for theand to enforce European law on maritime safety TENs to a level that it is in proportion with theand pollution prevention. Council and Parliament mandate to carry out the 30 priority projects. The Commission hasConcerning security, I think that a horizontal proposed to raise the budget available for TENsapproach, to all transport modes, is paramount. up to € 20 billion for 2007-2013, i.e. four timesI will soon present a communication on the sub- more than the current budget, during whichject, and hope that the necessary measures will projects costing € 140 billion should be car-follow. ried out. It also proposed to finance exceptional cross-border cases up to 50% with the TEN bud-If different modes of transport have to operate get, whereas recently the maximum cofinancingon a level playing field, congestion and envi- rate was raised only up to 20%.ronmental costs have to be reflected in infra-structure charges. Consequently, the adoption Therefore, in the decision on the next financialof a new “Eurovignette” regulation is essential framework 2007-2013, it is essential to deter-to improve the funding of the TEN-T and to pro- mine if we are going to have a shy and limitedmote the modal shift from road to other more investment policy on Trans-European Transportenvironmental friendly modes of transport. Networks or if we are going to use infrastruc- ture as the locomotive of European economicExpand and improve European infrastruc- growth.ture High Technology Projects launched by theWe owe the creation of an EU transport infra- Commissionstructure policy endowed with budgetary meansto the European Parliament. While financing Galileopersistently remains the main problem that alarge transport infrastructure has to overcome, One of the growth-creating factors quoted in thevery large strides have been made in the coordi- Lisbon Strategy is the development and use ofnation of infrastructure planning. new information and communications technol- ogy. The Galileo satellite navigation project willEU enlargement forced a revision of the Guide- put a new high level technology tool at the ser-lines, which were approved in 2004 and which, vice of citizens and firms, and this will have aapart from integrating the main networks of the great impact on the efficiency of the transportnew Member States, identified 30 priority proj- system.ects due to cover the enlarged Union. The es-timated cost for the whole network was € 600 The success of Galileo may be used as a refer-billion, while the priority projects had a cost of ence in future industrial projects. At its initial€ 225 billion. stages, it was financed by EU funds for Research and Development, with participation from theDespite the European Investments Bank (EIB) European Space Agency (ESA). Article 171 ofpaying greater attention to the financing of the Treaty was used for the first time to setpriority projects, loans alone (reimbursable by up a Joint Common Undertaking financed bydefinition) are not enough to make major in- the European Union and the ESA to develop 31 Volume 1 - Spring 2005
    • Mobility - a Key Element for Growth and Competitiveness the project. Finally, it has been taken over by the risk of collisions and allowing for a better a Public-Private Partnership (PPP) scheme, in management of rail paths. the form of a concession resulting from a com- petitive tendering procedure that will take the ERTMS and the railway interoperability direc- project to the operational stage. The European tives will create a market of € 15 billion by 2010 Union will gain an independent capacity in this and will permit the creation of a single market in field, breaking the monopoly of the American railway equipment at the European level instead Global Positioning System (GPS), while the two of a fragmented market, thus allowing a cost systems will complement each other. The devel- reduction of around 25-50 % compared with the opment prospects for goods and services con- most modern systems installed at present. nected with satellite radio-navigation are enor- mous, with markets growing by 25% each year. The rapid deployment of ERTMS, starting with the main traffic corridors, is a priority to which SESAME I attach a great importance. I will make support from the TEN-T budget line conditional on ERT- The success of Galileo demonstrates that Europe MS deployment. The prospects for its deploy- is able to mobilise our innovation potential for ment have been raised by the recent adoption strategic technology. A similar initiative is fore- of the related technical interoperability specifi- seen to improve Europe’s Air Traffic Manage- cation. ment (ATM) infrastructure. It is expected that air traffic growth will continue to be strong for the External projection foreseeable future. Institutional reform is under way as a result of the Single Sky initiative to The internal market also has an external dimen- improve the organisation of the sector, and pro- sion, the importance of which was underlined vides the opportunity to organise the introduc- by a decision of the European Court of Justice tion of new technology, in particular “datalink” on 5.11.2002 against eight Member States that communication and satellite navigation, to en- had signed Open Sky agreements with the USA. able current air traffic management infrastruc- The Court rulings confirmed that Member States ture to deal with the new requirements. may not discriminate between EU companies on the basis of national ownership. The success- SESAME is the basis for developing a new gen- ful conclusions of the ongoing negotiations with eration of ATM network that will deliver greater the USA and other third countries would open safety, more punctuality and lower fuel con- the way to a very much needed consolidation of sumption, which will help accommodate an ex- the air industry. pected doubling of air traffic by 2020. The European Community is therefore renovat- This will improve the competitiveness of air ing and reinforcing its external policy in avia- transport by reducing costs and releasing infra- tion. It is a great opportunity to enlarge to third structure to accommodate demand in a dynamic countries the great success of the internal market sector. It will also have important direct and in- and allow the whole air transport chain to profit direct effects as a result of the technology and from the advantages of a global air market. innovation involved. The main tool of this long term policy will be ERTMS the conclusion of ambitious agreements with our partners in the world. The first essential Another major industrial project is the European step is already underway with the negotiations Railways Traffic Management System (ERTMS). with the United States, in which I hope to make The introduction of ERTMS as a management strong progress. and safety system for rail traffic will enable trains to cross Europe using a single command But more agreements must follow. The first and control system. ERTMS will improve safety mandates granted to the Commission will allow by controlling the distance between trains and the realisation of two important objectives: first emergency braking, thus drastically reducing the creation of a common air space with our32 European View
    • Jacques Barrotneighbouring countries, and second, the con- tant that the Institutions responsible make theclusion of global agreements with other regions right decisions. Because if we fail, the Europeanof the world with special interest in the Euro- citizen, just like Napoleon, will not want to lis-pean industry, in order to open the markets in ten to our excuses.the best competition conditions for all.Galileo is also a programme where benefitscan be improved with international coopera- Jacques Barrot is Vice-President of the Europeantion. The European satellite navigation system Commission responsible for Transport.will offer an unmatched global public service.Non-Member countries are well aware of this;more and more of them want to be associatedwith it. Certainly, the first objective is to makeGalileo compatible with other navigation sys-tems, i.e. the American GPS and the RussianGlasnoss. However, the international potentialof Galileo is not merely limited to technical har-monisation: it also involves the promotion ofthe system throughout the world, showing itsefficiency, reliability and security. This processhas already been actively initiated with severalnon-European countries.ConclusionMilitary historians consider that the genius ofNapoleon Bonaparte lay in his skill to movetroops in the battlefield. But in a certain battle,the advance of the infantry ended up in disasterbecause, the artillery failed to support their at-tack with fire. When the furious emperor askedthe person in charge of the cannons why he didnot shoot on his order, he answered: “For threereasons, Sire. First, because we don’t have am-munition.” Napoleon went away without listen-ing to the other two.Mobility is at the centre of the Lisbon Strategy.Transport is present in the future fields of actionthat the Commission has just proposed, namelyconcerning the internal market extension andexpanding the transport sub-sectors lagging be-hind, ensuring open and competitive marketsboth at home and abroad, expanding and im-proving the European TEN infrastructure, andcontributing to a strong industrial base throughprojects like Galileo, SESAME or ERTMS.However, this ambitious programme needs thenecessary resources to reach its targets. Thedecision on the next financial framework 2007-2013 will determine if the Lisbon Strategy willend up in victory or in defeat. And it is impor- 33 Volume 1 - Spring 2005
    • Joe Borg Relaunching the Lisbon Strategy - a Contribution from Fisheries and Maritime Affairs? By Joe Borg The mid-term review As highlighted by the Kok report, the overall of the Lisbon Strategy picture, after 5 years, is far from satisfactory. Al- issued in November though some progress has been made, it has 2004 by W. Kok has been uneven. Overall: identified some areas of progress and sources of • economic growth is still too low comparedsatisfaction for the European Union. But it has, with other economic powers and it needs tomost of all, shown an urgent need to react to be increased from an approximate averageworrying results regarding growth and competi- of 2% to 3% or more;tiveness. It is against this background that the • employment rates (especially for females)Commission led by President Barroso has ap- are still too low and unemployment still tooproved on 2 February a communication to give high in many member states;a new impetus to the Lisbon Strategy. • modernisation of social protection and em- ployment policy has started but much re-In this paper, I wish to recall some features and mains to be done;objectives of the Lisbon Strategy, in order to bet- • investments in research and ICT are still tooter highlight what needs to be achieved by the low, compared with other economic pow-Union. I shall then look at how the Lisbon Strat- ers;egy relates to my portfolio i.e. to the two areas • the internal market is still far from comple-of fisheries and maritime affairs. tion, especially as regards services.1. A new impetus for the Lisbon Strategy, Whilst painting this picture, it is worth recallingWhy and How? that benchmarking does not necessarily need to be made against third country economies (USA,Taking stock of the situation China, Japan, Korea). Some member states are performing very well in many areas and areThe Lisbon Strategy aims at increasing the a valuable source of good practices to others.growth potential of the EU economy by un- While reforms and experiences undertaken indertaking profound structural reforms, which some member states might not be transposablewould turn the EU into “the most performing to others, they provide evidence that the Euro-knowledge-based economy in the world”. It pean model of society is compatible with highalso aims at ensuring the sustainability of this growth and competitiveness.growth. The Lisbon Strategy is undertaken inthe overall framework of the European model Lisbon Strategy, social cohesion and sustainableof society and aims at ensuring the sustainability developmentof this model at a moment when it faces manychallenges, like, in particular, the ageing of its Above all, the key concern emerging from thispopulation. picture is that Europe is facing a serious prob- lem of growth and employment that needs toThe key reforms pursued by the Lisbon Strat- be addressed urgently and profoundly, by mo-egy are related to building a knowledge-based bilising all stakeholders. This is the most press-economy, as well as stronger research and in- ing concern for our citizens. It is the commonnovation, the completion of the internal market, responsibility of Commission, Member States,the modernisation of our social protection and Parliament and social partners, to implementan active employment policy aiming at higher the necessary reforms that will free our growthemployment and social inclusion. potential and pave the way for our employ- 35 Volume 1 - Spring 2005
    • Relaunching the Lisbon Strategy - a Contribution from Fisheries and Maritime Affairs? ment objectives. Creating this sense of urgency As stated in the Kok report, “Well-thought en- as regards growth and jobs, goes hand in hand vironmental policies provide opportunities for with reasserting our attachment to the European innovation, create new markets and increase model of society, with its social cohesion and competitiveness through greater efficiency…But environment pillars. this virtuous combination of environmental and enhanced competitiveness is not automatic; it Indeed, we have to advance our model on its requires the right choice of policy instruments… three pillars, i.e. economic, social and environ- both in the short and long term.” mental. One of them, the economic one, is in bad shape: unless we concentrate our efforts The Lisbon process, the Commission strategic ob- on it, the whole construction will be stalled. By jectives and the financial perspectives focusing on our growth and competitiveness problems, we are doing what is necessary to The discussions on the financial perspectives safeguard our social cohesion and our ability to are of a crucial importance for the future of the protect the environment in the long term. Union. While the EU budget obviously pursues a wide range of objectives, the Commission is The question is, therefore, not one of choos- determined to mobilise all EU financial instru- ing one of the pillars against the others, but to ments at its disposal for the achievement of the build the best possible policy mix at this point Lisbon objectives. in time, to allow us to achieve our objectives in the long term. We believe that this policy mix In setting its strategic objectives for the in- should give more weight to competitiveness coming mandate, the Commission has put and growth concerns for the coming years. them under four broad priorities: Prosperity, Solidarity, Security and the projection of the In seeking to boost competitiveness and growth, three former in the international dimension. It we are also committed not to endanger the long has also made it clear that the three priorities term sustainability of our growth. This is particu- are mutually supportive and that many activi- larly true in areas where economic activities are ties and objectives falling, for example, under directly dependant on limited natural resources. solidarity will contribute to prosperity, as well. This means that, among different environmen- tally and socially sustainable options, we should In particular, I wish to stress that structural funds, favour clearly those that are most conducive to among other instruments, will directly contrib- competitiveness and avoid those which will put ute to the Lisbon Strategy. As I will explain for unnecessary burden on the competitiveness of the new European Fisheries Fund, they will be enterprises. steered to also become key Lisbon instruments at the EU level. One of the key challenges the EU is facing is to find the best ways of meeting the obligations This brings us to the relationship between my of the Kyoto protocol. This strategic long-term portfolio and the Lisbon Strategy: What contri- goal will obviously remain a key perspective bution do Fisheries or Maritime Affairs at large for many EU policies. In all these areas, policy bring to the Lisbon process? options are considered that must allow us to meet our Kyoto objectives, like taxing pollution, developing and promoting clean energy tech- 2. Fisheries and the Lisbon Strategy nologies, setting quantitative targets for member states regarding renewable energy, setting and ‘Fisheries’ is an area where environmental con- promoting energy efficiency targets, and mar- straints and obligations related to the conserva- ket-led mechanisms like tradable rights. Giving tion of stocks are imposed on any policy de- priority to competitiveness will require a well- cision. As a consequence, the conservation of thought mix of these different instruments in a stocks prevails upon any other concern since, way that favours those which are least costly to without healthy fish stocks, there cannot be enterprises in the medium term, while allowing a healthy fishing economy. Against this back- us to meet our long term Kyoto objectives. ground, the Common Fisheries Policy (CFP) has36 European View
    • Joe Borgdeveloped along two main pillars: our policies, as well as, their involvement in the management of fisheries;• the conservation policy aiming at ensuring • To strengthen controls and enforcement. sustainability of fishing, and• the structural policy aiming at supporting We shall pursue vigorously the three preceding and accompanying the restructuring process objectives. needed to match fishing capacity with re- sources. But we are also seeking to reinforce competi- tiveness, within the constraint of keeping fishThe December 2002 reform of the CFP has fo- stocks healthy. This is done :cused on restoring sustainability of fishing, in acontext of excessive fishing effort. It has opened • by contributing to the adjustment of fleetthe way for a renewed fisheries structural policy, capacity and stopping undue public aid toaiming at better supporting the coastal commu- fleet renewal, which creates an environmentnities affected by the restructuring of the fishing more favourable both to sustainability andsector as well as the reduction of the fishing competitiveness;effort. • by liberalising carefully the trade of fish and fish products;Against that background, the question of the re- • by exploring carefully the new ways to man-lationship between the Lisbon Strategy and the age fisheries such as Individual TransferableCFP can be addressed in two ways: Quotas that might allow the improvement of the management of stocks and increase• How can we best ensure sustainability of competitiveness; fishing, while being in line with the priori- • Finally, despite the difficulty of the process, ties of the Lisbon Strategy? we are seeking to simplify the CFP legisla-• How do we ensure compatibility of the ob- tion, with the aim to make its implementa- jectives of the fisheries structural policy with tion by the stakeholders simpler and more those of the Lisbon Strategy? effective.Sustainability of fishing Structural fishing policySustainability has an environmental and a so- The current Financial Instrument for Fisher-cio-economic dimension. We wish to ensure ies Guidance is aimed mainly at guiding andlong-term sustainability of fish stocks, as well as facilitating restructuring of the fishing sector,prosperity of fisheries and coastal communities. which was affected by overcapacity. In additionIn our view, a well-managed fisheries policy to measures targeted at restructuring the fish-should lead to both. Experience has shown that ing fleet, it already had measures relevant to theeffective fisheries management, on the basis of Lisbon Strategy:good quality scientific data and advice, remainsthe primary tool to achieve stable and sustaina- • It provided support to develop alternativeble fisheries. However, we also know that there activities, such as, aquaculture, processingare still certain weaknesses in our system. of fish and developing new market outletsThe 2002 reform recognised that simple annual for these products;adjustments to TACs and quotas are not suffi- • It provided support to develop innovativecient if we are to achieve our objectives. It has more effective and selective fishing tech-laid down the three main principles that will un- niques;derpin our work in the coming years to ensure • It provided socio-economic support to helpsustainable fishing: re-train fishermen who were made redun- dant by the restructuring of their fleet.• To move progressively towards a multi- annual management of fish stocks; The new European Fisheries Fund (EFF) is rein-• To improve acceptance by stakeholders of forcing significantly this trend. Following the re- 37 Volume 1 - Spring 2005
    • Relaunching the Lisbon Strategy - a Contribution from Fisheries and Maritime Affairs? form of the Fisheries Policy in December 2002, 3. Maritime Affairs and the Lisbon Strategy which decided in particular to stop subsidising renewal of fishing vessels, emphasis is being In defining the new Fisheries and Maritime Af- put on a stronger and a more diverse economic fairs portfolio, the President-designate of the base and, like for other structural funds, on sim- Commission, Mr Barroso, indicated that I would plification of delivery. The following develop- be responsible for managing the Union’s Com- ments are relevant to the Lisbon Strategy: mon Fisheries Policy, as well as for working with regions affected by changes in fishing patterns1. • We have, through the EFF, introduced efforts He asked me “to steer a new Maritime Policy to involve women in fisheries, aquaculture Task Force. This will involve those Commission- and processing and to create new diversifi- ers whose activities are helping Europe and, in cation activities. This contributes to ensuring particular maritime communities to face up to a higher participation rate in the labour mar- current economic, social and environmental ket; challenges. The aim would be to launch a wide • EFF supports training of fishermen in cases consultation on a future maritime policy for the of long term reductions of fishing effort. Union. ” To this effect, Member States are asked to submit in their national strategic plans to This was confirmed in the Commission’s five- support similar socio-economic measures. year strategic priorities, which stated that: This is a contribution to active labour mar- ket policies and provides incentives for the “In view of the environmental and economi- acquisition of skills, knowledge and human cal value of the oceans and the seas, there is capital; a particular need for an all-embracing mari- • We are seeking higher levels of investment time policy aimed at developing a thriving in fisheries research and development; maritime economy and the full potential of • The EFF also provides support to innovative sea-based activity in an environmentally sus- fishing or aquaculture methods, and pro- tainable manner. Such a policy should be motes sustainable uses of resources through supported by excellence in marine scientific more selective, more productive and less research, technology and innovation.” polluting methods; • The EFF supports measures to find new In the following part, I wish to provide a back- markets and develop higher value-added ground for this new policy development and fisheries products; explain how it relates to the Lisbon Strategy. • Like other structural funds, we have under- taken with the new EFF regulation a signifi- Background for a maritime policy cant simplification of the delivery mecha- nisms of the funds. The oceans and seas are of great economic im- portance, directly or indirectly sustaining mil- In conclusion, despite the constraint of limited lions of jobs not only in marine industries such fish resources and the overarching need to keep as transport, ports, fishing, and aquaculture, but stocks healthy, we can follow policies that are also in the tourism and energy sectors. No less conducive to growth and employment in fisher- relevant are the many social, recreational, and ies and coastal communities. This is a clear in- cultural uses we make of our oceans and seas. dication that, by refocusing the Lisbon Strategy on the competitiveness priority for the years to The following estimates of the value of the Eu- come, this Commission is keeping track of its ropean marine resource give an idea of their long-term sustainable development agenda. wide contribution to our wealth: • European maritime regions account for over 1 This portfolio covers responsibility for the Law of the Sea and the Community Fisheries Control Agency.38 European View
    • Joe Borg 40% of the EU (15) GNP. for growth and job creation.• Between 3 and 5% of Europe’s GNP is esti- mated to be generated directly from marine The competing uses of the seas must be man- based industries and services, the value add- aged carefully if their full economic potential ed by these activities being approximately is to be realised in a sustainable manner. This €110 – 119 billion per annum. This figure requires a thorough screening of all policies that does not include the value of raw materials may have an impact on oceans and seas. (e.g. oil, gas, fish, etc).• Coastal waters generate 75% of the ecosys- The sustainable development of sea-based activ- tem service benefits for Europe’s coastal ities, therefore, demands replacing a fragmented zone – estimated to have a value equivalent approach to oceans and seas management with to € 18 billion per annum. a collaborative, integrated approach, involving• The monetary value of being able to accura- among others, fisheries, environment, transport, tely forecast sea conditions for safe routing energy, research and enterprise policies. This of ships, to provide storm warnings, etc, is integrated approach is at the heart of the mari- estimated by the insurance industry to be time policy that needs to be built. considerable. It is this integrated approach that will ensureIn addition, the recent development of deep sea that sea-based activities can deliver their full po-exploration has shown the considerable poten- tential to the central Lisbon Strategy objective oftial value of non-living seabed resources (miner- sustainable economic growth and employment.als, gas hydrates), as well as of living resourcesin relation to biotechnologies. The Green Paper on Maritime Policy and its re- lationship with the Lisbon StrategyThe very scale of the oceans and seas has tradi-tionally led people to perceive them as an inex- A Task Force within the Commission is being sethaustible source of wealth. Human exploitation up to undertake the necessary work leading toof the oceans has in general been limited only the drafting of a Green Paper on an EU Maritimeby the degree of technological development Policy and to launch a wide public debate onand by the resistance to human agency offered the subject. This Green Paper, to be adoptedby the marine environment. Yet sustained and by the Commission in the first half of 2006, willrapid improvements in technology and higher constitute a first step towards an EU Maritimelevels of coastal population have created new Policy, in line with the Commission’s strategicpressures on available resources, with a marked objectives.intensification of activities relating to fishing,transport, recreational navigation, and exploita- The Task Force should build upon existing EUtion of oil and gas. policies and initiatives. It should seek to identify the potential for beneficial interfaces and syner-The current fragmentation of decision-making gies between the sectoral policies, and how theymakes it difficult to reconcile competing uses could be made useful with a view to improvingand to define priorities for oceans, coastal areas competitiveness, creating growth and boostingand islands, resulting many times in the adop- employment in a socially and environmentallytion of contradictory, parallel or short-sighted sustainable manner.measures. The work of the Task Force should be broadOn the one hand, the intensive and rapid growth in scope, should explore the value of a mari-of coastal cities and economic activities may be time policy and the areas it should address, andcontributing to the degradation of the marine should be based on a clear understanding of theenvironment. On the other hand, the growth of value of the oceans and seas to Europe, theircoastal tourism and of the aquaculture sector, future potential, as well as, risks and challengesthe development of maritime transport, and the attached to them.growing use of the energy, mineral and geneticresources of the seas provide new opportunities It would look at ways to further strengthen the 39 Volume 1 - Spring 2005
    • Relaunching the Lisbon Strategy - a Contribution from Fisheries and Maritime Affairs? European Marine Research Area, achieve Euro- pean leadership in marine science and technol- ogy and better integrate science with industry and policy making. The work of the Task Force must also take inspiration from current best practices in rela- tion to the development and implementation of maritime policies. Options for good governance should be considered, as well as, sectoral and regional specificities. Consideration will also be given to the need for better regulation and sim- plification. As a result, the Green Paper should identify the benefits which could result from an integrated Maritime Policy in the medium and long term in relation to economic growth and competitive- ness, as well as, employment, sustainability and security. It should also identify challenges aris- ing for the implementation of such a policy and propose options to tackle them. Overall, the Green Paper should identify and assess the contribution of Europe’s maritime af- fairs to achieving the objectives set out by the European Council in Lisbon (but also in Gothen- burg and The Hague). Joe Borg is a Member of the European Commis- sion responsible for Fisheries and Maritime Af- fairs.40 European View
    • Stavros Dimas Creating Growth and Jobs: a Role for Environment and Sustainable Development? By Stavros Dimas European citizens care and a healthy environment. This is embodied in about the environ- the concept of sustainable development, which ment. A Eurobarometer the Strategic Objectives confirm as the overarch- survey conducted in ing principle of all EU policies. November 20041 asked citizens to what extent A strong environment policy can provide a cen-the state of the environment, economic factors tral contribution to EU competitiveness and toand social issues influenced their quality of life: the Lisbon agenda. The EU harbours an impor-72% replied that the environment did so “very tant potential for eco-innovation, increased eco-much” or “quite a lot”. A slightly higher number, efficiency and the development of environmen-78%, described economic factors in this way. It tal technologies. These are real strengths of theis not surprising then, that almost nine out of European economy on the global market place.ten Europeans said policymakers should pay asmuch importance to environmental issues as to A growing number of business leaders and poli-economic and social factors when taking deci- cymakers recognise that environmental aware-sions. ness makes business sense. But we still need to dispel many myths surrounding environmentThese results represent a clear mandate for policy - that it is expensive, that it costs jobs,the EU to continue to design policies aimed at that it is a brake on competitiveness. We willprotecting the environment and ensuring sus- also need to identify and clearly communicatetainable development. The improvements that the costs of inaction. My task in this Commis-can be achieved in this field - for example bet- sion is to ensure that environment protectionter air quality, cleaner seas and rivers, safer remains a priority and a core element of thechemicals - are noticed and felt by everyone. competitiveness and growth strategy of the EU.Environmental policy is certainly an area wherethe value-added of EU action is very obvious: Eco-innovation is an opportunity for in-environmental problems do not respect borders. creased global competitivenessWe should build on this and make a concertedeffort to highlight and communicate what EUenvironmental policies have achieved so far and There are many concrete examples of the po-will continue to achieve. tential of environmental policies to increase our competitiveness. In the wind power industry,Environmental protection and, in more general thanks to early support schemes in some Mem-terms, sustainable development, remains at the ber States, European companies today domi-heart of the Commission’s strategic five-year pro- nate 90% of the global market, which is worthgramme presented by President Barroso to the around € 8 billion a year and growing at a rateEuropean Parliament at the end of January. The of 30%.Strategic Objectives call for a new partnershipfor European renewal with the aim to restore In 2003, the expanding world market for envi-dynamic growth and jobs, while respecting the ronmental goods and services was estimated atenvironment. They emphasise that actions that over € 500 billion. The European eco-industriespromote competitiveness, growth and jobs can sector has enjoyed a growth rate of around 5%be mutually re-enforcing with social cohesion per year since the mid-90s,2 which is an out-1 Eurobarometer 62.1: The attitudes of European citizens towards the environment, published in January 2004.2 Analysis of the EU Eco-Industries, their Employment and Export Potential, Ecotec, 2001 41 Volume 1 - Spring 2005
    • Creating Growth and Jobs: a Role for Environment and Sustainable Development? standing result compared to the rest of the econ- development programmes now give greater pri- omy. For example, in 2002 French eco-business ority to environmental technologies. achieved 6.2% turnover growth, and its exports increased by 10.4%.3 In Germany alone, 1.5 mil- As a final example, last August, the Commission lion jobs are linked to environmental protection. issued a handbook to encourage public authori- This represents more than the jobs in vehicle ties and public institutions, such as schools and construction or the food industry. hospitals, to “green” their procurement. With a budget of some € 1,500 billion per year, equiva- I believe that, in particular, the EU’s leadership lent to 16% of EU GDP, public authorities have in fighting climate change will give us many the power to introduce promising new technol- opportunities to develop new climate-friendly ogies and eco-friendly goods and services onto technologies and exploit first-mover advantages the market and bring the EU a major step closer as global demand for such technologies soars. to sustainable development. Already now, booming developing countries, such as China, are looking for environmentally Sustainability improves the overall perform- sound ways to meet their rapidly increasing de- ance of companies mand for energy. As measures aimed at reducing emissions of greenhouse gases are introduced around the globe, climate friendly technologies However, even if the Commission sets a good will be in demand throughout the world. policy framework, it is only the European com- panies that can turn this into real profits. There Well-designed environmental policies can cre- is mounting evidence that good corporate en- ate the right framework for the development vironmental management is linked to better of such technologies. The Commission has al- financial performance and higher share prices. ready responded to the focus on competitive- A study conducted by the independent ratings ness with some important practical measures. agency Oekem Research and the global invest- A step in the right direction is the EU Emissions ment bank Morgan Stanley reveals that the share Trading Scheme launched on 1 January 2005. By prices of companies with a good sustainability inducing companies to reduce their emissions, index outperformed the share prices of their en- it will bring out the best skills of engineers and vironmentally and socially less aware competi- managers who have already started to look for tors by 17% between 2001 and 2004.5 A recent energy efficiency increases and new clean tech- review of 60 European and North American nologies.4 studies undertaken over the last six years found that 85% of those studies identified a positive In January 2004, the Commission launched link between environmental governance and the Environmental Technologies Action Plan financial performance.6 50% of the businesses (ETAP), which seeks to overcome existing ob- registering under the EU’s Environmental Man- stacles to the development and deployment of agement Audit System (EMAS) get their invest- environmental technologies. The focus is on ment back and begin to turn a profit within getting from research to markets, improving twelve months of the initial registration. market conditions and acting globally. Progress in implementing ETAP has been satisfactory. This is increasingly recognised by business lead- For example, several technology platforms have ers. The World Business Council for Sustainable been established bringing together the research Development, a coalition of 170 international and business communities, and EU research and companies from 35 countries, confirms: “Pursu- 3 La conjoncture des éco-entreprises, Planistat pour le Ministère de l’Écologie et du Développement Durable, France, 2003 4 Analysis of the EU Eco-Industries, their Employment and Export Potential, Ecotec, 2001; Hintergrundpapier: Umweltschutz und Beschäftigung, Umweltbundesamt, Deutschland, 2004 5 The performance of 207 companies that were rated “best in class” in terms of environmental and social criteria was com- pared with the performance of 581 companies that received lower ratings. All companies are listed on the Morgan Stanley Capital International World Index. See http://www.oekom-research.com/ag/english/index_news-center.htm 6 Innovest Strategic Value Advisers study for the Environment Agency for England and Wales, 200442 European View
    • Stavros Dimasing a mission of sustainable development can date. I find the following figures very telling:make our firms more competitive, more resil- • Today, 7.2% of children across the EU-25ient to shocks, nimbler in a fast-changing world, have asthma and 12.3% wheeze (an indica-more unified in purpose, more likely to attract tion of asthma), estimated to cost a total ofand hold customers and the best employees, roughly € 3 billion a year. The increase inand more at ease with regulators, banks, insur- these respiratory diseases is thought to beers, and financial markets.”7 largely due to air pollution, in particular high levels of ozone and particulate matter.10EU environmental policy does not kill jobs • According to the European Agency for Safety and Health at work, occupational skin dis- eases result in the loss of three million work-Yet, some still question whether we can af- ing days each year, valued at € 600 million.ford our environmental policies in the current These eczemas and other skin problems caneconomic climate. I have often heard the claim often be directly related to chemicals.that environmental protection in the EU costs • 7%-20% of cancers in France can be linkedtoo much and thus inhibits our economy. At the to environmental factors, including air, wa-macro-economic level, this is not true. We know ter and soil pollution, radiation exposurethat the EU spends approximately the same on and noise pollution.11environmental protection as the US and Japan- around 2% of GDP.8 There are physical limits to what human health and the environment can bear. We can chooseThe tremendous costs of inaction to ignore them and pay the costs later - or take the steps necessary to integrate environmentalOf course, we should listen to the concerns of thinking into our actions and design them inthose that are affected by our policies. But we a way that they promote growth and employ-should also remember that there is actually a ment.cost for inaction. Environment policy savesmoney by avoiding costs for society in the fu- The link between Lisbon and the EU’s Sus-ture. tainable Development StrategyThe year 2004, for example, was the costliest This year will not only see the mid-term reviewyear for natural catastrophes so far in insurance of the Lisbon Strategy. Also due later in the yearhistory, with global insured losses of over € 30 is the review of the EU’s Sustainable Develop-billion, according to the world’s largest reinsurer ment Strategy, launched in Gothenburg in 2001Munich Re. About half of the 650 natural ca- - one year after the Lisbon process12.tastrophes recorded in 2004 were windstormsand severe weather events, which accounted for Anchored in the Treaty and in the Draft Con-more than 90% of the year’s insured losses.9 stitution, the Sustainable Development Strategy represents the long-term vision for Europe andWith current global warming trends continuing, the guiding framework for all EU policies. Thesuch costs will rise further, not to mention the new approach to policy-making that it calls for,human tragedies such disasters cause, unless requires dealing with economic, social and en-preventive action is taken. Therefore, integrating vironmental policies in a balanced and mutuallythe environment into our economic decisions is reinforcing way in order to enhance welfare bothnot something that we can postpone to a later in the EU and globally. In operational terms, the7 The business case for sustainable development, World Business Council for Sustainable Development, 20028 OECD, Environment and Employment: an Assessment, Paris, France, 20049 Munich Re press release, 28 December 2004, at http://www.munichre.com/; Climate Change: Statistics, at http://www.muni- chre.com/10 TNO: Evaluation of the cost of disease: assessing the burden to society of asthma in children in the EU, 200411 Rapport final de la commission d’orientation pour le plan national environnement santé, France, 200412 Gothenburg European Council, 15/16 June 2001, Presidency Conclusions 43 Volume 1 - Spring 2005
    • Creating Growth and Jobs: a Role for Environment and Sustainable Development? Strategy identifies six key unsustainable trends This stocktaking exercise shows mixed progress that pose a serious threat to our current and across the priority areas. While a substantial future well-being: climate change, threats to hu- number of measures have been put in place man health, poverty and social exclusion, an since 2001, these efforts will take time to bear ageing society, rapid transport growth and un- fruit, and the persistence of the unsustainable sustainable natural resource use. trends identified in 2001 calls for a strengthened sustainable development process. How does Lisbon relate to the Sustainable De- velopment Strategy? This link has not yet been In a second stage, guided by the orientations clearly articulated. I would hope that the mid- given by the Spring Council, the Commission term review will do that. will come up with a proposal for a revised Sus- tainable Development Strategy by the autumn In my view, Lisbon should be set within the of 2005, under the UK Presidency. I very much wider context of sustainable development and look forward to the Parliament’s contribution to also put into practice its principles for policy- both review processes. making. This would help the EU make the right decisions on innovation, research, education Conclusion and other issues that are relevant for its com- petitiveness. For example, with regard to cli- The mid-term review of the Lisbon Strategy and mate change, the Lisbon Strategy could trigger the first review of the Sustainable Development the launch of a major drive for greater energy Strategy will largely determine Europe’s key efficiency and increased spending on R&D in policy orientations for several years to come. climate-related technologies. It is clear that these reviews are taking place against a background of fear of loss of competi- However, the Sustainable Development Strategy tiveness, the rise of China and other emerging should not be just a vague statement of princi- economies, and a focus on reducing administra- ples, but contain firm and clear long-term com- tive burdens. In this context, it is important to mitments that are translated into intermediate show that environmental protection and com- objectives and targets. This set of commitments petitiveness are not in opposition, but that they must include principles that will guide policy- can and indeed should be made mutually rein- making, such as integration and coherence (be- forcing. This especially should be reflected in tween different policy sectors, between internal the revised Lisbon Strategy. and external policies and between short-term and long-term goals), science-based policymak- Europe’s citizens care about their income and ing and the precautionary principle. job security, but they also want an open and caring society, and a healthy environment as a Next steps main contributor to their quality of life. They want prosperity, solidarity and security. The Over the next months, what will be happening? EU should therefore not aim for any kind of growth, but growth that contributes to increas- The mid-term review of the Lisbon process is ing people’s overall quality of life - growth as a likely to take place in two stages. The Commis- means rather than an end in itself. sion has put forward its assessment for the Spring Council. It is thought that the Spring Council The support of the European Parliament will be may then ask for an action plan or white paper crucial to make this vision a reality. I therefore setting new priorities for the implementation of hope for constructive collaboration between our the Lisbon goals. two institutions in the years to come. The review of the Sustainable Development Strategy will also take place in two stages. The Commission is providing the Spring Council Stavros Dimas is a Member of the European with a policy paper containing the main lessons Commission responsible for Environmental poli- drawn from an internal stocktaking exercise. cies and priorities.44 European View
    • Ján Figel Education and Training – Are We on Target for 2010? By Ján Figel On 2 February this year The Commission therefore presented propos- the Commission adopted als for a more focused, slimmed-down Lisbon, its Mid-term Review of which would concentrate on delivering growth the Lisbon Strategy enti- and jobs. This does not in any sense mean that tled “Working Together the Union’s goals on the environment or with for Growth and Jobs: a regard to maintaining its social model havenew start for the Lisbon Strategy”. Introducing been abandoned. Rather, it represents the re-the Mid-Term Review to the European Parlia- alisation that neither those same environmentalment on the same day, José Manuel Barroso, goals nor the social model can be achieved andthe President of the European Commission, retained without greater growth. In an ageingsaid: “The simple truth from the last five years society, there are not many alternatives, apartis that we have to get our economy moving, if from modernising social protection systems andmore people are to find a job they want and if making the labour market more flexible. Again,we hope to preserve and develop our unique this is not a question of introducing a “hire andmodel of society, that is our continent’s call- fire” approach to labour markets: Europe can-ing card.” Introducing the document to a wider not compete on the basis of cheap labour. Itpublic via the Commission’s Lisbon Strategy is about ensuring that the labour force has theWebsite , the President stated: “Our clear aim is skills needed to assure employment, adaptabil-to have more and better jobs in a more dynam- ity and high productivity.ic, innovative and attractive Europe. With thisstrategy I believe we now have the right tools to This brings me to the specific topic I wish toachieve our goals.” These two statements sum address in this Article, namely the role of educa-up both the challenge facing Europe and what tion and training in the Lisbon Strategy. In orderwe must do to meet it. to understand this, it is necessary to take a his- torical perspective and return to the origins ofThe Commission’s assessment followed the re- Lisbon. I shall return at the end to the questionport of the High Level Group led by Wim Kok. of the place of education and training in the re-According to Kok, “The Lisbon Strategy is even vised Lisbon Strategy – the answer to the ques-more urgent today as the growth gap with North tion is in fact rather straightforward. It is useful,America and Asia has widened, while Europe though to remind ourselves of the precise goalmust meet the combined challenges of low which the Heads of Government set for the Eu-population growth and ageing. Time is running ropean Union in Lisbon in March 2000, namely:out and there can be no room for complacency. To become the most competitive and dynamicBetter implementation is needed to make up for knowledge-based economy in the world, capablelost time”. of sustainable economic growth with more and better jobs and greater social cohesion.The Commission shared the view of the KokGroup that Lisbon is even more urgent today They went on to identify some of the key con-than 5 years ago. The reality is that the Strategy tributions which education and training couldhas been blown off course. This is not just as make to attaining this goal, pointing out thata result of difficult economic conditions since people are Europe’s main asset and should beLisbon was launched; it must be acknowledged the focal point of the Union’s policies. Investingthat an overloaded policy agenda combined in people and developing an active and dynam-with a lack of coordination and conflicting pri- ic welfare state will be crucial both to Europe’sorities have also taken their toll. Most of all, place in the knowledge economy and for ensur-however, there has been a failure to deliver and ing that the emergence of this new economy doesto implement. not compound the existing social problems of 45 Volume 1 - Spring 2005
    • Education and Training - Are We on Target for 2010? unemployment, social exclusion and poverty. Education and Training 2010 They also asked the Council of Education Min- In 2001, the Ministers for Education adopted isters to undertake a general reflection on the a report on the future objectives of education concrete future objectives of education systems, and training systems1, agreeing for the first time focusing on common concerns and priorities, on shared objectives to be achieved by 2010. A while respecting national diversity. year later, the Education Council and the Com- Europe’s national – and indeed in many instanc- mission endorsed a 10-year work programme2 es sub-national – educational traditions are rich to be implemented through the open method of and diverse, and this diversity can be a source coordination – a legally non-binding mecha- of cross-fertilisation and innovation. Many of nism which safeguards national prerogatives our member countries have, in recent years, while securing political commitment to meet been engaged in national processes of re-ex- agreed objectives by the most appropriate na- amination and reform of their systems, in order tional instruments. to take account of factors like greater diversity among the school population, the need to cater Approved by the European Council, these for intercultural awareness while transmitting texts constitute the new and coherent Commu- shared civic and cultural values, the need to set nity strategic framework of co-operation in the education and training in a lifelong learning per- fields of education and training, a process now spective, catering for changing parental living known as “Education and Training 2010”3. This and working patterns, or a growing recognition integrates all actions in the fields of education that education is an investment which yields far- and training at European level, including voca- reaching social returns as well as contributing tional education and training. to economic growth. The Lisbon objective has provided a powerful boost to reform within the The Bologna process, initiated in 1999, deserves European Union context. a specific mention here. Although closely con- nected with Education and Training 2010, it goes wider and now covers some 40 European The European Union’s Education Ministers have countries. It aims to establish a common system already been cooperating for more than a quar- for higher education degrees in Europe and is, ter of a century, developing programmes like thus, crucial in the development of the Euro- Erasmus – which helped to make Europe a more pean Higher Education Area, which the Com- tangible reality for individual citizens – and re- mission is closely involved in. flecting together on issues of common interest, like how to improve the quality of education The Ministers for Education agreed on three ma- or deal with shared problems, such as school jor goals to be achieved by 2010: dropout and violence. Their cooperation has been increasingly close and covered a growing • to improve the quality and effectiveness of range of topics. But, their response to the Lis- EU education and training systems; bon mandate was a quantum leap, launching a • to ensure that they are accessible to all; and process through which, for the first time, they • to open up education and training to the set about systematically reviewing the purpose wider world. and functioning of their education and training To achieve these ambitious but realistic goals, systems, and clearly linked their cooperation to they agreed on thirteen specific objectives cov- the wider issue of what education and training ering the various types and levels of education can contribute to the overarching strategy of the and training (formal, non-formal and informal) Union. and aiming to make a reality of lifelong learn- ing. 1 http://europa.eu.int/comm/education/policies/2010/doc/rep_fut_obj_en.pdf 2 http://europa.eu.int/comm/education/policies/2010/doc/10_year_en.pdf 3 http://europa.eu.int/comm/education/policies/2010/et_2010_en.html46 European View
    • Ján FigelSince then, technical working groups have been tinuing vocational training. Community fund-supporting Ministers’ work on the programme. ing, including the structural funds and theExperts from 31 European countries, as well as, education and training programmes, shouldstakeholders and interested EU and international have an increasing role to play in supportingorganisations support the implementation of the the development of human capital.objectives for education and training systems atnational level through exchanges of “good prac- • Make lifelong learning a concrete real-tices”, study visits, peer reviews, etc. ity There is a need for coherent and compre-Acting on the basis of proposals from the Com- hensive national lifelong learning strategiesmission, and using the Open Method of Coordi- and to promote more effective partnershipsnation, EU Ministers of Education in May 2003 between key actors including business, theadopted benchmarks (agreed targets at Euro- social partners and education institutions atpean level) in five key areas4. These common all levels. These strategies should includetargets reflect the seriousness of the intention to the validation of prior learning, and themake European education a byword for quality. creation of learning environments that areThey concern the following areas: open, attractive and accessible to everyone,• Basic skills – reading; especially to disadvantaged groups.• Early school leavers (drop-outs);• Completion of upper secondary education; • Establish a Europe of Education and• Graduates in maths, science and techno- Training logy; There is a need to develop a European• Lifelong learning participation; framework, based on national frameworks, to stand as a common reference for the rec- ognition of qualifications and competences.Interim evaluation of progress The recognition of diplomas and certificates across Europe is essential to the develop-In Spring 2004 the Education Council and the ment of a European labour market and ofCommission submitted to the European Council European citizenship. Member States shoulda joint report. This was an interim evaluation of also take the appropriate measures to re-the implementation of the “Education & Train- move obstacles to mobility and provide theing 2010” programme since Lisbon, which sent necessary financial support, in the context ofthe message to Heads of Government and poli- and beyond the Community programmes.cymakers that, overall, progress was too slowand that there were deficits in important areas - This said, progress has been achieved atsuch as limited participation in lifelong learn- Community level in fields such as the adop-ing. The following three priority areas should be tion of the Erasmus Mundus and eLearningacted upon simultaneously and without delay: programmes and cooperation on Vocational Education and Training (the Copenhagen• Focus reform and investment on the key Process) and Higher Education (the Bologna areas for the knowledge-based society Process). The inevitable conclusion, though, This involves a higher level of public sector is that the pace of reform of education and investment in key areas for the knowledge training systems needs to be accelerated and society and, where appropriate, a higher the objectives of “Education and Training level of private investment, particularly in 2010” should be better taken into account in higher education, adult education and con- the formulation of national policies.4 http://europa.eu.int/comm/education/policies/2010/doc/after-council-meeting_en.pdf 47 Volume 1 - Spring 2005
    • Education and Training - Are We on Target for 2010? Is education and training on track to make on education slowed down markedly after 2001. the necessary contribution to achieving the Thus, while we started out on the right track, Lisbon goal? the effort may not have been sufficiently sus- tained in the most recent years. Fortunately, we do have a yardstick at hand, in There is also a big difference in relative spend- the form of the agreed benchmarks I mentioned ing levels between Member States. The Nordic earlier and the Lisbon Council call for a substan- countries show the highest level of spending, tial annual increase in per capita investment in especially Denmark and Sweden (over 7% of human resources. Where are we today then? GDP), while spending is lower in Southern Eu- rope and in some of the new Member States. Investment in human resources While public spending in the EU, in terms of Investment in education raises the productive percentage of GDP, is on the same level as in capacity of the economy, with positive effects the USA and higher than in Japan, there are ma- on productivity, labour-force participation rates, jor differences in private investment. Private unemployment, as well as, on social cohesion. spending on education institutions in Europe, The Lisbon Council therefore called for a sub- which amounted to about € 55 billion in 2001, stantial annual increase in per capita invest- is less than one-third of the US level and only ment in human resources. half the level of Japan. Also, the data available does not show an increase in private spending in the EU in recent years. Given public budget- 2010 ary constraints, private spending by both indi- Indicator 2000 2001 benchmark viduals and firms, especially as regards higher education, needs to be stepped up in order to Public Substantial achieve the goals set in Lisbon. spending on increase in education as 4.94 5.09 per capita a % of GDP in EU 25 investment PISA and low achievers in reading Investment in education is a major expenditure Reading is one of the basic skills for participa- item in public budgets. In 2001, 10.9% of public tion in the knowledge society, and good reading budgets in the EU were devoted to education, skills are also an essential foundation for learn- compared to 10.4% in 1997. Public spending ing activities later in life. The Council therefore on education and training as a share of GDP adopted the benchmark that by 2010 the per- increased from 4.94% in 2000 to 5.09% in 2001, centage of low achieving 15-year olds in read- representing a total expenditure of about € 470 ing literacy in the European Union should have billion. decreased by at least 20% compared to the year 2000. This benchmark is based on data from the The real increase in education spending amount- PISA survey (which the OECD organises every ed to about 5%, or over € 20 billion, in 2001, three years, the last having been carried out in which must be seen against the background of 2003), namely the percentage of pupils with an increase in the number of pupils and stu- reading literacy proficiency level 1 or lower in dents of 0.3% in the same period. It therefore the PISA reading literacy scale (students at level can be concluded that in 2001 Europe was on 1 are capable of completing only the simplest track as regards substantially increasing per cap- reading tasks developed for PISA; students be- ita investment in human resources. low level 1 are unlikely to demonstrate success However, since it always takes several years to at even the most basic type of reading). compile education spending data on a national The results of the 2003 PISA survey show that level, unfortunately only partial information is Europe has not made any statistically significant available on the trends after 2001. It seems that progress since 2000 in achieving this bench- as a result of slower economic growth and tight mark. public budgets the increase of public spending48 European View
    • Ján Figel tency-intensive society, where attainment of up- Indicator 2010 2000 2003 per secondary education has become something 1 benchmark of a norm. Percentage of low- 15.5 achieving (Decrease by Indicator 2010 2000 2004 15-year-olds 19.4 19.8 at least 20% 2 benchmark in reading compared to literacy 2000). Percentage in the EU of the population aged 18-However, there have been individual successes: 24 with atsome countries that performed poorly in 2000 most lower(for example Latvia, Poland) have reduced the secondary 17.2 15.9 10percentage of low performers significantly in education2003. In the case of Poland this is seen to be a and notresult of educational reforms which had not yet currently in furthermade an impact in 2000. educationThe best-performing country in reading in the or trainingworld is an EU country: Finland. Many EUcountries in recent years have been analysing The average rate of early school leaving has de-what lessons they can draw from the good re- creased steadily in the past. There was an im-sults of Finland and the educational practices provement of over one percentage point in thebehind it. period 2000 to 2004, bringing the latest figure for the EU to 15.9%. However, this is still nearlyWhile the EU countries participating in PISA did 6% higher than the benchmark of a rate of ear-not make progress, on average, since the 2000 ly school leavers of only 10%. Greater effortsround, the USA and Japan show deteriorating are therefore, needed in order to achieve theresults. In relative terms, the position of Europe benchmark in this area; progress has to be tri-thus improved. Reading skills, which are more pled to reach it. But the goal can be achieved,closely dependent on family background, are as the best-performing countries show. Ninemore difficult and take longer to improve than EU Member States have rates of early schoolmathematics and science literacy. In the latter leavers below 10% and especially some of thefields, where educational reforms have a more new Member States show good results, with Po-immediate impact, there was a clear improve- land (5.7%) and Slovenia (4.2%) being the bestment in results for many EU countries and in the performers in Europe.EU average since 2000. The benchmark of 85% of young people attain- ing upper secondary education by 2010 is close-Early school leavers and youth education ly linked to the question of early school leavers.attainment Unfortunately no progress has been achieved in the last few years as regards this indicator: 76.4%Reducing the number of early school leavers is of young people in the EU had attained upperone of the foremost priorities to improve so- secondary education in 2004, the same level ascial cohesion. Encouraging young people to in 2000. The Union has to do much better hereparticipate in post-compulsory education is vital in order to reach the benchmark. Again the newfor their social and labour market integration. Member States show a good performance, withUnemployment rates for those with only lower Slovakia and the Czech Republic showing at-secondary education, in EU25, were on average tainment levels of over 90%.3% higher than for those with upper secondaryeducation. Those who leave school with lowqualifications are in danger of being left behindin today’s increasingly competitive and compe- 49 Volume 1 - Spring 2005
    • Education and Training - Are We on Target for 2010? Indicator 2010 Indicator 2010 2000 2004 2000/2001 2002 3 benchmark 4 benchmark Percentage Graduates 2000: of young in MST in 650,000 people 705,000 783,000 the EU (in 2001: aged 20-24 1000) 681,000 old having 76.4 76.4 85 attained at least upper Growth secondary +15% since 2001 education Graduates in mathematics, science and Lifelong learning participation technology Higher education is located at the crossroads of In a knowledge society, individuals must con- research, education and innovation, and an ad- tinuously update and supplement their knowl- equate supply of scientific specialists is of key edge, competencies and skills for personal and importance for the development of the knowl- professional development. The Council set the edge economy. Therefore the Council has set benchmark that by 2010 the European Union up the benchmark that the total number of grad- average level of lifelong learning participation uates in mathematics, science and technology in should be at least 12.5% of the adult working- the EU should increase by at least 15% by 2010 age population (age 25-64). The average level while at the same time the level of gender imbal- of participation in lifelong learning of the adult ance should decrease. working-age population in the EU in 2004 was 9.4%, an increase of 1.5% over the 2000 result. As regards this benchmark only data for the This is the proportion of the adult population period 2000-2002 is currently available, but it that has participated in formal, non-formal or seems that Europe is on track not only to reach informal learning activities within the four the benchmark, but even to surpass it. weeks preceding the survey. However, much of the increase was a result of a change of sur- While the number of maths, science and tech- vey methods, and the real increase was much nology (MST) graduates has to increase by over lower. The participation rate must thus increase 100,000 by 2010 compared to 2001 in order to at a faster rate to meet the benchmark of at least achieve the benchmark, in 2002 alone it in- 12.5% by 2010. In addition, the participation creased by nearly 25,000. The EU also seems gap between those with high and those with to be making progress as regards the gender low levels of prior education has widened. At imbalance: the share of female graduates in- present, those with a high prior education level creased from 28% in 2000 to 31% in 2001, and are fourteen times more likely to participate in it progressed further in 2002. However, as a lifelong learning than those with a low prior result of the demographic development and education level. fewer cohorts, the absolute number might grow less quickly in the future. In 2002 the EU had 705,000 MST graduates. This was three times as Indicator 2010 many as Japan and nearly twice the US figure. 2000 2002 5 benchmark On the other hand, countries like China (590, 000 MST graduates in 2002) and India are catch- % of adults ing up fast. participating 7.9 9.4 12.5 in lifelong learning50 European View
    • Ján FigelOverview of achievement of education text, in order to respond to the new chal-benchmarks lenges of the knowledge society and demo- graphic change;Since Lisbon, Europe has made good progress • the increasingly important role of educationin some education fields, while more efforts are and training in creating a competitive andneeded in others. Despite declining birth rates, dynamic knowledge-based economy, and inthe number of pupils is stable and the number facilitating adaptability to change;of tertiary students is increasing by about half a • the need to build on the strengths of the cur-million per year. Public investment in education rent sectoral programmes design; andgrew significantly in the year after Lisbon and • the need to simplify and rationalise Com-there has been clear progress in the number of munity legislative instruments by creating anMST graduates. As regards to the PISA study, integrated framework within which a wideEuropean countries have on average improved variety of activities can be supported.their performance in mathematics and in sci-ence literacy much more than countries like It will consist of four sectoral programmes, eachthe US and Japan. However, greater efforts are broadly corresponding to a life stage (Comen-needed to achieve more progress in the field of ius for schools, Erasmus for higher education,low achievers in reading, early school leavers, Leonardo da Vinci for vocational training andupper secondary education attainment and life- Grundtvig for adult education) complementedlong learning participation. Since the European by a programme on cross-cutting issues and aUnion includes some world leaders in these ar- programme focusing on European integrationeas, learning from each other can help to im- (the ‘Jean Monnet programme’).prove performance. The Commission is activein facilitating and enabling mutual learning in The new programme, together with the substan-order to reach the common goals set at Euro- tial increase of the budget volume which thepean level. Commission hopes will be agreed within the broader financial perspectives, will give the EU a powerful instrument in the field of educationNew integrated lifelong learning program and training for the period 2007-2013.In their joint report of 2004 to the Heads of Gov- The programme, which combines continuityernment, the Council and Commission stressed with new activities, will focus on mobility, sincethe importance which they attach to the role of it has been proved that this form of Communitythe next generation of education and training action has a clear positive impact on both indi-programmes. This referred in particular to the viduals and institutions involved. It is designedproposed new integrated lifelong learning pro- to be simpler to operate, and to deliver moregramme which will take the place of the exist- flexibility. The new programme will thus helping Socrates and Leonardo da Vinci programmes to contribute to the fulfilment of the three mainfrom 2007 on. goals for 2010: increasing the quality of educa- tion and training provided in Europe; improvingThe overall policy objective of the new integrat- access to education and training at all stages ofed programme is to contribute through lifelong life; and opening up education and training sys-learning to the development of the European tems to the wider world.Union as an advanced knowledge society. Itaims to foster interchange, cooperation and mo- Conclusionbility between the education and training sys-tems of the Union’s member countries so that In short, the challenges are undoubtedly great.they become a quality world reference. Member States are indeed moving to reform their systems, but the pace of change in societyThe proposed programme responds in particu- and the economy is so rapid that the effort tolar to four factors: reform must not only be sustained but signifi- cantly accelerated.• changes across the EU, whereby education The Lisbon objective has undeniably produced and training systems are becoming increas- an enormous impact in the world of education ingly integrated in a lifelong learning con- and training, both by setting clear, quantified 51 Volume 1 - Spring 2005
    • Education and Training - Are We on Target for 2010? targets and by helping to cut the Gordian knot In conclusion, Education and Training remain of a short-sighted fixation on preserving nation- central to the revised Lisbon Strategy and we al sovereignty at all costs. Europe is not a threat must redouble our efforts and our commitment to national systems, on the contrary, it is a part if we are to meet the targets we have set for of the solution. ourselves. For the educational reform movement to be sus- tained in all Member States, it is essential that it should remain an integral part of the Lisbon Ján Figel is a Member of the European Commis- agenda. This is indeed what the Commission sion responsible for Education, Training, Cul- has proposed in its mid-term Review of the Lis- ture and Multilingualism. bon Strategy. It has done so because, on top of the benefits in terms of social cohesion, it recog- nises the indispensable contribution of efficient Endnote: further information on the new gener- and effective education and training systems to ation of European Union programmes in educa- any strategy which aims to increase growth and tion, training, culture, youth and the audiovisual jobs. As is stated in the mid-term Review, an sector is available on the Commission’s Europa increase by one year in the average education website: http://europa.eu.int/comm/dgs/educa- level of the labour force can add as much as tion_culture/newprog/index_en.html 0.3 to 0.5 percentage points to the annual EU GDP growth rate. The mid-term Review puts it succinctly: “Structural change, greater labour market par- ticipation and productivity growth require a continued investment in a highly skilled and European Council, Lisbon, adaptable workforce. Economies endowed 23-24 March 2000 with a skilled labour force are better able to create and make an effective use of new tech- The Union has today set itself a new stra- nologies. Educational attainment in Europe falls tegic goal for the next decade: to become short of what might be required to ensure that the most competitive and dynamic knowl- skills are available in the labour market and that edge-based economy in the world, capable new knowledge is produced that is subsequent- of sustainable economic growth with more ly diffused across the economy. The emphasis and better jobs and greater social cohesion. on lifelong learning and knowledge in econom- Achieving this goal requires an overall ic life also reflect the realisation that advancing strategy aimed at: educational attainment and skills makes an im- portant contribution to social cohesion.” − preparing the transition to a knowledge- based economy and society by better poli- The mid-term Review also proposes a slimmed- cies for the information society and R&D, down and more focussed action plan, consisting as well as by stepping up the process of of ten main elements. One of these is “Investing structural reform for competitiveness and more in human capital through better education innovation and by completing the internal and skills”. The action plan in this area consists market; essentially of the actions foreseen in the Educa- − modernising the European social model, tion and Training 2010 work Programme, with investing in people and combating social the five agreed benchmarks, and further actions exclusion; such as establishing a European Qualifications − sustaining the healthy economic outlook Framework and enabling European universities and favourable growth prospects by apply- to compete in what is becoming a global mar- ing an appropriate macro-economic policy ket for knowledge. The approach, at Commu- mix. nity level, to modernise education and training systems has, therefore, been laid out.52 European View
    • Viviane Reding Towards the Knowledge-based Economy: Information Society By Viviane Reding The Lisbon Strategy • Fourth, the EU ICT sector is important in its has recently been own right. It represents 8% of GDP and 6% re-launched with a per cent of employment and is one of the renewed focus on most productive sectors, growing annually “Working Together for at 9%1. But, empirical evidence suggests that Growth and Jobs”. The Europe’s weaker performance in growth andapproach proposed by the current Commission jobs can be largely explained by the smallis very much in line with the first priority of weight of our ICT sector as compared to thethe Action Programme of the European Peo- US.ple’s Party (EPP) for the period 2004-2009. The … and the best is yet to come.emphasis is on a dynamic, competitive, solidar-ity-based and job-generating economy. This will The Information Society in Europe is poised toalso be the guiding principle of my mandate as enter a new period of development. The timeEuropean Commissioner for Information Society is ripe for a significant wave of growth basedand Media. upon the growing availability of fixed and wire- less broadband services and the potential forICTs are important … fast growing digital services industries.To begin with, I want to underline the impor- i2010: A European Information Societytance of Information and Communication Tech-nology (ICT) to the relaunched Lisbon Strategy In the coming weeks the Commission will adoptmuch more visible and widely understood. a new initiative i2010 (or European Information Society 2010) which will aim to make sure that• First, ICTs contribute to 40% of total produc- Europe gets the full benefits of this new wave in tivity growth, but they could give a much terms of prosperity, jobs and growth. We must greater contribution if they were more do this by giving Europe a single information widely adopted. For example, in the United space, stimulating investment in research, de- States ICTs account for 60% of total produc- velopment and deployment in ICT and encour- tivity growth. aging the adoption of ICT and by building an inclusive vision of the European Information• Second, although more than 70% of the Society. EU population is covered by broadband only 7.5% are using it at the moment. This i2010 is built around three themes, all of which again provides an enormous opportunity for are consistent with the priorities of the EPP: growth in the next few years. Information space. The EPP priorities call for• Third, as regards the next generation of a single market, especially in services. My target ICTs, European investments in ICT represent is to create a seamless information economy in about 20% of total R&D spending, as com- Europe. pared to 30% in the United States. i2010 will target the creation of an internal mar- ket in information goods and services, such as content, games, interactive software and value1 European Commission calculations based on data collected by GGDC (Groningen Growth and Development Centre), presented in a Economic Paper from ECFIN (European Economy - European Commission Economic Paper Number 208, July 2004) 53 Volume 1 - Spring 2005
    • Towards the Knowledge-based Economy: Information Society added services, and use the new regulatory ensure that this “win-win” proposition of ICT is framework for electronic communications to utilized to the maximum benefit of Europe and stimulate competition and encourage investment its citizens. in Europe’s emerging digital services economy. The Lisbon Goals Innovation in Information and Communica- tion Technologies (ICT). The EPP prioritises When European leaders met in March 2000 to research and innovation and places specific em- launch the Lisbon Strategy their aim was not phasis on increasing the use of ICTs, in small only to develop the knowledge society, but and medium sized enterprises. My target is for to become the best in the world. The years Europe to consolidate and build up leadership since then have been disappointing in terms positions in key informational products and of progress; but, the Lisbon goals still remain services all along the innovation chain, from within grasp and the Lisbon Strategy remains research to deployment and adoption. Today, the centrepiece of Community policy, providing Europe has leadership in some areas of ICT re- a framework for action on common objectives search and innovation. But, it is vulnerable to and for assessing “the state of the Union”. increased international competition. To stay on the next technological wave, Europe has to in- It should be underlined that the past five years vest much more in ICT research and innovation have seen some impressive achievements. Since than it currently does. It also has to lead the 1999, six million jobs have been created in the world in adopting ICT, especially at home, in EU 15, at a time of recession. There is now low- small firms and in public services. er long-term unemployment and more female participation in employment. Strategic network i2010 will look for increased commitment to in- markets (telecommunication, energy and rail- vesting in European ICT, both in research and way transport) are progressively being opened deployment. This means public-private partner- up. Internet penetration is high (nearly 100%) in ships between the Commission, Member States schools, firms and public administrations. Near- and Industry to ensure that targets are met. A ly half of all households are on-line. substantial increase in community spending is needed and will be sought. Proposals will also But, as the recent Kok report “Facing the Chal- be made to increase the effectiveness of the in- lenge” underlines, we are seriously undera- creased ICT research spending through technol- chieving on growth and innovation if we want ogy platforms, fiscal measures, property rights, to meet our appointment with destiny in 2010. etc. Why is this? First, Europe has a complex and fragmented pattern of regulation, which is not Inclusion and better quality of life. The EPP at all business friendly; there is also the slow emphasises that growth and competitiveness in pace of structural reforms and the generally a European context is founded on solidarity. My low investment in innovation, infrastructures target is a European Information Society that and people. The internal market remains highly leads the world in levels of accessibility. The fragmented. Nearly ten years after the Single European knowledge society should have the Market, the transposition of essential internal accompliments it needs to maintain European market directives is patchy, even those most rel- solidarity and to improve the general quality evant to the Lisbon Strategy. Kok has criticised of life. Information society contributes on both the political will of the Member States to drive sides of this equation. For example, new ICT the Lisbon Strategy. In fact, it is the responsi- solutions for “assisted living” can lengthen the bility of all stakeholders to engage fully with time for which older people can live independ- the Lisbon Strategy; the Member States but, also ently, in their own homes, thus raising quality of the European Parliament, private enterprise and life, while reducing a potentially very large call civil society. on social welfare and health care budgets. This of course concerns me and I take this chal- lenge very seriously. In fact, as Commissioner The new i2010 initiative will come forward with for the Information Society and Media, I have a a series of measures and stimulation policies to54 European View
    • Viviane Redinglarge responsibility for the growth of competi- of businesses. Also, ICT increasingly formstiveness and the growth of the knowledge so- an integral part of all industrial and serviceciety in Europe, which I will outline in the rest markets, either through the embedding ofof this article. ICT components in goods (for example in consumer devices, automobiles, medical de- vices) or as part of the service offer (track-ICT and growth ing of parcel deliveries, e-banking). Empiri- cal evidence suggests that the productivityInformation and Communication Technology gap between Europe and the US is to a large(ICT) is a key component of the Lisbon Strategy. extent explained by the former’s weaker in-Its importance stems both from the contribution vestment in ICTs.which it makes to overall economic perform-ance, and also from the benefits which it offers • In addition, ICTs provide an improvement toto society at large. The importance of ICT can people’s quality of life. ICT allows more andbe summarised, as follows: better services to be provided to larger num-• The ICT equipment and services sector is an bers of people. New information tools help important sector in itself. It has grown from to improve transparency and openness, as 4% of EU GDP, in the early ‘90s, to around well as, government relations with citizens. 8%. It accounted for 6% of employment in ICT is also a powerful tool for preserving the EU in 2000. It is also one of the most and promoting the European diversity and productive sectors, with annual productivity cultural heritage, by making content widely growth of, on average, 9% over the period available. 1996-2000.2 Several EU countries stand out in adopting and making gains from innovations in ICT6. But the• The ICT sector is the major source of new average European performance in realising the innovations that fuel future competitiveness. potential of ICT needs to be substantially im- It is one of the most innovative sectors, ac- proved. In a context where Europe is falling counting for 18% of overall EU expenditure short of the Lisbon goals, it is essential that the in Research and Development (R&D)3, and opportunities of ICT are fully exploited7. as much as 30% of US R&D expenditure4. Furthermore, nearly all other fields of tech- These messages are not new. Official reports on nological innovation vitally depend on ICT. the Lisbon Strategy such as the EU competitive- Nanotechnology and biotechnology would ness report and, the EU economic review, un- be unthinkable without ICTs. derline the importance of ICT. Notably, more recently, the Kok report has called for a “com-• In general terms, ICT is the bedrock of the prehensive and holistic” strategy on ICT8. modern economy. It is the single most im- The Action Programme of the EPP for 2004-2009 portant source of productivity growth. It itself states that “the ability to take the front lead represented 40% of EU productivity growth in the field of new technologies will be cru- and 60% of US productivity growth between cial for Europe’s competitiveness in the com- 1995 and 20005. Economic gains from ICT ing years. The EPP will give strong emphasis stem directly from growth and innovation in to research in information and communication markets for ICT goods and services and from technologies as well as to the industrial exploi- the use of ICT in raising the performance tation thereof”9.2 European Commission calculations based on data collected by GGDC (Groningen Growth and Development Centre), presented in an Economic Paper from ECFIN (European Economy - European Commission Economic Paper Number 208, July 2004)3 IDATE Comparaison de la recherche dans les TIC dans les grands pays industriels (Final Report 08.04.02)4 See “OECD Measuring the Information Economy 2002”; “OECD Information Technology Outlook” 20045 “The EU Economy: 2003 Review”, COM(2003)7296 There are routinely at least three European countries in the top five of the various attempts to rank global performance on factors such e-readiness, information technology indices or digital access. See: for example WEF Global IT report; ITU digital access index.7 “Report from the Commission to the Spring European Council. Delivering Lisbon. Reforms for an Enlarged Union”, COM (2004)298 W. Kok et al. (2004) Facing the Challenge: the Lisbon Strategy for growth and employment, Report of the High Level Group, European Commission, Luxembourg9 European People’s Party “Action programme 2004-2009”, 4 February 2004, p.12 55 Volume 1 - Spring 2005
    • Towards the Knowledge-based Economy: Information Society The Information Society at the core of Lis- ledge Society. In this case, he cites the regula- bon tory framework for electronic communications, stimulation measures to encourage the adoption The extensive contribution of ICT to growth and of ICT, creating a favourable environment for jobs is very clear if we look at the wide range e-business and the need to maintain European of policy areas in which ICT can and will make leadership in mobile communications. a contribution to the objectives which Wim Kok Indeed, ICT remains the key driver of growth and his colleagues identified in their recent re- and innovation in the world economy. No oth- port (see Table 1). er technology has ever delivered the sustained Kok explicitly identified the Information Society productivity gains that we have seen with mi- Policy as crucial to the realisation of the Know- croprocessors over the past 40 years. No other TABLE 1 - BROAD OBJECTIVES IDENTIFIED IN FACING THE CHALLENGE Key policy area Sampling of “Broad objectives” Information Society: defining a regulatory framework for electronic communications; encouraging the spread of ICTs; creating conditions for e-commerce; supporting European leadership in mobile communications technologies Realising the Research: Setting up of an area of research and innovation; boosting spending Knowledge Society on R&D to 3% of GDP; making Europe more attractive for its best brains; promoting new technologies Education and human capital: halving the number of early school leavers; adapting education and training systems for the knowledge society; fostering lifelong learning for all; promoting and facilitating mobility Removing obstacles to the free movement of services in the EU Keeping our Completing the internal market for network industries commitments to the Ensuring fair and uniform application of competition and state aid rules; internal market reducing state aid to 1% of GDP; defining the new mergers regime and take- over bid rules; updating public procurement rules Creating the Lowering costs on doing business and removing red-tape: developing a better right climate for regulation strategy at both European and national level, reducing time and costs entrepreneurs for setting up a company Building an Improving productivity, lifelong learning, new technologies and the flexible organisation of work; adapting the European social model to the transformation adaptable labour to the knowledge economy and society: facilitating social security in cross-border market for stronger movement of citizens; meeting target of 12% of primary energy needs and 21% of social cohesion gross electricity consumption from renewable energy sources Working towards Decoupling economic growth from resource use: tackle rising volumes of an environmentally traffic, congestion, develop a Community Framework for pricing of transport sustainable future infrastructure, ensure a sustainable use of natural resources and level of waste56 European View
    • Viviane Redingtechnology was ever rolled out as quickly or are already being made in other nations. Thisas pervasively as GSM or the Internet. And, calls for an immediate, concerted and ambitiousyet, most business gurus say that we are only approach to the framework conditions for thenow about to see the real benefits of the rollout economy of the future such as IPR, electronicof these technologies in terms of growth and payments, digital privacy and network security.competitiveness. The European ICT sector hasstrengths such as communications, embedded Cutting business free of red-tape is identified insystems and applications. Too often important the Kok Report as a key objective. This doesresearch results are made in Europe but, are not mean we don’t need rules. It means thatonly recognised elsewhere. The World Wide we need 21st century public administrationWeb is just one recent and obvious example! based on fast and transparent on-line services.We have to make sure that we ride these new For instance, it should be possible to set up awaves of development, because they are the new firm in 6 hours or 6 days instead of the 6motors of growth and job creation. weeks or 6 months sometimes needed today. Moreover, a more efficient public sector couldInformation Society policy has a significant im- also reduce tax burdens whilst aiding the sus-pact on other areas, as well. As is illustrated in tainability of European social systems. This is aTable 1, ICT provides an essential underpin- move in the right direction and there is no fun-ning element to a wide range of other actions damental reason why it cannot give fast results.to modernise the European economy. As we As an example, a new survey on online incomehave seen, ICT represents a very large share of tax declarations shows that they currently savetotal research expenditure. And given the very 7 million hours per year, for citizens who useshort lifecycles of ICT generations, it is one of them. This could rise to more than 100 millionthe areas of research where spending can most hours each year. For businesses, online VATquickly feed through into economic results. In declarations save about 10 hours per declara-education and the development of human capi- tion. If maximum utilization were achieved, thistal, ICT is one of the main drivers of modernisa- could translate into savings of some € 0.5 billiontion across all learning environments. ICT pro- for businesses across the EU each year.vides ways to adapt learning to the wide varietyof needs of different educators and learners. Itis also an important new market area in its own We need to work on making the European in-right, expected to exceed US$20billion globally novation system more dynamic and to use ourby 2008, with compound annual growth rates in instruments more effectively. It is, of course,Europe, MiddleEast and Africa of up to 30%.10 essential to support creative and leading edge science and technology, as we do in the ISTThe construction of the internal market was not research programme. But it is not enough. Aslaunched for its own sake or because of po- the EPP Action Programme points out, we havelitical ambition, but because it made economic to look at the conditions for the effective indus-sense. Creating economies of scale and more trial exploitation of these new innovations, es-transparent and less complicated conditions for pecially amongst SMEs. And we should considerbusinesses is especially important in the poten- the potential for government to lead the way intially fast growing areas of e-business and infor- putting services on-line as the driver of modern-mation services. The Lisbon Strategy is moving ising the public sector and by using governmentEurope towards a future knowledge economy spending as a force for innovation and growthin which electronic communications, software, through smart procurement.on-line services, digital content and audio-visualwill play an ever increasing role. We have to act Information Society policies are also essentialnow to make sure these industries can grow vig- to reinforcing the adaptability of labour marketsorously in Europe. Europe needs to be a lead- and enhancing environmental sustainability.ing market for these new industries. Advances Information networks and services are critical10 Source: IDC, Worldwide and US Corporate e-learning 2004-2008 Forecast: Behind the Scenes with e-learning, a Business enabler, page 13. 57 Volume 1 - Spring 2005
    • Towards the Knowledge-based Economy: Information Society infrastructures for a freer movement of citizens About 50% of EU households are connected to across borders to live and work, without los- the Internet. Almost 100% of schools, compa- ing their position in the social safety net. Mean- nies, and public administrations are on-line. But while, “decoupling economic growth from re- the game is not over. A new, and possibly much source use” is simply unthinkable without new more important phase is underway. The next advances in energy management systems, mate- wave driving new markets is broadband, both rial resource control, logistics and recovery/re- fixed and wireless and the convergence of the cycling techniques. In addition, the substitution services based on these new broadband infra- of traditional mechanical components by elec- structures. Broadband services cover about 80% tronic systems has reduced weight and mate- of the territory of the EU15 but, only around 8% rial use, resulting in more reliable, cheaper and of the population are subscribers. Subscription cleaner products. is increasing at 75% per year. This is fast, but it is well behind our international competitors. ICT – the yeast in the mix New bandwidth hungry content and services are coming on the market for both consumers The Information Society portfolio, therefore, is (e.g. music and games) and business (e.g. mo- not just another sectoral interest that bears on bile data services). The EU should aim to be- competitiveness, but is the one that lies at the come a lead market for these new services. But heart of growth and innovation needed to de- the EU so far lags behind; for example the ICT liver the Lisbon Strategy. contribution to growth in Europe is half of what it is in the United States. Information Society may not have the gravitas of macro-economic policy or the established posi- My new i2010: the European Information tion of employment and labour market policy; Society initiative, planned for adoption by the but if you want to make bread you need more Commission in May 2005, will stimulate more than just flour and water - you also need yeast. and better use of ICT. It will, therefore, make Information Society is exactly like yeast; it is the an important contribution to the Lisbon Strategy, active ingredient without which the economy with a strong potential to contribute to growth will not rise. and jobs through innovation and investment in the knowledge economy - an economy we have Moreover, it is an area which communicates re- to build if we want to maintain European stand- sults. It is an area in which citizens and busi- ards of life and sustainable development. ness can chart the progress in the form of new products and better services. It, therefore, plays Information Space an important part in keeping Lisbon visible and on track. First, information space will enhance the condi- tions for the development of important and high growth markets for content and services. It will Policy priorities for the Information Society continue to support the developments in areas and the Lisbon Strategy such as e-government, e-health, e-learning and e-inclusion. These services are important in their As we have seen, ICT is the “enabling technol- own right because they improve the quality and ogy” par excellence. It is responsible for around transparency of services that citizens receive, half of productivity growth in modern econo- and because they can allow the public sector to mies. It drives improved efficiency and better do more with the same level of resources. They services and products across the entirety of the are also important growth markets that are help- private and the public sectors. ing to modernise Europe. The new instrument will certainly also encourage the acquisition of Also, the ICT revolution is not over. We are e-skills and the wider use of e-learning, which is right now seeing a very important consolidation essential to achieving the knowledge society in of the use of ICT that will drive productivity Europe. We will also have to look at promoting gains and new markets over the coming years. the right conditions for wider use of ICT in the It is true that the Internet launch phase is over. economy; for example, the need for interoper-58 European View
    • Viviane Redingability, trust and dependability, and appropriate in the ICT domain. For example, consumer elec-business uses of ICTs. tronics and computing have started to converge very rapidly, creating many opportunities forSecond, I believe that we have to build com- new products and services. Such sectors canpetitiveness through competition. Competition grow 10% - 30% per annum. If we miss theseis opening up in the electronic communications innovation waves at the research and deploy-sector leading to greater services (including on- ment phases, the EU could be sidelined fromline) and to reduction of prices. Even still, five some of the main motors for economic growthcountries have not transposed the regulatory in the coming decade. It is clear that ICT is aframework on e-communications. We have to crucial motor for growth and yet Europe is fall-continue to be vigorous in our efforts to open ing behind in terms of investment. Communityup this market, because it is a key enabler of support for research in the ICT field has beengrowth. By the same token, I agree with the EPP steadily increasing over the years, but as a pro-in the need to promote the move towards mo- portion it is declining (as the FP become morebile broadband, especially by increasing com- complex).petition, predictability and clarity, as regardsto issues such as spectrum allocation and trad- If we are serious about the Lisbon Strategy anding. These orientations will guide my approach about our commitment to growth and jobs,since, in the next two years, I will review two of we should have the courage to increase R&Dthe main Directives for which I am responsible; spending substantially. Changes are needed inthe “Television without Frontiers Directive” and the Community research programme, to cutthe “Regulatory Framework for the Electronic red-tape so as to encourage more SMEs andCommunications Sector”. corporate involvement. Also, in my view, the new Framework Programme 7 that we are nowThe same principles of transparency and com- preparing, has to be accountable and transpar-petition can be applied to other information ent; but research is about taking risks and moreservices markets that have high growth poten- bureaucracy will not eliminate risk it will merelytial, but which are held back by the uncertainty, hide it. Furthermore, it should be more targeted.fragmentation and complexity of rules on pay- Two recent independent reports on the FP bothments, copyright, privacy and security across stress the need to make Community researchEurope. Here again, i2010 is in line with the EPP more strategic and more attractive to industry11.Action Programme. We need a much improved We need a research programme for ICT that isregulatory environment for doing business in targeted and strategic, industrially relevant andEurope, not just for the old economy but, for which is substantially increased in size.the new economy as well! Inclusion and better quality of lifeInnovation in Information and Communica-tion Technologies (ICTs) The third pillar of i2010 aims to exploit the po- tential of ICT in increasing the welfare of Euro-Third, we need to redouble our research efforts pean citizens. i2010 will aim at building a Euro-to stay on the wave of new innovations. ICT is pean knowledge society that uses its prosperityone of the research areas where the EU still has to reinforce solidarity, raise the quality of publicleadership (microchips, mobile, consumer elec- services and improve the quality of life. “i2010:tronics) but we are “on the edge”. Competition A European Information Society” provides a vi-now is not just from the US, Japan and Korea, sion of suitable and affordable access to essen-but from India and China. New ‘value domains’ tial ICT facilities, as well as the necessary skillsthat could be worth around € 500 billion per an- and value-added services and contents. This willnum are emerging, at least four or five of them contribute to further empower users, improving11 José Mariano Gago (2005) Five-Year Assessment: 1999-2003, Research and Technology Development in Information Society Technologies, Final Panel Report, January 2005, http://europa.eu.int/comm/dgs/information_society /evaluation/pdf/5_y_a/ ist_5ya_final_140105.pdf and Erkki Ormala (2005) Five-Year Assessment of the European Union Research Framework Pro- grammes 1999-2003, http://europa.eu.int/comm/research/reports/2004/fya_en.html 59 Volume 1 - Spring 2005
    • Towards the Knowledge-based Economy: Information Society their quality of life through enhanced partici- Strategy. They will be significant. They will de- pation in society. It will also result in benefits liver results. And they will definitely get Europe for the society and the economy at large, for moving in the right direction. instance, by boosting electronic commerce or electronic public services to the citizen. European economic competitiveness depends on providing the right enabling environment for The approach I am adopting is founded on a businesses to be efficient and innovative. We solidarity-based economy. My aims are to pro- must use ICTs to stimulate the growth of the mote the approach “no one held back and no knowledge economy, to promote competitive- one left behind”, through open access to serv- ness through e-communications and e-services, ices and the use of ICT to improve the quality and to reinforce innovation through a research and efficiency of public services. This will be programme that is strategic and big enough to crucial in the coming years with rising numbers meet the challenges we face. At the same time, of elderly people in our society. we must take care to streamline rules and red- tape, to reduce obstacles to new markets and Public services are a centrepiece of the Euro- to support investment in innovation, infrastruc- pean social model, decisively contributing to tures and people. social cohesion and economic activity. There is a strong political momentum for public service There is a need for a new sense of urgency. reform in the face of combined pressure from Comparisons with the US and Japan are quite budgetary constraints and societal challenges familiar. But increasingly the striking compari- like ageing and immigration. Just like in the case sons are with the new giants of China and India of purely commercial services, a better exploi- as well as, Korea and Brazil, where proactive tation of ICT possibilities will help modernise ICT strategies are helping to yield staggering and innovate services of public interest, such as double figure industrial growth rates. healthcare, education and all other administra- tive services. This means, improving their qual- Europe has a mature economy. We cannot ex- ity, efficiency and accessibility, and thus their pect to reach such high rates of growth. But we long-term sustainability. have to be vigilant and to see that the rest of the world is moving and it is moving fast. In other words… if we don’t take this seriously… the Conclusion rest of the world will! Looking at Lisbon after five years, it is clear that Europe needs to take steps to raise competitive- ness; steps that are significant, give fast results and which move us in the right direction. With Viviane Reding is a Member of the European only six years to go to 2010 we have to focus Commission responsible for Information Society on areas where visible results can be delivered and Media. fast. Information society is the sine qua non of Lisbon ICT is one major driver of change that can cred- ibly be expected to deliver the changes needed to move the Lisbon Strategy ahead. By contrast, without ICT, Europe’s hopes for growth will go nowhere… these days very little moves without ICT. The Information Society policies that I intend to promote will be in full support of the Lisbon60 European View
    • Andris Piebalgs The Lisbon Strategy and Energy: Making the Connection By Andris Piebalgs The Lisbon Strategy, energy products have been opened to compe- adopted in 2000, seeks tition in some Member States, but not yet in to make the European others. I would like to see the market open- economy the most dy- ing up throughout the Union, not in the inter- namic in the world by est of ideology or some abstract doctrine, but 2010. Five years later, because I believe that the force of competition,we need to ask ourselves whether we could driving prices down and improving service, is innot do better to reach this objective. Unemploy- the best interest of citizens. The Single Marketment is still a major problem for Member States, is all about providing choice to consumers. Atwhile our ability to cope with competition from present, this choice is not always available.other regions is sometimes questionable andour growth rate much lower than that of Asia The first task is to ensure the full and imme-and North America. Lisbon, in that sense, is diate transposition of the electricity Directives.about improving people’s daily life in the EU Last month, the Commission began the secondand about catching up with our international stage of infringement proceedings against tencompetitors. Member States that have failed to implement the Directives. We will carefully examine the man-Energy policy will be a key element in the Com- ner in which the requirements of the Directivesmission’s attempts to achieve a coherent re- have been implemented, and take the necessarysponse to the challenge of Lisbon, and also of steps if there is incomplete transposition. OnKyoto. With oil prices likely to remain high, our the basis of what I have seen so far, there is rea-growing dependence on imported energy, and son for some optimism: all – or almost all – thethe competitiveness implications of meeting our legislation adopted by Member States conformsKyoto targets, energy policy has to be at the top with the requirements of the Directives.of the agenda. Without reliable, affordable andsafe energy, our economy would simply come If the second package leads to a real outbreakto a halt. In other words, we depend on energy of effective competition in continental Europe,for our prosperity. I am determined to make legislative initiative may not be needed. Muchsure that energy policy contributes to solving depends, of course, on how the Directives arethese problems. implemented in practice, both at government and company level, particularly regarding un-Lisbon and its implications bundling – the separation of monopoly network business, transmission and distribution fromTo meet the Lisbon challenge, I see three ma- competitive activities, i.e. generation and sup-jor areas related to energy where, in collabora- ply. During this year, we will monitor how thetion with colleagues in the Commission, in the Directives have been implemented, and howEuropean Parliament and the Member States, implementation affects the market. In particular,progress can be made. we will examine whether markets are integrat- ing, or remain national in scope.Completing the Single Market At the end of 2005, the Commission will presentIt is now time to complete the work which an exhaustive Report reviewing the situation.began in 1986 and which was due to be fin- The report should launch a wide-ranging de-ished by 1993. Some aspects of the Single Mar- bate, enabling us to draw conclusions, later, inket – notably trade in goods – are essentially 2006. In my view, sufficient time, consultationcomplete, but there are exceptions. Markets for and analysis will be necessary before deciding 61 Volume 1 - Spring 2005
    • The Lisbon Strategy and Energy: Making the Connection on whether further action is needed. have profound implications for our long-term security. I will table a Green Paper on this issue Competition law, both at Community and na- by the end of this year. tional level, will also need to play an important role. Long-term gas supply agreements will re- Security of supply can be achieved through di- main an integral part of the European gas mar- versification of suppliers. To this end, our task is ket for a long time, to ensure security of sup- to secure the good relations we have established ply. Long-term electricity purchase agreements with key energy exporting countries. Russia is, by energy intensive industry will also continue for example, our most important supplier of oil to exist. For this reason, we will have to make and gas: a permanent dialogue on energy has sure that competition rules are taken into ac- been in place since 2000. Other partners include count by all stakeholders. I have agreed with Norway, Caspian Sea countries and OPEC. We my colleague, the Competition Commissioner need good working relations with all of them. Mrs Neelie Kroes, that the forthcoming report In the case of OPEC, we are about to initiate on energy markets will be prepared by a joint a dialogue between consumer and producer Competition/Energy team, presenting the full countries. It will seek to establish confidence picture. Such an integrated approach will allow and predictability at a time of high oil prices. us to form a solid judgment on what remains to be done. Security of supply also requires us to rethink the way we use energy. Energy must be used Our energy industry needs a stable regulatory in a more cost effective and efficient manner. I environment to invest: this must also be taken hope to see the Commission lead a new major into account. I look forward to working with the European Energy Efficiency Initiative with the Parliament and with Member States to extend objective of saving, by 2010, the equivalent of this fundamental economic point throughout 70 million tonnes of oil that would otherwise be the EU. consumed. This would save 15 billion Euros per annum. A Green Book on energy efficiency, to Our policy in this respect, of course, does not be followed by a wide debate, will be published stop at the Union’s borders. Projects are under- by the Commission before summer. way to encourage regional cooperation, and eventual integration of at least some of our Finally, security of supply makes the develop- neighbours into the single market for energy ment of renewable energies even more neces- products. Results so far are encouraging. Take sary. The EU has fixed the objective of 12 % the example, the South East Europe Energy renewables in overall energy consumption by Community, which will, in the near future, cre- 2010. This means a reduction of CO2 emissions ate a unified energy market between ten coun- by 200 million tonnes. It also means reducing tries in the region from Croatia to Turkey. This our dependence by 5.5 % by 2010 and creat- unified market will be based on a stable regula- ing 500,000 new jobs. To this end, we must fur- tory and market framework capable of attracting ther develop wind energy and use biomass for investment in gas networks, power generation producing electricity. Nuclear energy also has and transmission networks, so that all countries a role to play in ensuring the diversification of have access to a reliable gas and electricity sup- energy sources, provided that safety of facilities ply, essential for economic development and and proper management of nuclear waste can social stability. be guaranteed. The Commission attaches great importance to this, on the basis of the subsidi- arity principle. Security of supply All these actions can make a major contribution In the view of the International Energy Agency, to our Kyoto objectives, and at the same time, Europe’s energetic dependence is likely to in- make an immediate and appreciable contribu- crease in the next decades. We must react now. tion to Community competitiveness. It is important that the Commission leads the debate on how to address these trends, which62 European View
    • Andris PiebalgsResearch and Education a success of enlargement and ensure that we have the necessary budget to do so.As noted earlier, Europe depends on energy forgrowth and prosperity. In this respect, research I suppose many people think that the enlarge-is essential. However, compared with the USA ment of the ten new Member States can be tak-and Japan, Europe is lagging behind in this area, en for granted and that all we have to do is sitwith the exception of research into clean coal back and enjoy the results. I am afraid this isand ecological technologies. The question is for not the case. The successive steps which led myhow long can we hold even this lead. Given the country, and the others, into the European Un-technology-driven response of the US to call for ion was only the beginning of the process. Inenvironmental action, and the likelihood that particular, we need to ensure full participationthis will be given increased focus in the future, in the Single Market, including full implementa-there is a real risk that Europe will fail to main- tion of the acquis. Furthermore, public opiniontain its leadership. Research on new resources needs to look at enlargement as an opportunityis very much needed, as is on existing energy and not as a threat.technologies. When it comes to financing, we will need toResearch is of course linked to education. As a convince Member States, in the context of theformer teacher, I am in a good position to know new financial perspectives 2007-2013, to pro-that education systems must take into account vide the necessary framework for becomingthe needs of the economy and of science. Now, more dynamic.education is primarily within the competence ofthe Member States, and in some cases, of re- Post-Lisbongions; the Commission has a limited role in thearea. We, nevertheless, take a real interest in Revised Lisbon is about making up for lost time.overall trends. In many Member States, there is Energy lies at the heart of this strategy and ofa clear decline in the number of students who our daily lives.study the sciences or related subjects, like math-ematics or engineering. I do not wish to deni- The EU, in many respects, is like a wealthy per-grate other disciplines, and in no doubt, as a son living on an inheritance, who begins to no-scientist by training myself, can I be accused tice that the money is running out. We need toof favouring my own; but it is essential that look at best practices elsewhere; we need toour knowledge base, and our pool of educated eliminate complacency.workers, assist us to advance. This is not something the Commission can doI also see science as part of the basic tool-kit of on its own; we need to work closely with thean educated person; and scientific illiteracy is other EU institutions, with academics, with civiljust as bad as any other kind. All too frequently, society, with business and trade unions. If weI hear people say that “science is too difficult” can agree on the analysis of our situation, theor “much too hard to understand.” If that is to most important step will have been taken.be our attitude, we can forget about our Lisbonobjectives right now.A related issue is the involvement of women in Andris Piebalgs is a Member of the Europeanhigher education, particularly in sciences. It is Commission responsible for Energy.a fact that, generally, the participation rate ofwomen in sciences is low; and this is a problemwhich needs to be addressed. We cannot ex-pect to increase our competitiveness if half ourpopulation is left on the sidelines.Finally, it seems to me that, if we want to makethe Lisbon Strategy a success, we have to make 63 Volume 1 - Spring 2005
    • Ivan Mikloš Commentary: Europe and the Need for Reforms By Ivan Mikloš The word “reform” has reform should in fact expedite the growth of our become common cur- net contributions to the EU budget. rency in European eco- nomic policy rhetoric. Out-location Unfortunately, in many areas and in many Eu- The issue of out-location is undeniably an im-ropean countries, thoroughgoing reforms re- portant economic phenomenon affecting mostmain to be translated into reality. The Slovak European economies. Yet, any fruitful debate ongovernment has implemented numerous struc- it must begin with a correct specification of thetural reforms in the last two years, the most sig- issue at stake. In this case, one should not asknificant being the tax reform, healthcare system how we can avoid the “problem of out-loca-reform, social system reform, labour market re- tion”, but, instead, how we should transform theform, pension reform and public administration phenomenon of out-location from a potentialreform. These actions have led the World Bank problem into a real opportunity.to label Slovakia the world’s leading reformerlast year. Out-location is not a consequence of the recent EU enlargement but a phenomenon producedSlovak reforms and the European Union by economic globalisation. It is a logical result of the opening up of trade and investment over theThe Slovak reforms have generated positive re- past decades. The faster technological progresssponses but, also several question marks. Among has also contributed to reducing the complex-other things, they contributed to discussions, ity and costs of transferring production activitiesoften quite emotional, on out-location and tax abroad. Within Europe, the relocation of somecompetition. Slovakia has even been accused productive activity into Central and Eastern Eu-that our income tax has been set so low that rope is mainly due to the availability of lowerit may threaten the accumulation of sufficient labour-costs. However, economic reforms haveresources to support economic growth. Conse- also contributed to this process by improvingquently, development in Slovakia will have to the business environment, which many foreignbe financed, allegedly, by the more developed investors now view as more favourable thanEuropean countries via their contributions to that in their home countries.the EU budget. For host countries, like Slovakia, the benefits ofThis is simply incorrect. In fact, Slovak tax re- this process, in terms of increased production,form has been fiscally neutral – it does not lead employment and export revenues, are obvious.to any reduction in tax receipts. The reform sim- However, even home countries can benefit fromply transfers the tax burden from direct to indi- the process of out-location. Most available stud-rect taxes. At the same time, the significant sim- ies conclude that the process of out-location re-plification and rationalization of the tax law has sults in overall welfare gain in the United States:substantially reduced the burden on production as economic activities relying on cheap produc-and, thereby, acts as a significant stimulus to in- tion are moved overseas, they are replaced byvestment and job creation. Therefore, it should new activities with higher added value. Further-boost rather than reduce growth potential of the more, out-location may help domestic industriesSlovak economy. Given that the size of national in Western Europe. By allowing firms to frag-contributions and access to EU finance is largely ment and relocate their activities according todetermined on the basis of the gross domestic the best conditions, out-location provides firmsproduct (and not the tax burden), the Slovak tax with the opportunity to stay competitive by 65 Volume 1 - Spring 2005
    • Commentary: Europe and the Need for Reforms gaining access to lower cost inputs. Conclusion The causes and consequences of out-location Thus, the reforms we have implemented in are discussed in greater detail in a recent note Slovakia should in no way be viewed as intro- prepared by the European Commission. Its con- ducing a zero-sum logic into our relations with clusions are clear. The phenomenon poses no other EU member states. Their role is to help major problem at the macroeconomic level, al- create the conditions in Slovakia for a flex- though it does require a measure of adjustment, ible economy, responsive, in the context of which may affect some sectors more than oth- the increasingly globalised world economy, to ers. More importantly, for the EU to turn the the changes in comparative advantage that ris- phenomenon of out-location into a real oppor- ing living standards will inevitably bring. This tunity, it must be able to adjust and develop is precisely the situation currently facing many new areas of comparative advantage in the developed European economies, and they, too, technologically advanced sectors of the econ- must continue the reform process that many of omy to prevent the risk of a deindustrialisation them have begun. In this respect, I remain quite process taking place. The Lisbon Strategy for optimistic. growth and employment is directed at precisely this goal. I welcome the recent reform packages in Ger- many and France. I understand that such steps I strongly believe that reforms of the sort re- are not always popular and may be politically cently implemented in Slovakia are an integral difficult, but I hope that positive experiences part of this adjustment process. Tax reform, in- with structural reforms in Slovakia and other cluding the introduction of a flat income tax rate new member countries will ease their imple- and reducing income and corporate tax rates in mentation in the rest of Europe. favour of indirect taxes, should help stimulate entrepreneurship, job-creation, and investment in the technology and knowledge sectors. It should also enhance individuals’ efforts to find Ivan Mikloš is Deputy Prime Minister and employment and invest in human capital by re- Minister of Economic and Financial Affairs of ducing the disincentive effects of income tax. the Slovak Republic. All this, without necessarily sacrificing the pro- gressive nature of the tax system. Social and labour market reform, aimed at in- creasing the flexibility of the labour market, combined with modern education and training policy, should ensure that the structure of skills and employment adapts more quickly to changes in comparative advantage. Pension and health- care reforms, by reducing the immense pressure on public finances, should contribute to a stable and predictable economic policy, which is so important in times of industrial restructuring. It should also lead to more resources being avail- able to education and various policies aimed at stimulating R&D and innovation, all of which are essential for the successful development of a knowledge-based economy.66 European View
    • Alexander Radwan Lisbon - the Scapegoat:How France and Germany Bailed Out from the Stability Pact By Alexander Radwan Jacques Delors is con- of 3%. It has become common practise to for- sidered one of the most get about the fact that the main aim of the SGP successful Presidents of is a balanced budget. This leaves governments the European Commis- with substantial room to manoeuvre before they sion. His outstanding reach the 3% ceiling. reputation is based onhis primary vision of the European Single Mar-ket. Delors could count on Mitterrand and Kohl, A Pact tailored for France and Germanyboth European visionaries at the time. Today, theLisbon Agenda is the big project. Europe badly The governments of France and Germany ig-needs more employment and competitiveness nored this basic fact. They finally managed toin times of economic stagnation where growth exclude a broad range of budgetary measuresis at an all-time low and unemployment at an from the calculation of the deficit. The ‘specificunequalled high. The Heads of State and Go- economic situation’ of each Member State isvernment, however, appear not to share a com- supposed to be considered. The agreement tomon vision on the future of Europe. Five years soften the Pact, takes away any incentive to pro-later, they have to face the question whether the mote sustainable budgetary policies, let aloneLisbon Agenda is still among the governments’ balanced budgets. If the deficit rises above thepolitical priorities. 3% ceiling, governments will always find a more or less valid excuse. A more flexible handling ofThe current handling of the Stability and Growth the Stability and Growth Pact primarily suits thePact (SGP) serves as a good example. Unani- big net contributors. In the case of an excessivemously adopted in December 1996, the rules of budgetary deficit, their financial contributions tothe Pact have provided a climate of monetary the EU coffers can be taken into account. Andstability that lasts until today. Germany once ini- as the net contributors will almost always betiated and promoted the Pact. Astonishingly, it able to fight off a deficit procedure, the de-factois the very same country that has violated the rules of the Pact will be enforced at the expensePact three times in a row, recently, damaging its of smaller, less powerful Member States.credibility completely. After the spring Summitof the European Council, it is evident that Ger- The Pact is now subject to individual assessment.many and France have succeeded in stripping This means one currency, but 25 interpretations.the SGP of its straitjacket. EU finance ministers agreed to exclude the cost of German reunification in the calculation ofYet, the argument of financial stability and German deficits. It should be noted that thegrowth contradicting each other is a myth. Sus- yearly reunification costs today amounts to fourtainable fiscal policy and price stability are a per-cent of GDP. So any German governmentfundamental precondition for growth, competi- would easily get away with it. In fact, it wouldtiveness and employment. What really matters come nowhere near the deficit procedure, letis whether you accept budgetary restrictions on alone hard and fast sanctions. 15 years aftera European level that are necessary in a single German reunification, this approach constitutescurrency area. It is simply not true that govern- an offence to the new Member States as they arements can no longer spend money on structu- facing a comparable burden. As a consequence,ral reforms or on research under the Pact. The allowance had to be made for pension reform insame holds for the notion of the governments of these countries under the revised SGP.Germany and France that additional spendingautomatically means going beyond the ceiling 67 Volume 1 - Spring 2005
    • Lisbon - the Scapegoat: How France and Germany Bailed Out from the Stability Pact EU Commission needs regulatory compe- on the part of the Commission. It would have tences been wise to introduce a mechanism requiring unanimity in the Council when rejecting a Com- The Stability and Growth Pact has been in dire mission recommendation. As Member States straits ever since France and Germany were let were obviously not able to bring themselves to off the hook by the EU finance ministers de- strengthen the Commission’s competences for spite a Commission recommendation to move fiscal policy coordination, it is now up to other them into the final stage of the excessive defi- political players, like the European Parliament, cit procedure. A European Court of Justice rul- to encourage the Commission and to give the ing clarified the respective roles of the institu- necessary support. In any case, the Commission tions in the application of the Pact. The Court ought to monitor and benchmark the fiscal poli- ruled that EU countries could not put the Pact cies of the Member States and scrutinize deficit “in abeyance” and confirmed the Commission’s sinners. right to launch excessive debt procedures. Paris and Berlin then promised to bring their deficit The Lisbon horse-trading? below 3% until 2005. In the case of Germany this would equal a cutback from 3.9% in 2004 The modified Pact has been much-lauded by the to 2.9% in 2005. However, selling pension funds Heads of State and Government at their Sum- or drawing on privatisation profits, in order to mit in Brussels. The plot was this: More spend- desperately meet the target is anything but sus- ing on education, research and infrastructure tainable. Besides, with unemployment exceed- projects are ways to reach the aim of the Lisbon ing five million and the growth rate being at a Strategy, i.e. to become the most competitive sluggish one per-cent, any claim of a substantial region in the world. The fact that such budget- reduction of the deficit is window-dressing. ary measures would all potentially come at the expense of future generations, of course got no The main shortcoming of the Stability and mention. As the provisions of the SGP can only Growth Pact is the fact that sanctions proposed be amended by unanimity, there is a sneaking by the Commission can be turned away by a suspicion that governments of the big net pay- blocking minority among finance ministers, i.e. ers “bought” the required concessions off their the “deficit sinners” themselves. Persuading EU partners. The line probably was that reform their fellow EMU members, France and Germa- of the Pact could be compensated by a more le- ny (both about to break the SGP rules for the nient position towards the coming financial per- fourth time in a row) managed to put the exces- spective covering the period from 2007 to 2013 sive deficit procedure on hold. Italy gets away (agreement on which is also subject to unanim- with it, too, after cutting the deficit back under ity). Berlin and Paris are ready to pay more into unclear circumstances. On the other hand, a the EU’s coffers as the price for a more “flexible” procedure is launched against the Netherlands Stability and Growth Pact. that have reduced their overall debt signifi- cantly over the last years. The signal the bigger The Brussels summiteers are boasting about ren- EU members send out to the rest is this: “We dering a service to the Lisbon agenda. Far from don’t care about rules which we haven’t made it! The naked truth is that the loosening of the ourselves!” This, of course, is going to have a Pact comes at the expense of the Lisbon goals. certain impact on the acceptance of grand EU It is a matter of fact that the structural deficits projects such as the Lisbon Strategy or the Euro- of the European economy and the relative lack pean Constitution. of competitiveness are detrimental to higher growth rates. Adherence to the criteria of the It is obvious that the Stability and Growth Pact Pact (as they used to be) would safeguard a sta- needs to be amended. It was wrong, however, ble currency through sustainable and balanced to go for further flexibility. Rather, the obliga- budgets. This would allow for tax cuts and fos- tion to reduce debt in times of economic growth ter growth and employment. Non-compliance should be implemented more strictly. Existing with the Pact’s criteria may help create a bet- provisions will remain ineffective as long as they ter economic appearance towards the election are not accompanied by more enforcing powers date, but it definitively leads to an increasing68 European View
    • Alexander Radwanburden for future generations. We tend to live atthe expense of our children and grandchildren,which is one of the problems the Lisbon agendashall actually avoid. Heads of State and Govern-ment have been talking a lot about Lisbon, butthey have not delivered.Alexander Radwan is a Member of the EuropeanParliament and Economic Affairs Spokespersonof the EPP-ED Group. 69 Volume 1 - Spring 2005
    • John Bruton The Challenge of Lisbon for the European People’s Party By John Bruton The European Council, economy. at a meeting on 23rd and 24th March 2000, Speaking on the Lisbon process, Jean-Claude adopted what became Juncker, Luxembourg Prime Minister, and one known as the “Lisbon of our most distinguished EPP leaders, said: Strategy”. It set out toconfront what it called a “quantum shift result- “We all know what we need to do, but we don’ting from globalization and the challenges of a know how to win elections after we have donenew knowledge-driven economy”. It did so at it”.1a time when the Council said the Union was“experiencing its best macro-economic outlook This sums up the challenge facing the EPP. Thefor a generation”, but had “more than 15 million Party must come up with a method for turningEuropeans still out of work”. unpleasant pension, healthcare and labor mar- ket reforms into election winning strategies.The Strategy covered policy areas that weremainly within the competence of Member States, That seems like a tall order. But do we reallynot the Union itself, and the ambitious goals set have any choice?at Lisbon were to be achieved by a new openmethod of coordination, whereby the setting of Europe’s low birth rate at the core of theguidelines and the exertion of peer pressure, problemwould speed up the necessary reforms. Thesereforms were also spurred on by the dramatic Between 1960 and 2000, the average depend-growth in the productivity of the United States ency ratio (defined as the number of personseconomy which, after a period of European aged 60 or over, relative to the number agedcatch up, was then powering ahead of Europe between 15 and 59) for the EU 15 rose from 26in its overall competitiveness. to 35 dependents. At the same time (thanks to more immigration and a higher birth rate) theInterestingly enough, this 2000 version of the dependency ratio for the United States remainedLisbon Strategy paid little attention to an issue constant at 25.that has come to dominate the debate in 2005 -what the Kok report has described as the “com- Now at 35 dependents, the dependency ratio forbined challenges of low population growth and the EU 15 is (unless we increase our birth rate)ageing”. The fact that it faces up to the impact expected to reach 47 dependents by 2020 andon economic growth of low population growth 70 dependents by 2050.2and ageing makes the Kok report, and the Bar-roso Commission’s response to it, more realistic Basically, fewer and fewer people of workingthan the original Lisbon Strategy of 2000. age will have to support more and more elderly people. There will be almost as many peopleIn this article, I would like to offer some sug- over the retirement age than there will be peo-gestions on how the member parties of the Eu- ple of working age.ropean People’s Party (EPP) can help achievethe Lisbon goals. I will draw on my experience The problem is, of course, not exactly the sameof over thirty five years in Irish politics, and on for every country. The age dependency ratiomy more recent studies of the United States1 Financial Times, 2 February 20052 “An agenda for a Growing Europe” Sapir Report (2003) 71 Volume 1 - Spring 2005
    • The Challenge of Lisbon for the European People’s Party for Spain in 2050 will be 73.8 and in Italy 68.1, row would mean fewer contributors to the costs whereas it will “only” be 46.7 in France and of caring for the elderly. “only” 39.9 in Britain. But present projections are that the age dependency ratio in the United In promoting higher labour force participation States in 2050 will be 34.9, which will be little rates among those of childbearing age, a choice more than half the average European rate. arises between short and medium term social benefits. This choice needs to be honestly de- So even if President Bush felt he needed to de- bated, even if that debate could be a conten- vote his State of the Union address to the pros- tious and difficult one which called some well pect of long-term deficits in Social Security and established social goals into question. Medicare, we in Europe have a much bigger problem. The State of our Union, as far as age- The Lisbon Strategy seeks to increase what it ing is concerned, is much more severe! calls the “participation rate”. “Participation” is defined as taking part in paid work. A parent But, it is also worth remarking that, when one at home, looking after a number of small chil- is looking as far ahead as 2050, one does have dren, is arbitrarily deemed not to be “participat- the time to do something to change the trends, ing” in society in accordance with the measure and one is not confined to unpleasant welfare used by economists. But that is a very narrow reforms as the only means of bridging the age- and economistic measure of “participation”. A ing gap. A substantial increase in the European new broader measure of participation is needed birth rate could, even without more immigra- which would place a higher social valuation on tion, begin to reduce the projected dependency parenting, and this new valuation should be ex- ratio by as early as 2025 – which is well within plicitly included among the Lisbon goals. the expected lifetime of most readers of this pa- per. The relevance of achieving a higher birth If the tax code is altered, as it has been in some rate is hardly discussed at all in the review of countries, artificially to discourage a choice to the Lisbon Strategy. It is almost as if it is a taboo stay at home and look after children in order to subject. Why? promote “participation”, then the birth rate will fall still further. The Commission’s most recent communication on the Lisbon Strategy3 says “While the issue of In the short run, that may save money on the low birth rates should be properly addressed schooling of extra children. But, in the long as part of a long-term policy, raising employ- run, it will deprive society of the young workers ment levels is the strongest means of generating who will be needed, sooner or later, to pay the growth and promoting socially inclusive eco- taxes to finance their parents’ and grandparents’ nomics” and it goes on to add that the “huge pensions and nursing home care. potential” of women “in the labour market” re- mains to be fully “exploited”. The need to devote more time to paid work is not the only possible obstacle to having more Given that the time available is finite and peo- children. Indeed some countries with high fe- ple have to make choices, the “exploitation” of male participation rates in paid work, have this “potential” of women in the labour market higher birth rates, than other countries which could well have the effect of preventing them have both lower paid work participation rates from having as many children as they them- and lower birth rates. selves would otherwise wish. That could even further reduce the birth rate. It would further Other factors play a part. High housing costs worsen, in the medium term the dependency and unduly prolonged third level education ratio. Fewer children today would mean fewer may postpone the time when a couple can af- workers tomorrow and fewer workers tomor- ford to come together to have children. Avail- 3 “Working together for growth and jobs – a new start for the Lisbon Strategy” (COM(2005)24)72 European View
    • John Brutonability of childcare may also be a factor, but the I make no claims to special expertise in this mat-data is ambiguous on this. Taking a prolonged ter, but I do have some experience derived fromperiod of parental leave may interrupt the accu- my time in Irish politics over thirty-five years.mulation of pension rights or progress along achosen career ladder. Anything that adds to the My own experience, as Irish Finance Ministerhigh cost on a decision by either a father or a who introduced very tough budgets in the 1981-mother to take responsibility for having children 82 period, is that when the public sense theredeserves to be examined if we want to give Eu- is a national crisis requiring unpleasant actionrope a more balanced demographic structure. by the Government, they will support theirThere is an incentive distortion if the cost of Government, so long as the necessity for therearing children is imposed mainly on families, action is explained to them in clear languageand the cost of caring for the elderly is mainly by a united team that has its full heart in thetaken over by the State. job in hand. Half-hearted, divided, or uncon- vinced Government leadership will convinceFrom an accounting point of view, Philip Long- nobody. Half-hearted, divided or unconvincedman says: implementation of the Lisbon Process will go nowhere.“Older citizens consume far more resources thanchildren do. Even after considering the cost of Another problem that a reformist leadership willeducation, a typical child in the United States face is a demand from party supporters whenconsumes 28% less than the typical working asked to support sacrifices now, that they beage adult, whereas elders consume 27% more, shown “light at the end of the tunnel”. In othermostly in health related expenses”.4 words, party supporters want firm assurances that, if the unpleasant medicine is consumed to-On the basis of such figures, there is a very day, there will be a complete cure within at leaststrong economic case in terms of maintaining a week! While it is easy and sometimes neces-Europe’s stock of human capital for giving sub- sary to give such assurances, they do not alwaysstantial family allowances to European families turn out to be true. An unexpected change inwho are willing to have more children. global conditions – such as a rise in interna- tional interest rates or a fluctuation in currencyCan difficult choices be sold to the electo- values – can postpone the arrival of the benefitsrate? of even the best designed reform programme. This happened in Ireland in the 1980’s.But, whatever way you look at it, this is a prob-lem that can only be solved in the medium term. Some of the reforms that will need to be under-A higher birth rate next year will make no dif- taken – reducing job security or raising the re-ference before 2025 or later. In the shorter term, tirement age – will eventually increase employ-difficult choices also have to be made. These ment and reduce taxes or deficits. But that maychoices include liberalising the labour market, not happen until well after the next election.reducing the reservation wage, postponing re- And that is simply too late for today’s Primetirement and restricting health benefits. And, as Minister!Jean Claude Juncker points out, these choiceshave to be made by politicians, most of whom One useful approach, which was found to beface the need to be re-elected within the next particularly effective in Ireland in the late 1980’s,three years, not the next twenty! is that of getting opposition parties and social partners to buy into the reform programme, atHow do you sell unpleasant policies to an un- least in part. Then, even if one does not win thewilling electorate? next election, one has at least got the satisfac- tion of seeing their programme implemented.4 “The Global Baby Bust” by Philip Longman in Foreign Affairs, May/June 2004 73 Volume 1 - Spring 2005
    • The Challenge of Lisbon for the European People’s Party And, who knows, you may get the credit for votes were counted. the results of your reforms in the next election after that. Political sincerity and personal conviction will be essential to the success of any drive by EPP This was our experience in Ireland with the parties to implement the Lisbon Strategy and budgetary policies of 1982. The budget was make Europe a more competitive and knowl- defeated in Parliament, and an election ensued edge-based economy. which the Government lost. The new Govern- ment that came into office put through 90% the As I said earlier, we will convince no one else budget they themselves had voted against a unless we are convinced ourselves! Given the few months before. Then they, in turn, lost an ageing profile of our European workforce, it election quite soon afterwards, and the original would be unconvincing for an EPP party simul- Government was re-elected. taneously to oppose immigration of appropri- ately skilled people to Europe, while at the same Some EPP parties are now in opposition and time claiming that it wants to keep costs down are facing a Government of the left which is and enhance the flexibility and effectiveness trying to implement Lisbon reforms. Should an of our workforce. Notwithstanding the super- EPP party adopt the tempting opposition tactic ficial popular support that an anti-immigration of destructively criticising what the Government stance might attract, the underlying inconsist- is doing, or should it, on the other hand, adopt ency would penetrate into the public conscious- a policy of qualified support for what its politi- ness and undermine its legitimacy. Integration cal opponents are trying to do? and the creation of a positive European alle- giance amongst immigrant families is another I think qualified support is the best tactic. Ire- matter and is something about which we can land’s painful decade of fiscal correction lasted learn from American experience. from 1980 to 1989 and in the last two years of that time my party, Fine Gael, was in opposi- tion. Retirement or renewal – the choice for Eu- rope’s “baby boom” generation In 1987 our then party leader, Alan Dukes, adopted a policy that was without precedent in The Lisbon Strategy, in its present form, will not Irish political history. He said that if the Gov- change Europe’s demography. That is a fact. ernment continued on a path of fiscal correc- Perhaps not a very palatable one. But a fact, tion, we would not vote against its measures in nonetheless. Parliament. He got a lot of grief from his party supporters and parliamentary backbenchers for As a result of demography, German public taking this course. He was told that the party spending on pensions, even after accounting for would lose it’s identity and would disappear a reduction in future benefits written into cur- because its policies would be indistinguishable rent law, is expected to swell from an already from those of its main political opponents. staggering 10.3% of GDP today, to 15.4% in 2040, while the number of workers available to His critics were proved completely wrong. When support each retiree will shrink from 2.6 work- the election came round in 1989, Fine Gael ac- ers to only 1.4 workers per retiree.5 tually increased its representation, notwithstand- ing its qualified support for the policies of, what Raising the retirement age would, to some ex- had by then become a rather unpopular Gov- tent, ease this burden of old age health and pen- ernment. Fine Gael was seen by the electorate sion benefits. But a rapid decline in physical fit- as being sincere rather than opportunistic, and ness among the population could make a policy it was rewarded rather than punished when the of later retirement harder to sustain. 5 Longman op.cit.74 European View
    • John BrutonIn the United States, declining fitness among the In truth, the achievement of the Lisbon goals re-general population already causes this problem. quires a radical reappraisal of the expectationsIncreases in obesity and sedentary life and work people in Europe have about “what I am goingstyles are causing disability rates to rise even to do when I retire”.among the population who are 59 or younger.Researchers estimate that this trend will cause The goal of “retirement” may have to be re-a 10% to 20% increase in demand for nursing placed by goals like “retraining”, “reorientation”homes and home care over and above the in- and “renewal” for people who are approach-creases that otherwise would have occurred. In ing their 65th year. What will be required willthe case of European men, the percentage who be a change in social psychology, as well as, aare overweight ranges from 40% in France to change in social policy. Older people will have70% in Germany. Reversing this trend would to come to enjoy a life of renewed challengecontribute to the Lisbon goals, because it would and change, rather than the present expectationreduce long-term health costs and would make of quiescence and routine. Mentalities will havelater retirement more feasible. to change.But Europeans should not feel that they are What Europe can learn from Americaalone in facing a problem of how to maintaineconomic dynamism, while supporting an age- I would now like to turn to what Europeansing population. might learn, in seeking to implement the Lisbon Strategy, from the historical experience of theFor example, the U.S. Defence Department al- United States of America.ready spends 84 cents on pensions, for everydollar it spends on basic pay. In 2000, the cost The first lesson we should learn is to keep aof military pensions amounted to 12 times what sense of proportion.the military spent on ammunition and morethan 5 times what the U.S. Air Force spent on According to US economist Robert J. Gordonnew planes and missiles. European output per head was 5% higher than American output per head was in 1820.6 Then,Ageing, even the ageing that takes place long thanks to the expansion of the US frontier andbefore reaching retirement age, may also ad- to immigration, European output per head fellversely affect the rate of technological and or- back to 93% of the US level by 1870. By 1913,ganisational innovation. Europe had fallen even further behind – to just 74% of the US level of output per head. AndOlder people, with family responsibilities, are then, thanks to two world wars initiated by Eu-less likely to take risks or move to a new work- ropeans, European output per head fell evenplace than are young, unattached people in further again to 56% of the American level intheir 20’s or early 30’s. The older people get, 1950. The “American challenge” is nothing new!the more they value security. And those who We have been losing ground since 1820!value security are less comfortable with theprocess of “creative destruction” that, according Since 1950 Europe has, more or less, been catch-to Schumpeter, is inherent in economic growth. ing up. By 2000, West European output per headFor example, the ageing of the Japanese work- had reached 77% of the American level whichforce during the 1990’s has undoubtedly con- is considerably better than where Europe wastributed to Japan’s declining growth, by com- in 1950! We had got back to where we were, inparison with the enhanced growth of the much relative terms, in 1913.more youthful population of China. The older apopulation gets the more inclined it becomes to There has, indeed, been a falling back in Eu-use its political influence to resist change. rope’s relative output per head in very recent6 “Two centuries of Economic Growth : Europe chasing the American Frontier” by Robert J. Gordon – Centre for Economic Policy Research (2004) 75 Volume 1 - Spring 2005
    • The Challenge of Lisbon for the European People’s Party times in the 1990’s, thanks to the much more retailing and wholesaling is much easier if you rapid application of information technology in can have wide aisles in shops and warehouses the United States. and can have customised out-of-town locations for shopping malls. It is much more difficult to The number of hours we work achieve maximum retail and wholesale efficien- cy, and consequently lower prices, in a store in But a good part of this difference is explained the centre of a medieval European city! by the fact that Americans work more paid hours than Europeans do – more hours per Likewise, it is much easier to achieve high pro- week, more hours per year and more hours per ductivity per farm worker on the rolling corn- lifetime. Some might say that Americans live to fields of the United States, than it is in the small work, while Europeans work to live! fields on the small farms of Europe. But this trend for Europeans to work fewer Adair Turner estimates that US productivity in hours than Americans is a fairly recent one. retailing and wholesaling has been growing at a Between 1979 and 2001, the average annual dramatic 6% per annum, while the typical Euro- number of hours per year worked by Ameri- pean growth rate in these fields has been only cans remained more or less stable at 1820 hours. 1%.8 In the same period, the number of paid hours worked in France fell from 1800 hours in 1979 There are, however, a number of things that the to 1532 hours in 2001 – a drop of almost 300 United States does that Europe should reason- hours work in the year. In Germany the annual ably be expected to imitate if it wants to achieve number of hours worked also fell by around 300 the Lisbon goals. hours and in Italy, the U.K. and Sweden, the annual number of hours worked fell about one Americans are more productive because they are hundred hours a year.7 more willing to move house to a new job. Eu- ropeans are much less willing, it appears, to do In theory at least, it should be possible for Euro- so, even within their own country. Many zones peans to increase their incomes and output by of high unemployment in Europe are located reverting to the number of hours they worked just outside commuting distance from areas of in 1979. That is a choice that should at least labour shortage. be considered as one means of achieving the Lisbon goals. In the United States you can easily buy a new house without even having a deposit. Banks The influence of geography and housing are much more cautious in Europe. The hid- policy den charges – legal fees and taxes – imposed on people buying a house are much higher in The difference in productivity between Europe Europe. Increasing mobility and reducing costs and the United States may also be partially ex- in the housing sector should be one of the goals plained by factors that cannot be changed at all. of the Lisbon Strategy. For example, America has more space. Competition and Higher Education The more space you have the more productive you can be, especially in activities like retailing, One of the reasons for US dynamism is the high wholesaling and farming. Lower productivity in level of competition between businesses. Un- retailing and wholesaling accounts for over a derperforming companies in the United States third of the productivity gap between the UK are much more liable to be taken over, and their and the US, and for well over half the productiv- management replaced. One third of the com- ity gap between Germany and the US. Efficient panies in the Fortune 500 today will have lost 7 “What’s wrong with Europe’s economy” by Aidair Turner, London School of Economics (2003) 8 Adair Turner. Op.cit.76 European View
    • John Brutontheir place within the next three years. There third level in Ireland is three times that in Aus-is no room in the United States system for com- tria. This may be partly explained by the olderplacent “national champions”. The watering age structure of the Austrian population, but it isdown of the EU takeover directive means that a discrepancy that deserves further study.top management in a large European companycan rest much more easily on their laurels than Productivity within higher education is impor-can top management in a similar United States tant. If salary levels of academics do not vary incompany. accordance with effort and achievement, there may be less effort and achievement. The USAnother area where Europe lags behind the academic world is highly competitive and this isUnited States is in higher education. something from which Europe could learn.The US spends a higher share of its GDP on Supporting innovationhigher education from public sources than doesthe average EU country. When you add to that Why is it that Europe produces nearly twice asthe financing that comes from private sources many science and engineering graduates per(student fees and charitable donations), the US capita as the United States, and yet remains farspending on higher education surpasses that in behind the US in the number of patents ob-Europe by a very large margin. It is no wonder tained in the fields of science and engineering?then that talented European researchers are at- The European Union creates only a quarter astracted to work in US universities, contributing many patents per million people as the US.thereby to the US economy. US universities canafford to pay them better, and offer them better A small part of the explanation for this must beand more exciting working conditions. the failure, after so much effort, to bring the Eu- ropean Community Patent into operation. TheIn the United States, 37% of the working age fact that this long overdue help for scientificpopulation has a third level educational quali- innovation is being held up because of a dis-fication. In the EU 15, on average only 24% of pute about language is emblematic of Europe’sour working age population have a third level problems. As a businessman said in Davos inqualification. There is, of course, wide variation 2003 “National culture is an asset: nationalism iswithin the average. a disease, ... and Europe has that disease”.In Ireland 35% of the work force have a third Innovation in the United States is greatly as-level qualification, in Finland 32.3% and in Swe- sisted by the fact that Americans are not afraidden 31%. In contrast, only 10% of the Italian to fail. Risk-taking means being willing to fail,work force and 13% of the Austrian have such and to try again. Europe’s banking system, anda qualification.9 Europe’s people, are far too intolerant of the businessman or woman who has failed. As theTables published in the Sapir report show that Kok report pointed:there is a surprisingly small relationship betweenthe number with third level qualifications, and “Despite the evidence that failed entrepreneursthe amount spent by Government on third level learn from their mistakes and perform better ineducation. Perhaps it takes an inefficiently long their next business, customers and financierstime to get a marketable third level qualification are reticent to place orders (with them). Honestin some countries. bankruptcy still carries too many severe legal and social consequences”.Austria spends 1.7% of its GDP on third leveleducation as against 1.6% spent in Ireland, but A political party, like the EPP, can do a lot tothe proportion of the workforce qualified at change the perverse and unproductive hostility9 Sapir. Op.cit. (2003) 77 Volume 1 - Spring 2005
    • The Challenge of Lisbon for the European People’s Party to those who have failed in business. On a wider scale, this is the political challenge facing the member parties of the European Peo- ple’s Party. Are we prepared to take risks? Implementing the Lisbon Strategy involves tak- ing real political risks. There is every possibility that we will fail, at least in narrow political party terms. We are asking people to change their lifestyles and their life expectations. We are not doing so in order to achieve some consumerist goal or to accumulate more money. We are ask- ing people to change now so that, as Europe gets older, it will be able to afford to preserve the essentials of what previous generations of Europeans have built – a caring model of soci- ety that is the envy of the rest of the World. John Bruton is Vice-President of the European People’s Party and currently the Head of the European Commission Delegation in the United States. He was Prime Minister of Ireland from 1994 to 1997.78 European View
    • Carl Bildt Accelerating Globalisation - Is Europe Destined for Decline? By Carl Bildt Is Europe destined for be the truly a revolutionary one. It started in decline in this age of three stages, in 1978, 1989 and 1991, and it’s still accelerating globalisa- in the phase of gathering speed. tion? It was in 1978 that Deng Xiaoping had to face Across the Atlantic, it’s the fact of the collapse of the collectivized ag-not difficult to pick up the sentiment that this riculture in China. Peasants were starving, flee-is indeed the case. And in the booming econo- ing the farms and trying to survive by grabbingmies of East Asia, it is rare to hear the European whatever land they could. In the face of col-economies quoted as models and inspirations lapse, and under the threat of large-scale re-for the future. bellion, Deng initiated the famous reforms that since then so profoundly have changed China.But we Europeans can only be doomed to de- He opened the system for entrepreneurship, andcline if we decide that inaction and inertia is the he opened the Middle Kingdom to the world.response to the challenges of globalisation. The next collapse was the one of the SovietLooking ahead, the development of the glo- communist system, so powerfully symbolizedbal economy will be shaped by the innovation by the fall of the wall in Berlin in 1989. Withinpotential of America, the production potential just a few years, a powerful wave of liberalisa-of Asia and the reform potential of Europe. Of tion and opening up swept over Central andthese three developments, I believe that the Eastern Europe.third, over time, might well be the most impor-tant. And the third, somewhat less dramatic, collapse was the one of the Indian economy in 1991. Un-Evolution of globalisation til then, largely driven by old-fashioned socialist ideas, the Indian economy had languished fromWe are living in what is still just the early phase crisis to crisis, but once the liberalisation startedof the third great wave of globalisation. to work, it rapidly took off on an impressive growth path.The first one occurred in the period prior to thegreat European catastrophe of 1914. It was a If we add these three major waves of liberalisa-period of unprecedented expansion in virtually tion together, they mean that close to half theevery area, accompanied also by major moves population of the globe is now - step by stepof population as Europeans moved West across - entering the global system of production andthe plains of America and East through the wil- consumption.derness of Siberian Asia. Already today, it is obvious that this processThe second one was more limited in geographic is changing virtually everything everywhere inscope, but nevertheless of profound importance, terms of how our economies operate. Therecovering the period from the late 1940’s to the are very few corners – if any – of the globalearly 1990’s. This was the age of the trans-Atlan- economy unaffected by these profound windstic economy and the spectacular rise of Japan of change; and it is still in its early stages. Forto its position, as the second strongest economy China, we have now seen a quarter of a centuryin the world. of this process, while for the East of Europe and India the process has gone on for little moreBut it’s the third wave of globalisation that will than a decade. To start to understand the mag- 79 Volume 1 - Spring 2005
    • Accelerating Globalisation - Is Europe Destined for Decline? nitude of the change, we should envisage the Again, we are only in the beginning of the proc- process gathering pace over the coming dec- ess. Turkey is already part of the common Eu- ades. But there might well be setbacks. ropean customs union, but as it moves towards membership it will become fully a part of the Indeed, the process of globalisation took some- integrated single market. Within the same time what of a pause, as a consequence of the com- frame it is realistic to expect the inclusion also bination of the events of September 11, the of all the countries of the Western Balkans in the dramatic decline in equity values after the burst single market. of the tech boom and the war in Iraq. But the resilience of the process was proven by the fact Beyond this area, we are likely to see Ukraine, that this series of profound shocks produced lit- with its 50 million inhabitants and impressive tle more than a ripple in the long-term trends. production potential, move from a customs un- Since then, we have seen the process starting to ion towards full integration with the single mar- accelerate again. ket. Whether Russia will be able to realize the potential of the common economic space with To this process of globalisation should be added the European Union remains to be seen, but the the fact that we are living in the midst of the possibility is certainly there. most rapid development of science and tech- nology in the history of mankind. Although the Transformation of economic landscape more wide-spread use of the Internet, made possible by the web, is only little more than As the single market is made both wider and a decade old, it’s difficult to comprehend how deeper, we will see competition increasing, and the world prior to the Internet really worked. with this increase in competitive pressure will The digital information flows across the fibre ca- come a gradual acceleration of the transforma- bles and satellite transponders are very rapidly tion of the economic landscape of all the differ- bringing the world together. ent parts of Europe. Globalisation and Europe If investments in the past were going West in order to benefit from the opportunities there, Europe is more profoundly affected by this we are now increasingly seeing investments go- development of the opening up of the global ing East in order to benefit from the new op- economy than any other of the major regions. portunities in the East of Europe and the East of Asia. While this causes some worries as to The reason is very simple: the European econo- the immediate effect on employment in some my is influenced both by the overall process of of the older economies, there can be no doubt globalisation and by the profound increase in that the long-term effects will be beneficial for competition coming from the expansion of the all concerned. European single market through the enlarge- ment of the European Union. The transformation is already very visible on the level of the individual firms and indeed on the When the ten new members entered the EU level of entire sectors of industry. It’s enough to last year, they together added no more than ap- open a daily newspaper anywhere in Europe proximately 5 % to the overall size of the EU to see how the process of change is gathering economy. The coming enlargement with Roma- pace. nia and Bulgaria will add only marginally to this figure. As one example, we are already seeing signifi- cant changes in the patterns of production in But the impact of their accession goes well be- the automotive sector, which has always been yond what this figure implies. Indeed, I would an important part of the overall manufacturing argue that the impact of this enlargement is now sector in Europe. The component industry has starting to drive up towards 50 % of the changes already, to a large extent, moved east, and now, that we see in the economic landscape of Eu- we increasingly see the new assembly plants lo- rope. cating there as well.80 European View
    • Carl BildtSlovakia well illustrates the trend. By its radi- Tallinn-Bratislava process is the true driver ofcal and path-breaking economic reforms, it is reforms within the European Union today, andtransforming itself from an economy that a dec- its impact is likely to increase in the years toade ago was producing little more than useless come.old Soviet tanks to a country that will producemore modern cars per capita than any other in Role of the European Unionthe world. The European Union of today is already a ma-This process increases the overall competitive- jor force in the global economy. The euro zoneness and profitability of European industry, and countries alone export more than the Unitedgives it the strength and resources to continue States, and the European Union is the largestto expand in the different parts of the global single export market for more than 130 nationseconomy. around the world. It is, also, worth noting, that Europe is not handicapped by excessive tradeOver time, we will see the pattern of location of deficits, that is increasingly seen as a burden onindustry starting to change. It’s natural to expect the US economy. Even on a highly competitivethat its research and development increasingly market like China, European export industrieswill be grouped around the knowledge clus- are performing very well.ters in the more advanced economies, wherewe will also see the centres of the increasingly As a major driver in the global economy, as wellsophisticated financial markets, while different as in the process of globalisation, it is obviousproduction facilities will increasingly be found that the EU has a profound interest in shapingin the East of Europe and the East of Asia. globalisation in the decades to come. Commit- ted to the importance of multilateral agreementsInstead of the labour force of the East moving and arrangements, and with its weight in theWest, as was often feared, we are thus likely to global economy, it is only reasonable to expectsee the capital resources of the West increas- the European Union to be the global leader iningly moving towards the East. these efforts.Apart from its beneficial economic effects in This calls for a European Union embracingterms of a more competitive European industry, not only the idea of free trade throughout thethis will naturally also have positive political ef- world, but also genuinely free trade inside Eu-fects. It is by giving the new member countries rope itself. The ambition of the single marketthe possibility of catching up with the older – the free movement of goods, services, peoplemember states over the coming decades that we and capital – must be realized inside the Union;are truly fulfilling the promise of creating a Eu- but, as far as possible, we should seek to em-rope that is both united and free. brace those principles to the global economy, as a whole.This increase in competition across the Europe-an economy will also be key in driving political Inside the European Union, the recent row overchanges. While the so called Lisbon process has the, so-called service directive shows that therebeen considerable less than a success in driving is still some way to go until there is generalchange, we have seen the process of reforms recognition of the benefits to be derived fromdriven by Tallinn and Bratislava starting to have the single market. Indeed, part of the rhetoricfar more profound impacts. of these debates sounds as if the old members want to protect themselves from the new mem-Over time, it is not a bad guess that the flat bers instead of embracing the huge opportuni-tax reforms, the first wave of which started in ties that enlargement is bringing.Tallinn, and the second wave was initiated inBratislava, will turn out to have been of greater Towards the outside world, the protected sys-importance in driving structural reforms in Eu- tem of the common agricultural policy is oftenrope than the Christmas tree of goals and targets seen as a barrier to the possibilities of some ofthat makes up the so called Lisbon process. The the poorer states of the global economy. 81 Volume 1 - Spring 2005
    • Accelerating Globalisation - Is Europe Destined for Decline? Over time, Europe must demonstrate in deeds, the opening up and broadening of the process as well as, in words that it is prepared to move of European integration itself is often vastly un- towards a situation where trade in agricultural derestimated. products is also opened up in the same way as it is for other goods. Few steps would be as im- Europe is not destined for decline – on the con- portant in terms of creating better opportunities, trary; its reform potential opens for it the pos- and thus also stability, for important parts of the sibility of a “renaissance”. immediate neighbourhood of the European Un- ion – be that of the fertile regions of Mesopota- mia or the rich plains of Ukraine. Carl Bildt is former Prime Minister of Sweden Conclusion and Chairman of the Kreab Group. The third wave of globalisation will, in all likeli- hood go on for many decades to come. It will provide the European economies with unprec- edented opportunities, particularly when seen in combination with the further expansion of the European single market that we are likely to see in the years ahead. There are certainly those locked in a nostalgia for the past that drives them into the reactionary policies of resistance to all of the changes that we are seeing today. We will see this manifested in the xenophobia of barriers to immigration, as well as, in the populism of subsidies to those unable to benefit from all of the new oppor- tunities. The extremes of the left will combine with the extremes of the right in an axis of re- sistance towards a world becoming more and more open. These forces should not be underestimated. In much the same way as our open societies in the past have been confronted with the forces of tribalism as what Karl Popper called the strains of civilisation have made themselves felt, we are likely to see how our open world will be under attack by some of the same forces of tribalism in the decades to come. For those of us that saw the defence of the open society as a critical task of our time, the defence of the open world will not be less critical. All of this creates gigantic new opportunities for Europe. The overcoming of tribalism and open- ing up to rules-based cooperation and integra- tion across old barriers and boundaries is at the very core of the European process. I do believe that the reform potential of Europe, driven both by the process of globalisation and82 European View
    • Alexander Stubb Efficient Execution of the Lisbon Strategy: The Balance Between the Community and the Open Method of Coordination By Alexander Stubb The European Commis- pability to finance European welfare systems. sion has stressed that its Ageing will raise the demand for pensions and main task is the imple- healthcare assistance. At the same time, it will mentation of the refo- reduce the number of people of working age cused Lisbon Strategy. who are supposed to produce the wealth to fi- The problem is that the nance the system.collegium doesn’t seem to have any idea howto accomplish this. Commission’s projections estimate that the im- pact of the ageing population will be to reduceNeither the Commission strategic objectives the potential growth rate of the EU from the2005-2009, nor the work program for 2005, nor present rate of 2–2.25% to around 1.25% bythe Commission’s communication to the spring 2040. The cumulative impact of such a declineEuropean Council bring anything concrete to would be a GDP per head some 20% lowerthe enormous task of reviving Europe’s eco- than would otherwise be expected. Already,nomic development. How have we come to this from 2015, potential economic growth will fallpoint and do we have any idea for a way out? to around 1.5% if the present use of the labour potential remains unchanged. On the expensesIn the first part of this article I will give a presen- side, ageing will result in an increase in pen-tation of the current situation, namely that Euro- sion and healthcare spending by 2050, varyingpean economy is doomed to stagnate if the cur- between 4% and 8% of GDP. Already from 2020,rent development continues. Second, I briefly projected spending on pension and healthcareexplore the good and, mostly, bad news in the will increase by some 2% of GDP in many Mem-path of the Lisbon Strategy. Third, I present my ber States and in 2030 the increase will amountsolution to the failed implementation of Lisbon: to 4–5% of GDP.wider use of the Community Method instead ofthe ‘Open Method of coordination’. Our economy should now be booming – if we are to gather the means to keep up the welfareWhy we have to act now? system in the coming decades. Instead, we are stagnating. Key European industrial sectors andEurope, with its 455 million consumers, is now companies are falling behind their internationalthe largest internal market in the world. It is also competitors, mainly in the US, but also in Japanthe largest exporting power. Rapid ageing is the and China. The world’s 15 biggest companies inmain problem of the world’s biggest economy. terms of profits – excluding banking – include only 3 European versus 11 US companies. It isBy 2050, the European working-age population striking that in Germany only the automobile(15–64 years) is projected to be 18% smaller than and automotive supplies industries have signifi-the current one, and the number of those aged cantly gained market share in the past decade,over 65 years will have increased by 60%. As a in France only pharmaceuticals and media.result, the average ratio of persons in retirement Almost every day we hear news about Europeancompared with those in working age in Europe companies either moving their own productionwill double from 24% today to almost 50% in or outsourcing to developing countries – mostly2050. The impact is then compounded by the to China and India. Until now this has been mo-low employment rate of people approaching tivated mainly by cheaper working force and60. getting nearer to the growing markets.These developments will have profound impli- The difference in salaries will diminish in thecations for the European economy and its ca- longer perspective. Salaries have already started 83 Volume 1 - Spring 2005
    • Efficient Execution of the Lisbon Strategy: The Balance Between the Community and the Open Method of Coordination to grow in the hottest spots of China. I am much The good & bad news more worried about the next challenge of glo- balisation: the competition between continents In March 2000, the then 15 EU leaders agreed about whose know-how and innovativeness at the Lisbon Spring Council that the EU should creates the best business ideas. commit itself to raising the rate of growth and employment to underpin social cohesion and The number of university students in China and environmental sustainability. The US economy, India is growing exponentially. These nations building on the emergence of the so-called are already starting to show that they will not ‘new’ knowledge economy and its leadership just produce, but they are also capable to cre- in information and communication technologies ate and lead. CIA’s recent report1 says “China (ICTs), had begun to outperform all but the very and India are well positioned to become tech- best of the individual European economies. Eu- nology leaders and Asia looks set to displace rope, if it wished to protect its particular social Western countries as the focus for international model and continue to offer its citizens oppor- economic dynamism” and adds that “the biggest tunity, jobs and quality of life, had to act with firms of the world will be more Asian and less determination - particularly in the context of the Western in orientation”. And these are Ameri- mounting economic challenge from Asia and cans speaking, who according to Jeremy Rifkin the slowdown of European population growth. “believe the best of times is yet to come and Europeans believe that tomorrow is likely to be The EU set itself a strategic goal for the next worse than today.”2 decade: to become the most dynamic and competitive knowledge-based economy in the We can only guess how deeply the progress world capable of sustainable economic growth forecasted above can influence our life. It is with more and better jobs and greater social definite that we can stop speaking about the Eu- cohesion, and respect for the environment. Ac- ropean welfare model, if we lose our positions tions by any one Member State, the argument in all fields of the economy. And it is not just ran, would be all the more effective if all other Asia who is winning Europe, but we are also Member States acted in concert; a jointly cre- losing our position in comparison to the United ated economic tide would be even more pow- States. Since 1996, the average annual growth erful in its capacity to lift every European boat. in EU output has been 0.4 percentage points The more the EU could develop its knowledge below that of the US. The most worrying sign is and market opening initiatives in tandem, the that, after having been about twice the US rate stronger and more competitive each Member for more than 30 years, the productivity growth State’s economy would be. rate of EU-15 fell below the US level in 1996 and has since then averaged 1.4% as opposed to the According to the Lisbon Spring Council the 2.2% recorded for the US. Lisbon Strategy aimed at preparing the transi- tion to a knowledge-based economy and soci- To summarize the basic facts: Europe is losing ety through better policies for the information its competitiveness, while demand for public society and R&D, by stepping up the process services is increasing because of ageing popula- of structural reform for competitiveness and in- tions. Our only chance to maintain the Euro- novation; by completing the internal market, pean welfare model is to get new dynamism in modernising the European social model, invest- the European economy. Something has to be ing in people and combating social exclusion done or we will be the major losers of the new and sustaining the healthy economic outlook century. and favourable growth prospects by applying an appropriate macro-economic policy mix. Be- cause of the range of its ambition, it covered a number of areas in which the EU had no consti- 1 Report of the National Intelligence Council’s 2020 Project, December 2004, http://www.foia.cia.gov/2020/2020.pdf 2 Rifkin Jeremy, The European Dream: The Birth of a Reluctant Superpower, Challenge Europe Online journal, January 2005, http://www.theepc.be/en/default.asp?TYP=CE&LV=177&see=y&t=42&PG=CE/EN/detail&l=1&AI=40984 European View
    • Alexander Stubbtutional competence and which were under the 64.3% in 2003, although not only full-time em-jurisdiction of Member States. Therefore, it was ployment. Seven Member States of the EU-15 aredesigned to proceed by a combination of the set to meet the interim target of 67% by 2005.traditional ‘Community Method’ of EU legisla- The overall female employment rate rose to 56%tion, brought forward by the European Commis- in 2003. Some countries have been successfulsion, and via a new process known as the ‘open in implementing policies targeted at raising themethod of coordination’. employment rates of older workers, now reach- ing 41.7%. Some European governments haveThe idea of the “Open Method of coordination” introduced measures that cumulatively havewas that Member States agree to voluntarily co- attempted to remove obstacles to the employ-operate in areas of national competence and to ment of low-paid workers, stepped up their ac-make use of best practice from other Member tive labour market polices, and permitted theStates, which could be customised to suit their growth of temporary employment. Mostly, thisparticular national circumstances. The European improvement has taken place thanks to the eco-Commission’s role would be to coordinate this nomic boom that had nothing to do with theprocess by ensuring that Member States have Lisbon Strategy.full information about each other’s progressand policies, whilst making sure that those ar- Furthermore, there has been progress beyondeas for which it has competence - notably the employment. Member States have progressed insingle market and competition policy - would the spread of ICT and Internet use in schools,reinforce the Lisbon goals by application of the universities, administration and trade. House-Community Method. Moreover, the Commis- hold Internet penetration, for example, hassion’s monitoring would stimulate and create risen rapidly, with 12 Member States meetingthe necessary peer pressure to achieve these the targets.goals by publicising the results achieved by theindividual Member States. The rest of the figures do not appear so posi- tive, though. Net job creation has slowed downThe Lisbon Strategy was created with high considerably in recent years and the risk is ap-hopes during a historically high economic hype parent that the 2010 target of 70% employmentof the first years of the new millennium. Be- rate will not be reached. The same applies tofore implementation of the Strategy got under the target of 50% for older workers. On the R&Dway, Europe was already stuck in a recession. target, only two countries currently have R&DThus, many Member States have been caught in spending exceeding 3% of GDP; in these samea conundrum. Due to structural weaknesses and two countries business is achieving the goal oflow demand, national economic performances spending the equivalent of 2% of GDP on R&D.have been poor. As national economic perform- The rest are behind on both scores.ances have been poor, it has been more difficultto implement the Lisbon Strategy. It has obvi- Progress in providing every teacher with digitalously been hard for some governments to keep training is very disappointing. Only five coun-up to their commitments in this low growth en- tries have exceeded the target for transposingvironment. EU internal market directives. On the environ- ment, the decoupling of economic performanceI cannot resist pointing out that many Member from harmful environmental impacts has beenStates have not taken the execution and delivery only partly successful. For example, the volumeof the agreed measures seriously enough. Com- of traffic in Europe is rising more rapidly thanpleting the single market, for example, has not GDP and congestion is worsening, as are pollu-been given the priority it required. This has kept tion and noise levels, and the continued damageEurope too far from the goals it must reach. to nature. Most European countries are below their Kyoto targets, regarding greenhouse gasDespite disappointments, there has been emissions, with only three countries since 1999progress in certain areas. Employment has im- recording visible progress in their reduction.proved between the mid-1990s and 2003. Theemployment rate rose from 62.5% in 1999 to European enlargement, while welcomed, has 85 Volume 1 - Spring 2005
    • Efficient Execution of the Lisbon Strategy: The Balance Between the Community and the Open Method of Coordination made European-wide achievement of the Lis- vestment and growth, leading to fewer jobs, are bon goals even harder. The new Member States the painful result. tend to have much lower employment rates and productivity levels; achieving the R&D goals, The clear problems in the implementation for example, from a lower base is even tougher of Lisbon have created some kind of schizo- than for the original EU 15 who signed Lisbon. phrenic thinking for governments of Europe. They realize the failure of the Lisbon Strategy, Politicians from all sides have been far too slow but blame the EU for it, although, according to to respond to Europe’s failure to achieve the the ‘Open Method of coordination’, it is the na- Lisbon targets. Most of Europe still suffers from tional governments who have the responsibility inflexible labour markets. Worse, many govern- of taking the needed measures to achieve the ments still have a tendency toward over-regula- Lisbon targets. This was also the tone of think- tion and red tape, compounding often deliber- ing when the European Council, in Brussels in ate failure to implement agreed internal market March 2004, invited the Commission to establish regulation. Our tax systems are riddled with in- a High Level Group headed by Mr Wim Kok to efficiencies, besides relying on tax rates that are carry out an independent review to contribute too high. Again, another striking comparison: in to the mid-term review of the Lisbon Strategy. 2005, the tax burden in the EU 15 (where taxa- The failure of the Kok report is that it doesn’t tion tends to be higher than in the new Member offer a way out of this schizophrenic thinking of states) is expected to be 44.2% of GDP, versus European governments. just 29.4% of GDP in the US. The additional tax- es in the EU are used to prop-up unsustainably To summarize again: The economic boom of the expensive welfare systems. Furthermore, many early years of the new millennium gave some public services are run by inefficient bureaucra- empty promises about the achievement of the cies, inflating costs still further. Lisbon targets. Now, since economic growth has slowed down, we can see that real structural re- Nor have politicians responded to the need forms have not been implemented. The Lisbon to rectify Europe’s inadequate technological targets cannot be achieved without a politically framework. Even as we face increasingly com- new way to apply the needed measures. plex technological challenges from current and emerging competitors, governments fail to The solution recognise the need for effective incentives to stimulate investment in R&D. After more than The High Level Group headed by Mr Wim Kok 15 years, they cannot even agree on an ade- presented its report to the European Commission quate Community Patent. New and expanding in November 2004. The report offers very little companies suffer insufficient access to venture that’s new to the discussion about the Lisbon capital. European education systems need to Strategy. Actually the structure, titles and goals put more focus on training young people for that the report imposes for Europe are almost the jobs of tomorrow. Little effort is made to exactly the same with those already presented attract and retain top scientific and engineering in March 2000 at the Lisbon Spring Council. Still, professionals. There is an old-fashioned attitude the paper has its use: it offers a realistic pic- to the running of university research. Resistance ture about Europe’s economic perspective and a to new technology continues; in some areas - package of relevant concrete measures that we nanotechnology, biotechnology, genetics, for should take to achieve the familiar targets. example - it is even hardening, to eventually end Europe’s prospects for a leading role in key The shortfall of the Kok report is that it concen- future industries. trates in choosing measures while the problem is implementation. The report’s third chapter is The reasons for Europe’s relative weaknesses devoted to implementation, but it lacks any ef- are quite obvious: Countries that fail to reform ficient proposals. and keep the pace, risk more than a passing comment from the European Commission; they To make the Member States’ commitment risk the disapproval of investors. Reduced in- stronger, the Kok report proposes that national86 European View
    • Alexander Stubbgovernments should present a national action Commission in future, as fast as they have doneprogramme before the end of 2005. In order to in the past four years. If you read far enoughengage all the forces around this key objective, you can see that Kok’s group also admits thatthese national programmes should be subject the ‘Open Method of coordination’ has fallen farto debate with national parliaments and social short of expectations.partners. Action programmes should be submit-ted to the EU Commission, which should draw The European Commission published in Febru-up a precise analysis of the 25 plans and spe- ary 2004 its communication to the spring Euro-cific recommendations in each one in its syn- pean Council about ‘A new start for the Lisbonthesis report for the Spring European Council of Strategy’. In the communication, the Commis-2006. While the ‘open method of coordination’ sion mostly repeats the proposals of the Kokgives the European Parliament (EP) no role in report. The proposals about National Lisbonthe Lisbon process, the report proposes the EP Action Plans and appointing a national “Mr” orto establish a standing committee on the Lisbon “Ms Lisbon” at the government level can help inStrategy for growth and employment. The re- getting the Lisbon Strategy to the core of nation-port also proposes a quite interesting idea about al politics, but they will not solve the problem.introducing budgetary incentives to encourage We need something that goes much further inMember State achievement of Lisbon targets. saving the Lisbon from the protectionist trap, where it is cursed to fall into as long as narrowKok’s report is right in criticizing the large national interests drive the process, instead ofamount of indicators in the Lisbon Strategy. common European interests.More than a hundred indicators have been as-sociated with the Lisbon process, which makes I believe that the main structural problem of theit likely that every country will be ranked as failure of the Lisbon Strategy is the very widebest at one indicator or another. This makes the use of the problematic concept of the ‘Openwhole instrument ineffective. Member States are Method of coordination’. If one looks back tonot challenged to improve their record. Simplifi- the broader history of European integration, itcation is vital. The proposal to establish a more is easy to see that the successes of integrationlimited framework of 14 targets and indicators have usually occurred when applying the Com-offers the opportunity to improve the working munity Method and the stagnations of develop-of the instrument of peer pressure. The High ment have been tied to growing intergovern-Level Group considers this list to represent the mentalism in the Community.best trade-off between keeping Lisbon simpleand capturing its ambition and comprehensive- In the early days of the European Coal and Steelness. According to its proposal, the European Community (ECSC), nobody knew which of theCommission should present to the Heads of new European cooperation organisations wouldState or Government and the wider public an- be the most potential core of far more reachingnual updates on these key 14 Lisbon indicators development. Many thought that the most im-in the format of league tables with rankings (1 portant organisation was the Council of Europeto 25), praising good performance and castigat- and there were enthusiastic plans of very broading bad performance - naming, shaming and economic integration, also within the OEEC.faming. What made the ECSC more successful than the others was the Community Method. It didn’tThese are nice ideas but, even if they would spend its energy in fighting for integration in allbe implemented, they are not heavy enough to sectors but, it concentrated in working with effi-solve the failure of the ‘open method of coordi- cient powers in certain sectors. The crucial thingnation’. For example, cutting the amount of the was the supranational decision making and theLisbon indicators is a move in the right direction right given to the supranational Court of Justicebut, as regards to the much advertised method to control legally that community legislation isof “naming, shaming and faming” - what is new followed by Member States.in it? In principle, the same method was alreadyestablished in the original Lisbon Strategy. Na- It is hard to imagine that the free-trade areational governments can forget the blames of the could have been created by applying the ‘Open 87 Volume 1 - Spring 2005
    • Efficient Execution of the Lisbon Strategy: The Balance Between the Community and the Open Method of Coordination Method of coordination’ in the 1950s and 1960s. We should immediately execute the Kok re- The same is true for the internal market in the port’s proposal about an autonomous European 1980s. In both cases the need for achieving the Research Council (ERC) to fund and coordinate common targets was clear for all but, after de- long-term basic research at the European level. ciding about the free-trade area or internal mar- The mandate of ERC should be widened to R&D ket in principle, the national governments were and it should be given enough resources to captured to protectionism by several national eliminate the gap between the Lisbon goal and interest groups in the stage of executing the the current situation in public R&D spending. common targets. It’s horrible to even think the situation we would now be in, if Europe would Of course, this would mean revolutionary rear- have given up in the face of narrow national rangements in the structure of the EU budget. interests then. The Commission estimates that Politically impossible, you say? I ask, in return, after only 10 years of the internal market, Eu- how it is politically possible that we are still ropean GDP is 1.8% higher than it would have spending about 40% of the budget to unsus- otherwise been and 2.5 million more jobs have tainable common agriculture policy. This, at been created. This contribution amounts to al- same time when R&D funding, so essential to most 10% of the EU potential growth rate on an our continent’s future, is nowhere near where annual basis. it should be. It is not that national governments are worse Second, we should create much stricter, Com- than the decision makers in the community munity level, rules on government subsidies for level but, it is just the logic of politics. National the private sector to ensure structural reform of decisions are made in accordance to national our economy and full implementation of the in- interests. These interests often collide with com- ternal market. The current subsidies are harmful mon European long-term interests and this is for the Lisbon goals, in many ways. At its height especially true for executing the Lisbon Strategy. of folly are the German subsidies for the coal in- What we are seeing is the persistence of wrong dustry: remember that the German government priorities for Europe, priorities often determined is one of the most eager proponents of very by political objectives, rather than by economic enthusiastic goals for cutting the carbon dioxide realities. emissions. To rescue the Lisbon process we need more Third, it is also necessary to consider common Europe and less protectionism. This is possible legislation about government influence on la- only by expanding the scope of the Community bour markets because the present situation con- Method and the Community budget in execut- strains dynamic development and mobility of ing the Lisbon targets. What new sectors should the work force. be implemented by the Community Method is a question that requires further study, for example These ideas go to the, so-called, core of na- by the European Commission. Allow me to give tional sovereignty. But can we really look into just three ideas. our children’s eyes and say that we wasted our chance to save Europe’s economic wealth, be- First, we should create an EU level R&D fund- cause of disagreements on what can be decided ing system if the national governments are un- by which federal or national institution? In my able to achieve the Lisbon targets in this crucial opinion, the answer is no. We have too much field. One of the preconditions for any increase to risk. in European productivity growth is rising R&D spending. Studies demonstrate that up to 40% The Lisbon Strategy is not about destroying the of labour productivity growth is generated by European model but, about saving it. Jeremy R&D spending. One of the most disappointing Rifkin, a major critic of the American model, has aspects of the Lisbon Strategy, to date, is that written: “The key to the future prosperity of Eu- the importance of R&D remains so little under- rope is the quick and successful integration of stood and, as a result, so little progress has been the largest internal trading market in the world made. that stretches from the Irish Sea to the doorsteps88 European View
    • Alexander Stubbof Russia. In Lisbon in the year 2000, the EU set Bibliography:a goal of becoming the world’s most competi-tive economy by 2010. Since then, the Member Presidency conclusions, Lisbon European Coun-States have procrastinated and stalled in making cil, 23.-24.3.2000the necessary reforms to create a single inte- http://ue.eu.int/ueDocs/cms_Data/docs/press-grated European commercial space. If the EU Data/en/ec/00100-r1.en0.htmcan successfully integrate the potentially biggestinternal market in the world so that Europeans Report from the High Level Group chaired bycan trade across their Member States with the Wim Kok, 11/2004same ease that Americans do across our United http://europa.eu.int/growthandjobs/group/in-States, Europe will likely become the ascendant dex_en.htmeconomic superpower in the world.” Work programme for 2005, The European Com-Despite the pessimistic view that started this ar- mission, 26.1.2005ticle, I also agree with the next words of Rifkin:“Dreams require hope, optimism, and confi- Strategic objectives 2005-2009, The Europeandence in the future. Pessimists and cynics do Commission, 26.1.2005not lead society into the future. They only holdsociety back. What Europe so desperately needs Communication to the Spring European Councilnow is a new generation of politically commit- “Working together for growth and jobs; a newted people willing to dream of a better tomor- start for the Lisbon Strategy”, The Europeanrow and take the necessary steps to make their Commission, 2.2.2005dream a reality.” How to put economic reform on the front burn- er – a business view, Cromme Gerhard, Chal- lenge Europe Online Journal (Issue 13), 1/2005Alexander Stubb is a Member of the EuropeanParliament and Professor at the College of Eu- What Future for Europe’s Economic and Socialrope. Model?, Jeremy Rifkin, Challenge Europe Online Journal (Issue 13), 1/2005 89 Volume 1 - Spring 2005
    • Mário David Building Global Growth - Relations Between the European Union and Mercosul By Mário David Since the Asunción prosperity and peace in South America. Treaty was signed by Argentina, Brazil, Para- First and foremost, the relationship between the guay and Uruguay two regions is a political one. It is based on deep in 1991, marking the historical and cultural ties that have created com- launch of South Ameri- mon values and a shared view of the world. Theca’s most successful regional integration process, European Union sees Mercosul as a natural part-the European Union has demonstrated its sup- ner for promoting democracy, rule of law andport, and its firm wish to establish cooperation respect for human rights. But the relationshipbetween the two regions. is also based on joint interests in trade, invest- ment and cooperation. The European Union isMercosul is a political and economic priority for Mercosul’s leading commercial partner and thethe European Union, not only strategically, but leading investor in the region. However, there isalso because of the close historical and cultural still plenty of room to strengthen these economicties that unite both regions. ties. Our hope is that the new agreement will lead to a significant increase in trade and invest-Today, almost a decade and a half after it was ment, and a more open and dynamic economicfounded, it is clear that despite progress and set- relationship.backs, the Southern Common Market has ben-efited all of its members, and has contributed The importance of this agreement, which willdecisively to stability throughout the region. The create the world’s largest free-trade area, wasprocess has proved its worth even in difficult made evident once again at the most recentconditions, such as the recent extreme economic Mercosul-EU Business Forum (MEBF), held onand social problems endured by Argentina. The 31 January 2005 in Luxembourg. At that meet-response was provided by a framework which ing, the two regions’ business communities re-also demonstrated the maturity of the region’s affirmed the crucial nature of the forthcomingdemocracy. Although certain integration targets agreement for boosting trade, investment andhave been postponed, political leaders have economic integration. The agreement’s potentialdemonstrated their commitment to a strong and was demonstrated by an MEBF study presentedunited Mercosul at crucial moments, in a confi- at the meeting: It showed that the opportuni-dent and decisive way. ties lost because of delays in trade liberalization between the two regions are estimated at aboutEurope’s aim of creating closer ties with Merco- 100 million euros a year.sul was consolidated back in 1995, with the sign-ing of the Framework Cooperation Agreement It is well known that Portugal would like to seebetween the European Community and Merco- the agreement sealed quickly, because it is de-sul. This opened the way to negotiations on a cisive for consolidating relations between bothmore ambitious agreement to create a genuine blocs. In fact, the negotiations began during thetwo-region association. Portuguese presidency of the European Union, in 2000. Last October, Portugal gave furtherThe aim of an association agreement is to proof of its commitment, when it hosted a meet-strengthen the strategic partnership between the ing in Lisbon between European and Mercosultwo regions in the fields of politics, economics negotiators, which provided a new and favour-and cooperation. For the European Union, this able footing for reaching an agreement. Portugaldemonstrates its clear belief in the fundamental hopes that this will soon become reality.role that Mercosul can play in promoting growth, 91 Volume 1 - Spring 2005
    • Building Global Growth - Relations Between the European Union and Mercosul Future outlook – the need to strengthen dia- Furthermore, in recent times Mercosul has logue mechanisms opened up to the world by signing agreements with several regions, and also by expanding Although our shared values and our historical its associate membership. Now, in addition to and cultural ties provide us with the basis for Chile, Bolivia and Peru, it includes Venezuela, a joint approach to major world issues, the fact Colombia and Ecuador, so that it currently en- is that relations between the European Union compasses every part of South America. Conse- and Mercosul have yet to attain a political scale quently, Mercosul can play a considerable role commensurate with the strategic importance of as a bridge, not only to Latin America, but also its partnership. The European Union recognizes to other regions of the world, such as Africa. Mercosul as an ally in the establishment of an effective multilateral system and world order, We need to offer an urgent answer to that chal- as is expressly stated in the European Security lenge by instituting annual Summits between Strategy. There is also dialogue between our in- the European Union and Mercosul. By taking stitutions on numerous subjects of mutual inter- that step, we will place this fundamental stra- est. But the relationship deserves to be more tegic partnership on the same level of regular ambitious. political dialogue as we share with many other partners. If we examine the recent past, we will In addition, we have to be aware that our Mer- see that the European Union and Mercosul have cosul partners increasingly feel that there is a only held three meetings between heads of state certain lack of interest on our part. and government since 1999. With India, for ex- ample, the Union has been holding annual Sum- The European Union is increasingly focused mits since 2000. on becoming a global player. But if that aim is to advance beyond mere rhetoric, the EU must The European Union cannot afford to fail this conduct regular high-level dialogue and cooper- opportunity to reinforce its role as a leading ate effectively with the various regional partners partner to Latin America. who share its world view. In this framework, Mercosul is an essential partner for the Euro- pean Union. The possibilities for cooperation Portugal’s role are countless, ranging from multilateralism to the fight against terrorism, drugs and organized Owing to the great sensitivity and knowledge crime, to sustainable development, the promo- Portugal has in its links to Brazil and the en- tion of democracy and human rights, and all tire South American continent, Portugal – just fields of scientific, economic and cultural coop- like Spain – clearly has a special role to play eration. in encouraging relations between the European Union and Mercosul. Portugal has been com- We cannot forget that Brazil is now, just like In- mitted – and will continue to be committed dia and China, a major regional leader, and it has – to strengthening those ties. But this is not and become increasingly important on the interna- cannot be seen as a Portuguese and Spanish tional stage. Two recent facts have strengthened venture. Their political, economic and cultural Brazil’s central position in the new international relations with the Mercosul states are an old order. Firstly its role at the World Trade Organi- and deep-rooted relationship that is sufficiently zation’s Cancún Summit, where it emerged as strong to stand alone. In addition, Portugal has one of the leaders of the Group of 20, which its own forums for cooperation and dialogue also includes Argentina. That group played a with those states, whether bilaterally, or within central role in the outcome of the summit, and the Iberian-American framework, or through the it has consolidated that role in subsequent WTO Commonwealth of Portuguese-Speaking Coun- trade negotiations. tries. Brazil is also in a strong position to become a So our motivation is not rooted in such inter- permanent member in any future reform of the ests. Obviously, Portugal will play a fundamen- United Nations’ Security Council. tal role in promoting and facilitating a deeper92 European View
    • Mário Davidrelationship between the European Union andMercosul. But that relationship must be seen asbeing worthwhile for the Union as a whole; andthis, as I have mentioned, involves a number ofbasic strategic factors that are essential if Europeis to take up its rightful position in the world.Mário David is President of the Foreign AffairsCommittee of the PSD and a Member of the Por-tuguese Parliament. 93 Volume 1 - Spring 2005
    • Erhard Busek The Future of Economic Reconstruction, Development and Cooperation in South Eastern Europe By Erhard Busek In 1999, during the ised reforms and regional cooperation amongst Kosovo war, when air each other. These two components were cor- raid, after air raid did nerstones of the “Stability-Pact deal” (SP) and not budge Yugoslav have remained the core parts of the Stability President Miloševic, the Pact’s mandate and actions to this day. There- public at large in West- fore, improvements in regional cooperation areern European countries knew that once again the yardstick by which the Stability Pact shouldsomething had NOT gone according to plan be measured.in the Balkans. Similar sentiments had befallenpolicy-planning units of foreign ministries in Based on experiences and best practices of for-Western countries even earlier - not over Kos- eign assistance in Europe since World War II,ovo, but over the West’s Balkan policy through- the Stability Pact is a continuing “intergovern-out the 90s. Some criticised it as too reluctant, mental conference” with a permanent secretar-others as an outright disaster. The fact is that iat based in Brussels. In my capacity of Specialthere were four wars between 1991 and 1999 in Co-ordinator, I head this office and chair theSouth Eastern Europe (SEE), with some of the Stability Pact Regional Table. The Regional Ta-worst atrocities in Europe since World War II. ble is the “general assembly” of all the Stability Pact participants, and its decision making body.Against this background, wide consensus It is driven by consensus, and - very importantlyemerged that a paradigm shift was needed in - the beneficiary countries of SEE participate onthe international approach to this region. These an equal footing with the donor countries andwere the circumstances in which, in June 1999, institutions.the Stability Pact for South Eastern Europe wasconceived at a conference, chaired by Germany, It is truly a unique partnership. These “benefici-in Cologne. Germany held the rotating presi- aries” include eight countries. To use EU jargon,dency of both the EU and G8, at that time. they are the Western Balkan states (Albania, Bosnia-Herzegovina, Croatia, FYR Macedonia,What was so new about this initiative compared Serbia and Montenegro, including Kosovo), theto previous ones? It was a different approach, two future EU Member States (Bulgaria, Roma-which for the first time saw a determination to nia) and Moldova, which is the only country notmultilaterally tackle a problematic region, which to have a confirmed perspective for EU mem-had a potential to set the European house on bership, but aspires, nonetheless, to join the EUfire. As compared to earlier experiments of bi- at some date in the distant future.lateralism in SEE (for example, Paris works withcapital A in South East Europe, Berlin with capi- The SP is structured into three Working Ta-tal B, and London with capital C), the Stability bles, roughly modelled after the three basketsPact was specifically mandated with coordinat- of the Helsinki process of 1975, today knowning all donor assistance to the Balkans. In practi- as the OSCE. The three tables deal with Hu-cal terms, this consists mainly of EU countries, man Rights and Democracy, Economic De-the European Commission, the US, Switzerland, velopment and Reconstruction, and JusticeNorway, Canada and Japan, and international & Home Affairs and Military Security. Theorganisations such as OSCE, NATO, OECD, SP’s key objectives are to promote regional co-Council of Europe, as well as, International operation among the countries of SEE and expe-Financial Institutions (IFIs) such as EIB, World dite integration into European and trans-AtlanticBank, EBRD, Council of Europe Development institutions, namely the EU and NATO. We areBank etc. In return, the SEE countries prom- not a development bank; rather, we are a unique 95 Volume 1 - Spring 2005
    • The Future of Economic Reconstruction, Development and Cooperation in South Eastern Europe political instrument that can act as catalyst for Again, the Stability Pact provided the platform to activities that facilitate and foster the transition bring NATO, European Commission, OSCE and process in the Balkans from a war-torn region the countries concerned, together. Of particular to democratic, market based economies that are note is the fact that Kosovo is fully participating part of Europe. in these activities. In the eyes of the general public in SEE, how- Regional ownership is another crucial aspect ever, the Stability Pact is often associated with of the Stability Pact’s “method”. As we talk money - big money and never enough of it, of about sovereign countries with elected govern- course! However, one crucial aspect that I must ments and parliaments, any notion of neo-co- emphasise is that the Stability Pact does not lonial implementation of reforms is out of the have its own funds; it acts as a kind of clear- question. By putting the countries themselves ing house for donors interested in stimulat- in charge of the reforms, while ensuring access ing and encouraging regional co-operation. to technical assistance and funding, the accept- While this feature is sometimes criticised, it is ance of necessary reforms is higher and more also of huge advantage as it allows us to keep sustainable. Sometimes, this comes at a cost: it our structure lean and flexible. Our office re- takes more time to operate this way, as small mains small and focused. It has a staff of about inexperienced administrations grapple with the 35, including administration. implementation of complex reforms. Our niche position, therefore, is to deliver “add- However, under our auspices, several regional ed value”. Bringing projects and donors together initiatives are “headquartered” in the region, and removing obstacles on a political level is a e.g. the organised crime and corruption fight- key asset or added value of the Pact. For exam- ing secretariats located in Bucharest and Sara- ple, for the Regional Energy Market, the Sta- jevo. There is now a centre for the collections bility Pact secured “political consensus among of small arms in Belgrade, while the seat of the the countries of the region” and facilitated the international commission managing the Sava necessary change of mindset from the illusion River will be in Zagreb along with a 20-nation of energy self-sufficiency to the socio-economic strong Arms Control facility. benefits of cross-border co-operation. The pre-condition for activities being launched In defence conversion, where NATO has ac- within the Stability Pact framework is that they quired considerable expertise, the Stability Pact are of a regional nature and this was communi- succeeded in soliciting funds from the World cated to SEE governments right from the begin- Bank to retrain several thousand redundant mil- ning. If we look back, it is correct to say that this itary officers in Romania and Bulgaria. Obvious- was the stick ahead of the carrot. Reactions to ly, integrating military personnel into a civilian this approach were mixed. Some governments workforce considerably reduces a security risk, bluntly explained that we could not expect as well as, providing much needed employ- them to design joint projects with neighbours ment. The point is that in normal operations, they did not know or wish to know at that time. the World Bank and NATO do not meet; in the Today, I can say, that old scepticism is funda- Stability Pact framework, they do. mentally gone. Governments know that they have to either work together or they will fail to Another example is the integrated border receive support. For example, the donors made management process, initiated in Ohrid it quite clear that necessary funding for elec- in May 2003. Borders in the Balkans are still tricity rehabilitation is available, but only if the perceived in mythical dimensions; wars were governments committed themselves to working fought over borders! As Western Europeans we together to liberalise their markets. It did the probably cannot properly fathom the symbolic trick. significance, when Western Balkan governments started to talk about secure and open borders Generally speaking, we have today a natural and agreed to the shift from military to civilian and normal “European” pattern of consultation border guarding, as is the EU standard practice. amongst SEE governments. What was initiated96 European View
    • Erhard Busekas a condition by donors has proven to be sus- of new enterprises. Despite the strong tradetainable through its own success! liberalisation effort, significant non-tariff barri- ers continue to represent a major obstacle toWhat can we report after about five years of intra-regional trade. Finally, regulation, taxationstrong dedication to the economic development and corruption remain key constraints to the de-of the region? Real GDP growth in SEE has been velopment of private sector enterprises, particu-quite strong and in the last three years it has ex- larly SMEs, which can have a significant impactceeded 4%, a rate quite faster than that recorded on the creation of new jobs.in Central Europe and the Baltic states, markinga good beginning for a long-awaited catching On the strength of the progress achieved toup. Growth has been driven by the expansion date, SEE is now firmly on the radar screensof the private sector, which now accounts for of foreign investors and international capitalmore than 60% of GDP, and by the expansion markets. A window of opportunity has openedof trade opportunities following the liberalisa- up for SEE, as capital flows are increasingly be-tion of intra-regional trade and the improved ac- ing reallocated away from regions perceived ascess to EU markets. This performance, in turn, riskier, such as Latin America, towards Easternhas been made possible thanks to a larger share Europe, which is perceived as more stable be-of total credit going to the private sector and to cause of its linkages to the EU and the supporta steady advance in the process of privatisation, of dedicated financial institutions, such as theparticularly of large companies. Together with a EIB and the EBRD.significant improvement in the business climate,as witnessed by the in-depth analysis conducted But being on the radar screens of the investorsby the World Bank and the EBRD, this has led does not guarantee actual investment. It merelyto a growing inflow of foreign capital, both FDI improves your potential for investment leadingand portfolio funds, which has reached a record to greater attention to, and closer screening of,level of over € 9 billion in 2003. political and economic developments with a view to making a comprehensive assessment ofDespite these considerable achievements, SEE the risks and returns involved.still faces a number of challenges and risks. Asregards economic performance, the level of real At present, mostly because of the political un-GDP in SEE in 2003 was still at about 90% of certainties still prevailing throughout the region,the level prevailing in 1989, i.e. before the start the assessment of markets is generally one ofof the transition process. This is a considera- “wait and see”. This may be unfair to individualble progress compared with the level of 75% countries of the region where political stabilityrecorded in 1998, but it is still lagging behind has been achieved and the reform process isthe progress achieved in Central Europe and the well established, but in the context of globalisa-Baltics, where real GDP in 2003 was at 123% of tion of trade and investment flows, it should notthe 1989 level. be surprising that the creditworthiness of the region is regarded as more important than theSuch economic performance reflects a similar standing of individual countries. Internationaldelay in the transition process, in general. On investors respect and can operate within exist-average, SEE countries are still at about 70-75% ing political and institutional realities, but theyof the road to full transition, compared with increasingly require integrated markets, freearound 90-95% in Central Europe. from trade and foreign exchange restrictions, with reasonable regulatory frameworks and reli-Among the most significant aspects of the lag able legal systems. In the pursuit of these objec-in transition are the high share of “informal ac- tives, the countries of the region can count ontivities” in the economy, which still represents the support and the assistance of the Stabilityabout one-third of GDP, and the low level of Pact.financial intermediation. Moreover, there is stilla lack a new ”greenfield” investment, as mostof the FDI flows have been driven by large-scale privatisations, rather than by the creation 97 Volume 1 - Spring 2005
    • The Future of Economic Reconstruction, Development and Cooperation in South Eastern Europe Regional infrastructure approved by the Board of Directors of the IFI concerned, the loan is signed, the international In the first few years of our work, support for tendering process completed and construction infrastructure has been one of the most impor- can begin, involves, most of the time, several tant contributions of the SP to the stabilisation of years. The slow progress is, however, also due the region. Under SP auspices, the international to a number of difficulties, which are generally community has shown genuine commitment to outside of the control of the IFIs. Let me give rehabilitate and modernise the infrastructure in you a few examples: the SEE. • Six of the road projects are in Albania: the A joint office was set up in Brussels by the reasons for the lack of implementation or World Bank and the European Commission with the slow implementation of these projects its main task the preparation of list of priority are mainly land acquisition difficulties or infrastructure projects of regional significance to weak institutional capacity in the ministries submit to international donors. For example, a concerned. However, recent progress could first set of so-called “Quick-Start” infrastructure help to speed up the process of implemen- projects was submitted to multilateral donors at tation. the Regional Funding Conference held in Brus- • In FYR Macedonia, the commencement of sels in March 2000 when € 1.1 billion was raised two road projects was delayed, mainly due for projects consisting mostly of transport, en- to reluctance on the part of the authorities to ergy, telecommunications and water supply or accept technical standards suggested by the sanitation projects. A new list of regional infra- IFIs and the implications of an Environmen- structure projects was submitted to a second Re- tal Impact Assessment. gional Conference held in Bucharest in October 2001 when € 2.4 billion was pledged. Stability Pact support for infrastructure in SEE has moved from the convening of pledging con- As could be expected, the combined list of ferences and the monitoring of a project list to projects resulting from the two regional Con- a more strategic approach of sectoral priorities ferences has been subject to some amend- at the regional level. The key principle is that ments. For various reasons, a few projects were future selected projects have to contribute and dropped from the list, for instance, because the be part of a strategic approach to develop infra- countries concerned decided to finance them structure networks of regional importance. without the involvement of the IFIs. The first move in that direction was the decision Currently, the list comprises some 45 projects, at the meeting in May 2001 in Tirana to establish with a total cost of € 3.96 billion. These projects the Infrastructure Steering Group (ISG) chaired have financing secured or under way, with the by the European Commission and consisting involvement of bilateral donors or international of representatives from the EIB, the EBRD, the financial institutions. They were selected ac- World Bank, the Council of Europe Develop- cording to agreed criteria, namely technical ment Bank and the Stability Pact. I must note feasibility, economic and environmental viabil- that SEE is the only region in the world where ity, submission by one or more countries and a the IFIs have a framework within which they marked regional character. can agree on priorities and co-ordinate financ- ing, thereby reducing duplication and playing to Some disappointment has been voiced regard- comparative strengths. ing the relatively slow progress of the projects, for which financing was pledged at the Brus- It has been recognised that efficient planning of sels and Bucharest Conferences. On this mat- public investment in the transport sector neces- ter, realism is called for. Experience shows that, sitates the development of four main building even under the best circumstances, the time pe- blocks: a) the establishment of a Core Regional riod required for a major infrastructure project Transport Network as a jointly agreed reference to pass through all the processing stages (the for planning investment of regional relevance, so-called “project cycle”) before the project is b) a process to prioritise investments of regional98 European View
    • Erhard Busekimportance and which are financially afford- lenges for the countries of the region andable and suitable for international financing, progress will not be painless, as we need to payc) a commitment to policy reforms, notably to special attention to the socio-economic impactimprove sector management and address cross of this treaty. For example, the effect that tariffborder issues, and d) the establishment of an rates will have on vulnerable social groups. We,institutional framework to coordinate efficiently also, need to prepare and implement suitable la-among the countries of the region. The signing bour and retraining policies as part of the proc-of the Memorandum of Understanding on the ess of restructuring utilities and energy relatedCore Transport Network in June 2004 now pro- companies, while not neglecting environmentalvides the appropriate framework for the imple- protection standards.mentation of a regional approach in this vitalsector. Fostering regional tradeCreation of a regional energy market The Stability Pact’s Trade Working Group has been specifically instructed to develop andCreating a Regional Energy Market in South subsequently monitor the implementation ofEastern Europe, which will soon be upgraded to measures to liberalise trade regimes in SEE. Be-the Energy Community of SEE (ECSEE), is an ex- ing part of the Stability Pact’s overriding goalample of how the region can become fully inte- to stimulate sustainable economic developmentgrated into the EU in one sector despite the fact in the region, the Trade Working Group’s keythe countries are not yet EU Member States. achievement to date has been the creation of a system of bilateral free trade agreements (FTA)Initialling of the ECSEE Treaty in April by the among the SEE countries that substantially liber-ministers from the region paves the way for a alise trade in the region.progressive creation of an integrated EuropeanUnion standard market for energy supply and We are already seeing positive results from thosedemand in SEE. Improving the balance between FTAs that have been in force for a while. Forenergy supply and demand is crucial to improve example, in the case of Albania, I am delightedand sustain economic development in SEE. This, that when comparing trade figures for the first 6undoubtedly, requires a strong commitment by months of 2003, when two FTAs were in force,the countries of the region towards market ori- with figures for the first 6 months of 2004 whenented reforms, regional integration and sustain- 7 FTAs were in force, we see a tripling of over-able development. all exports to other SEE countries. We expect even more positive results in 2005, as the wholeThe advantages of ECSEE are enormous: im- package of FTAs will be in force. The Workingproved utilisation of existing supply and pro- Group is now actively looking at a programmeduction capacities and fostering more coopera- to reduce and eliminate non-tariff barriers totion and integration in the region (which would trade, which are very prevalent in the region.result in economic growth, stability and in- The Group is also examining the possibility ofvestment, including optimising investment pri- moving from a network of bilateral FTAs to oneorities). The countries face common problems, single FTA – and thereby creating a genuine freesuch as the lack of money in the energy system trade area in SEE.and the major need for investment. Individualmarkets are too small to support major new in- Private investmentvestments and, without the regional perspective,the alternative could be stagnation. The regula- But all this would not be possible without atory frameworks in the region are still young considerable input from private investments.but, can progress rapidly to the type of regional The business community is actively involved incooperation needed. Another element in favour the region both through direct investment andof this initiative is the wealth of technical talent through providing assistance to the govern-in the region. ments. The quality, scope and structure of dia- logue between governments and the businessHowever, ECSEE entails many transition chal- community – both domestic and international 99 Volume 1 - Spring 2005
    • The Future of Economic Reconstruction, Development and Cooperation in South Eastern Europe - are vital components in improving the envi- membership”, there is a consensus among poli- ronment. Through the Investment Compact, our cy-makers that the first and most important pri- joint undertaking with the OECD, the business ority in the Balkans is stabilisation, in order to community can make a meaningful contribu- lead to economic development. tion to the ongoing political debates. Through the Investment Compact’s network of Foreign Ever since its creation, the Stability Pact has Investors Councils, which are active in SEE, the been pushing for growth and stability in this Business Advisory Council for SEE, the BIAC region. We coordinate the work of over sixty and others we are able to conduct a construc- participating international organisations and tive dialogue with the ministers and officials governments, and I can’t emphasise enough the of SEE – something we need to continue to importance of the Trans-Atlantic connection and strengthen and intensify as we need to consider the extremely important role of the US. the fact that we are getting closer to the end of privatisation in SEE and that we have to redou- The SP has been given a clear mandate of being ble our efforts to attract greenfield investment to complementary to the Stabilisation and Associa- the region. Given the immense competition for tion Process. To put it differently, we have been investment worldwide, a decision to cooperate instructed by the EU leaders to help countries of on a regional basis to improve the environment the region meet the Copenhagen EU member- and promote investment is critical. ship criteria. But in my regular travels to SEE I have detected a worrying trend of great misun- But one has to note the catalytic role of the In- derstandings about what the EU stands for and vestment Compact in stimulating reform and how it functions. Perhaps we could consider its vital role in monitoring and supporting the that it is also part of our responsibility to help implementation process. The region is today these countries to have informed debates and well and truly consolidating political and eco- start managing expectations. Let me give you nomic stability and this achievement should be two arguments: acknowledged. 1. I often get the impression that these countries Five years on… do not fully understand that the adoption – and implementation – of the 100,000 pages of the The SP was 5 years old in June 2004, but as we acquis communautaire will not lead automati- celebrated the 5th anniversary of our creation, cally to Western European levels of prosperity. unfortunate events in Kosovo (17 March 2004) reminded us of how fragile the situation can be. 2. Another problem is that the countries knock- While it appeared, on the surface, that the situ- ing on EU’s door usually perceive EU mem- ation was improving, days of protests took us bership as a key to a treasure box, structural all, again, by surprise. To be blunt, the events funds upon cohesion funds upon money for in Kosovo last year reminded us that the war in every purpose. However, EU membership is Kosovo was fought only five years ago. Thirty- expensive and requires advanced administrative one dead and more than 500 wounded was a capacities; this is already becoming known to strong reminder that our focus needs to be on some countries of the Western Balkans. Just to the region constantly. give a few examples. Moreover, I would like to emphasise my strong • The Commission’s CARDS funding is avail- belief that the European Union cannot afford able, but the region’s governments lack the to lose sight of the Balkans. I believe it has the necessary capacity to exploit the full poten- responsibility to keep it permanently on its po- tial of the funding opportunities; litical agenda. Not just because it needs to react • Also, as we know from our Infrastructure to the insistent knocking of these countries, but Steering group, the countries have limited also because it is a historic opportunity to finally ability to implement viable infrastructure get the Balkans “right”. projects; While political and public discourse cannot Having said that, I must also reiterate that I avoid making references to the idea of “EU strongly believe there will soon be tangible100 European View
    • Erhard Busekeconomic benefits from our work in the pastfive years stabilising and developing this region.While living standards in the Western Balkansare still below the 1991 average, a close look atthe economic data shows great progress. More-over, I am confident that the countries of theregion will find wisdom and concentrate, not onpolitical quarrelling but, rather on pushing thenecessary but often painful economic reforms,however unpopular or politically damagingthey may be.Erhard Busek is the Special Coordinator of theStability Pact for South Eastern Europe. 101 Volume 1 - Spring 2005
    • Peter Jungen Entrepreneurs in Europe: A Vision of Prosperity By Peter Jungen Europe in general is graphic change of our society and the inca- lacking growth, com- pability to finance the increasing health and petitiveness and eco- pension costs with a steadily diminishing work nomic dynamics - not force. The European social model can only be only compared with the financed in the future if at all levels and at each United States, but with age Europeans work longer hours, start workChina, India and South-East Asia. Globalization earlier in life and finish later. It is very simple tois a challenge, but together with EU enlarge- summarize: A higher deficit today means higherment it opens enormous opportunities for fur- taxes tomorrow.ther development of the European community. The top priority today is to restore sustainableEnlargement essential for “old” EU dynamic growth in Europe in accordance withmembers the Lisbon Strategy. In March 2000, the Lisbon European Council set strategic goals for the2004 was a very important year for the Euro- coming decade to create the most competitive,pean Union and especially for the European knowledge-based economy in the world. Theeconomy. Enlargement will have a more posi- core of the Strategy is job creation, enduringtive effect on the old members of the European economic growth and greater social cohesion.Union than it does to the newcomers. The new These goals, which the Small and Medium Entre-members have developed a very strong entre- preneurs Union of the European People’s Partypreneurial spirit, most likely because of their has supported from its inception, were set inrelatively smaller and more competitive econo- order to guarantee Europe’s success in the agemies. The way to enlargement has required 15 of globalization and to restore the conditions ofyears of structural reforms in the ten new mem- full employment in the European Union. Thisber countries to shape the future of their econo- is vital to Europe’s position in the world andmies – a process many of the “old” EU members Europe’s ability to mobilize resources so as tostill have ahead of them. tackle many different global challenges.Europe’s model based on growth and Competition between regions andeconomic performance institutions A globally competitive Europe is only possibleThe most urgent issue facing Europe today is if we generate more competition within Europe.clearly the lack of growth. Strong economic EU Member States have not used enough theperformance and dynamic growth is the cor- potential economic dynamism that could arisenerstone on which the European model of so- from competition among the different regions incial solidarity and sustainability was built on. A the Member States. Decentralized decision-mak-sound macroeconomic framework is essential to ing and the gradual transfer of appropriate re-the health of the European economy. Only by a sources to the regional and local authorities canstrict compliance to the rules of the Stability and contribute to a more effective implementationGrowth Pact it will ensure stability and growth. of the Lisbon Strategy, enabling the local andTo weaken the Stability and Growth Pact would regional authorities to develop their own policygive a wrong signal to the new Members States strategies through competition; for example au-of the European Union who had to fulfill strict tonomous tax policies, regulation policies andeconomic criteria to enter the Union. Moreover, public services.we face huge intrinsic debts of the Europeansocial security system due to the rapid demo- 103 Volume 1 - Spring 2005
    • Entrepreneurs in Europe: A Vision of Prosperity More focus on entrepreneurs ment is only managed by entrepreneurs. The President of the European Commission, José- We have to support SMEs in their efforts to in- Manuel Barroso, wants to re-invigorate the Lis- ternationalize and make the most from the op- bon implementation strategy to follow a more portunities our economy provides. Constructive results-oriented path by 2010. The Small and measures have been initiated including: entre- Medium Entrepreneurs Union of the EPP, there- preneurship awareness programs, the promo- fore, supports the lately unveiled 5-year plan tion of entrepreneurship in social sectors, ena- in which the Commission highlights its vision bling micro-enterprises to recruit by reducing for prosperity in Europe and points out that the the complexity of regulations, facilitating SMEs’ priorities of the plan re-structuring the Lisbon access to public markets by reducing costs and Strategy should focus on fewer topics; In par- efforts to start businesses and reinforcing the ticular, on: culture of entrepreneurship in Europe through • Innovation and research: They are critical facilitating start-ups’ access to finance. to economic dynamism, growth and job cre- ation. The Union needs to stimulate these An enlarged competitive European Union needs goals by pursuing policies to catalyze inno- SMEs that are encouraged and supported to vation and entrepreneurship and by com- compete and open up to free trade with the rest plementing Member State actions. A climate of the world. More than ten years have passed of innovation needs to be fostered, which and the Internal Market has not materialized, goes even beyond technological innovation, leaving economic growth untapped and creat- to embrace also new ways forward in ar- ing unnecessary costs for firms and consumers. eas like distribution, marketing and design. In order to promote the Lisbon goals, it is nec- A new generation of research programmes essary to have the European economic policy will propose changes to narrow the gap be- fitted to SME requirements. Access to finance, tween Europe’s research effort and its major especially for SMEs, is crucial through all stages competitors. The EU budget should make a of development. We have to initiate activities greater contribution to the agreed goal of that improve the conditions for entrepreneurs 3% of GDP devoted to research. Research and SMEs and encourage national governments programs have to focus on areas where the to follow suit. EU can offer real added value. • Entrepreneurship: EU politics has to con- EU politics must focus much more on entrepre- centrate more on entrepreneurs, since it is neurs. As entrepreneurs are crucial for trans- they, who transform innovation into growth forming innovation into growth and growth into and create new jobs. Spending on research job creation, EU politics have to be much more does not automatically lead to economic in line with their needs. The appointment of a growth. Only entrepreneurs create innova- special SME-envoy within DG Enterprise has tion. Thus, innovation turns invention into proven that the EU Commission understands the economic value and growth, which is essen- important role of entrepreneurs and SMEs. The tial in creating new jobs. launching of the Commission’s action plan: The • European business environment: The European Agenda for Entrepreneurship and the business environment needs to be more en- 5-Year Plan for Prosperity, Solidarity and Secu- couraging to companies wishing to seek out rity in Europe, were also productive steps in the new opportunities. A properly functioning right direction. Internal Market is an essential prerequisite to growth and competitiveness. A fast imple- More result-oriented agenda mentation of the Services Directive, which No government, no politician, no trade union, needs to lead to a fast completion of the no parliament nor the European Commission single market, and a business-friendly ap- has ever created a single job which covers its proach to the proposed new chemical direc- costs in a competitive environment. Employ- tive REACH are essential, in this respect. The104 European View
    • Peter Jungen recent World Bank Study “Doing Business petitiveness in Europe. in 2004: Understanding Regulation”1 shows • By choosing his team, President Barroso that a lot needs to be done to encourage created the Commission comprising of more entrepreneurs, in particular start-up compa- trained economists than ever before in any nies. Some of the new EU Member States, Commission, a decision which gives hope to e.g. Slovak Republic, are doing much better European entrepreneurs. than most of the “old” EU 15. • The appointment of a special SME-envoy• Stability and Growth Pact: A sound mac- within DG Enterprise has proven that the roeconomic framework is essential to the Commission understands the important role health of an economy. We strongly be- of entrepreneurs and SMEs. The launching lieve that only a strict Stability and Growth of its “Action Plan: The European Agenda Pact will help to ensure stability through a for Entrepreneurship” in 2004 and its regular strong commitment to the rules governing follow-up activities was another step in the the Pact. Softening the Stability and Growth right direction. Pact would give a negative message to the new Members States of the European Union, Tax competition proven very successful who had to fulfill strict economic criteria to enter the Union. On the other hand, we all More than 20 years ago, Margaret Thatcher and see a huge wave of new debts on the hori- Ronald Reagan triggered a worldwide revolu- zon, looking at our ageing society and the tion by dramatically slashing marginal income incapability of a diminishing work force to tax rates. The so-called “Reagan Revolution” set finance the increasing health and pension the basis for a fast growing and solid US econ- costs. If we don’t prevent the deficits, taxes omy for the following decades. In addition to will rise. rejuvenating the UK and US economies, these• Infrastructure and energy: The costs of supply-side tax cuts prodded other nations into poor infrastructure and energy of the Euro- implementing similar reforms. Thanks to “tax pean economy are huge. The Trans-Euro- competition” between nations, average top tax pean Network needs to build on the Growth rates in developed nations are nearly 20 points Initiative by ensuring that significant extra lower today than they were in the 1970s. resources are matched by new measures to make the networks operational and more New tax competition – a chance for Europe coordinated. More transparency and compe- tition in the energy market would also help A new wave of tax competition is sweeping Eu- to ensure better security of energy supply. rope, one that could yield impressive results for the global economy. It was Ireland, for instance,Lisbon needs highest priority that resisted EU pressure for tax harmonizationThe implementation of the Lisbon Agenda is the and enacted a 12.5% corporate-tax rate. Thishighest priority of President Barroso, demon- dramatic reform, accompanied by reductionsstrated by the following facts and very much in tax burdens on personal income and capitalwelcomed by the Small and Medium Entrepre- gains, has turned the “sick man of Europe” intoneurs Union of the EPP: the “Celtic tiger.” Moreover, these reforms have prompted corporate tax rate reductions in many• The President personally chairs the 33-mem- other European nations. A revolutionary reform ber “Lisbon Agenda Group” made up of was undertaken by the Slovak government, un- Members of the European Parliament. der Finance Minister Ivan Miklos, introducing a• The creation of a Vice-Presidential position flat tax of 19% including income tax. This move that ensures a coherent Commission ap- forced its neighbour country Austria to its big- proach to the Competitiveness Council. gest tax reform since the war by reducing the• President Barroso has created a new Com- corporate tax level from 34 to 25%. Hungary, as mission post specifically assigned with Com-1 See http://rru.worldbank.org/DoingBusiness 105 Volume 1 - Spring 2005
    • Entrepreneurs in Europe: A Vision of Prosperity well, cut its corporate tax rate to 16% from 18% Topic of the year: Education to Entrepre- and dropped the top tax rate on personal in- neurship come to 38% from 41.5%. Latvia, meanwhile, cut its tax rate on business income to 19%, and Ro- The Small and Medium Entrepreneurs Union of mania has announced that its corporate tax rate the European People’s Party is calling for im- has dropped from 25% to 20%. One of the most proved access to high-level training and further interesting tax-rate reductions is taking place in training must be fine tuned to better meet la- Estonia, which has enacted legislation to lower bor market demands. This is why the board of its flat tax rate from 26% to 20% by 2007. the Small and Medium Entrepreneurs Union of the European People’s Party decided to choose The new wave of tax competition leads to low- “Education to Entrepreneurship” as its topic of er tax rates and simplified tax systems, a result the year for 2005. which could never be achieved through tax harmonization. It creates more social justice as Many bureaucratic obstacles, such as enormous- more simple taxation structures allow less ex- ly complex social security systems, must be emptions and loop-holes and are, therefore, so- minimized to encourage flexibility and mobility. cially more accepted tax systems. This goes in This also applies to the mutual recognition of particular for a flat rate income tax. The recent academic certificates. With respect to the goal of experience in a number of Central and Eastern improving education and training, research and European countries proves easily that the effect development must be a priority. The conditions of tax competition leads to a more competitive for public and private funding for research and European Union economy. development must be stepped up to achieve the Tax competition between Member States and modest target of 3% of GDP. Public and Private even between regions is useful in order to con- funding of R&D should be allocated in the spirit tend for the “best practice” in this area. The of achieving a knowledge-based society with a attempt to harmonize direct taxes could have strong ethos of entrepreneurship. destructive effects on business activities, and therefore on growth and employment, as well. Hand-in-hand with education to entrepreneur- Hence, all Member States should oppose it. ship goes the promotion of a better understand- ing of business failure in Europe, distinguishing Competition for savings & shift towards in- between honest and dishonest bankruptcies in direct taxation order to tackle the stigma of failure. Other recent global financial phenomena are Improving the role of women as entrepreneurs, the worldwide competition for international in- teaching them how to run a company in order vestment savings - a competition for the world- to close the gender gap in European employ- wide capital. A shift from direct taxation (capital ment and boosting start-up rates is crucial for and labor) to indirect taxation (consumption) is the economic future of our continent. another “must” to finance our social model. Entrepreneurs are the change agents! Creating a knowledge-based economy EU politics have to focus much more on en- Only entrepreneurs can provide cutting-edge trepreneurs, since it is they who transform in- innovation that transforms knowledge-based in- novation into growth and create new jobs. vention into economic value and growth. If we Spending on research does not automatically want to compete with other regions in the world lead to economic growth. Therefore, we need like China, India, and the United States, Europe entrepreneurs in order to generate innovation. must be a knowledge-based society armed with Thus innovation turns invention into economic high levels of education and training. Participa- value and growth, which is essential in order to tion of all citizens in the knowledge-based so- create jobs. ciety ought to be the objective that underpins our efforts.106 European View
    • Peter JungenNational roadmaps to prosperityJoining efforts with the European policy mak-ers, the politicians and national governmentshave to do their homework and have to makesure that they do not burden the local economywith EU red tape. The EU Commission and theCouncil have to better commit individual Mem-ber States to the commonly agreed goals. Thesetargets should be included in “national road-maps”, containing steps and decisions neededand providing a time frame.Closing the gapOnly if all stakeholders involved – the Euro-pean Commission, the European Parliament,the Council and especially the national govern-ments – understand the priority, and the newfocus of the Lisbon goal on growth, can Europesucceed. The Lisbon target for the year 2010 isfar out of reach. Europe has to focus all its forc-es in order to keep up within the world leadingeconomies. The question is not if Europe will bethe most competitive and dynamic knowledge-based economy in the world by 2010, but ratherhow to prevent the widening of the gap, evenfurther, with these other dynamic economies ofthe world .A new entrepreneurship cultureThere is definitely no lack of work in Europe.There is a lack of employers, a lack of entrepre-neurs and therefore a lack of innovation andeconomic dynamism which leads to the under-performance of growth and employment. Tosolve this problem we need at least 5 millionnew entrepreneurs in Europe. The key is a newentrepreneurship culture!Peter Jungen is Co-Chairman of the Social andEconomic Policy Committee of the EPP and Co-President of the EPP SME Union. 107 Volume 1 - Spring 2005
    • Bartho Pronk The Lisbon Process - Impossible Dream? By Bartho Pronk This article deals with The method to improve the goal was twofold: the Lisbon Process. The process is a consequence • To improve the existing processes of coop- of the treaties of Maas- eration in the economic, financial and em- tricht and Amsterdam. ployment area. In Maastricht the mac- • To implement a new open method of coor-ro economic guideline became a central instru- dination with timetables, guidelines, indica-ment for economic policy, because of the Mon- tors and monitoring.etary Union, that was written into the MaastrichtTreaty. In Amsterdam it was decided to add the The Lisbon process has since run its course. Theemployment chapter to the Treaty. In order to only later addition to the Lisbon declaration wasimplement this chapter the so-called Luxemburg about the method to be used to implement Lis-process was set up. The Luxemburg process was bon. The different processes which fell underthe first open coordination system. It deals with the Lisbon umbrella (Macro economic policyemployment. Many other such systems have been guidelines and the Luxemburg, Cardiff and Co-established since the European Union. logne process) have been streamlined in 2002, so that heads of government can decide, duringIn March 2000 the Lisbon special European the spring European Council, about the resultsCouncil accepted a very important declaration. of the annual broad economic and employmentIt was called, “Towards a Europe of Innovation policy coordination cycles.and Knowledge.” This declaration started theso-called Lisbon process. The aim of the Lisbon The preparation of the former cycle takes placespecial European Council was to “invigorate the in the ECOFIN Council and the latter in the EM-community policies against the backdrop of the PLOYMENT Council. Between the two councilsmost promising economic climate, for a genera- there exists a loose cooperation. In this newtion in the Member States”. There were two new framework the formerly existing processes havedevelopments in Europe according to the dec- been integrated. It means that the Lisbon Strate-laration: gy has become the instrument to integrate social and economic policy in the European Union.• globalisation and• the growing importance of ICTs (informa- tion and communication technologies). Lack of tools - too many limitationsThe declaration sees both developments in a However, the process has its limitations. First-rosy light. It was held in the middle of an eco- ly, the Lisbon process cannot depart from thenomic boom. It was, also, before the crash in principle of subsidiarity. Secondly, even wherethe stock markets and before 9-11. Those two the European Union has a responsibility underevents showed that there was a darker side to the treaty that responsibility differs from area toICTs and globalisation, which had not been tak- area. It makes a lot of difference whether ween into account by the Lisbon summitteers. are talking about the internal market, the macroThe Lisbon summit set itself a new strategic goal economic guidelines or the employment guide-for the next decade: To become the most comp- lines. Also there is a very big practical differenceetative and dynamic knowledge-based economy between Member States in the Euro zone andin the world, capable of sustainable economic those who do not yet participate in this arrange-growth with more and better jobs and greater ment. In the Euro zone there is more necessitysocial cohesion. to coordinate economic and, consequently, so- 109 Volume 1 - Spring 2005
    • The Lisbon Process - Impossible Dream? cial policy. The Lisbon Strategy tries to do eve- Quest for the Holy Grail rything at the same time. Also the targets of the Lisbon Strategy are not well defined. It is very difficult to find out if the Council of The targets are: Lisbon laid down verifiable criteria in the Lis- bon declaration so that it is possible to verify • Competitiveness; whether the implementation of it is successful • Dynamic economy; or not. If the criteria are unknown, it is impossi- • Knowledge society; ble to determine whether the results are good or • More and better employment; bad. It seems the Council had as their main aim • Social cohesion; to improve the situation and was of the opinion • Sustainability. that more coordinaton would realize that aim more rapidly. Therefore, it is almost impossible It is, by the nature of things, very difficult to to make an objective assessment of Lisbon. achieve all targets at the same time. At the na- tional level many different ministries with their The objectives are relatively clear in some areas own competences deal with the targets. The like employment and relatively obscure in other Lisbon Strategy creates, consequently, a compli- areas like sustainable development. Therefore, cated matrix in which the Commission, different achieving Lisbon looks somewhat like the quest European Councils, and national ministries are for the Holy Grail and an almost impossible the main actors. dream. There is also an important role in the process Clearly the Lisbon Council made a mistake in for the European Parliament and the social part- expecting a higher growth than that was real- ners. The ECB and the EIB are linked to the ized in the years after and before 2000. The ex- process, as well. In short, all the great and the pected growth was 3% and more. In reality, only good in the European Union participate in the in 2000 was growth higher than 3%. In 1998 Lisbon Process. The Commission plays the key and 1999 the growth rate was 2.9%. The aver- role because it is the only institution which has age growth over the whole period was 2.16%. the knowledge and the contacts to prepare the This difference between 2.16 and 3% explains conclusions of the European Council. the fact that the employment situation did not improve as much as was expected or hoped for To the innocent outsider it looks as if the Euro- (see Annex I). pean Council is solely responsible. This impres- sion is definitively wrong. Without the Coun- If we look at unemployment, the situation in the cil the process would not have started, but the European Union has improved considerably. If Council is by nature more interested in political one compares 1993 with 2004, unemployment than in economic problems. That means that decreased 2.0%, from 10.1 to 8.1% (see Annex the process is quite autonomous and the Coun- II). There are considerable differences between cil gets interested only when the economy or the Member States. Only one of the 15 old Mem- the employment situation becomes a political ber States has now an unemployment rate over problem. This is not always the case. Therefore, 10%. In 1993 there were 6 Member States with there is the big danger that the whole process an unemployment rate of 10% or more. In some becomes a tremendous bureaucratic exercise, countries, the unemployment has decreased because the political responsibility will be less quite considerably. involved. The decrease, for instance, in Ireland was more In spite of this criticism it must be recognized than 10%, in Spain it was almost 8% and in Fin- that at the moment, the Lisbon process is the land it was 7.5%. In the new Member States only coordinating process in the European con- there are many challenges ahead. There are text. It produces data, which is of great impor- three new countries with more than 10% unem- tance for all the decisions about the European ployment (Poland, Slovakia and Lithuania). economy.110 European View
    • Bartho PronkThe unemployment in the USA decreased be- to stimulate economic change or reform of thetween 1994 and 2004 from 6.1% to 5.5%. This labour market. Therefore, it is important not tois a smaller reduction than that in the Euro- forget why there is a Lisbon process.pean Union. However, unemployment remainshigher in the European Union than in the USA, It is to give our citizens a better life, with moreeven though more and more individual coun- employment possibilities. If citizens do nottries have a comparable unemployment rate to believe that, the whole exercise will fail. Thatthat of the USA. Therefore, I think that it could would be disastrous in a time of big democraticbe possible to achieve a comparable unemploy- change, and many challenges that lay ahead.ment rate in the long term between the EU andthe USA. Ageing Europe and productivityGermany is the only member state that had a The importance of demographic change cannotlower unemployment rate in 1994 than in 2004. be overestimated. Some people tend to focusIt is also the biggest economy of the European worries on their pension and their health system.Union. This has had a negative impact on the Those are important factors. But more importantscores of the European Union. But in spite of is that our whole society is going to change. Ifthis, more progress has been made by the Euro- we do not deal with that change, employmentpean Union than by the United States. and productivity will suffer. Fortunately, figures show that the average exit age from the labourNot so weak after all? force is increasing from 59.9 years to 61.0 years in the European Union (see Annex III).Competitiveness is very important for the Eu-ropean Union. It is one of the main targets of Productivity is increased by two factors; tech-Lisbon. It is not always clear how competitive- nological improvement and increases in theness is defined. Sometimes it is suggested that working population. Part of our productivity im-the European Union is not competitive because provement, therefore, is a consequence of theunemployment is so high; this is not necessarily growing working population. This means thatcorrect. Europe’s productivity will grow less than that of competitors by the sole fact that our workingA country can be competitive and still have high population is growing less.unemployment. Also, the opposite is possible.Being more competitive is always necessary. The only way to compensate for that is to fo-Even a market leader always has to be aware of cus more on the other factor of productivity im-the danger that competitors may overtake him. provement, namely technology improvement.It is important to make a realistic analysis about This will mean more investment in learning,the present level of competitiveness with clear also for older workers. It is probable that bigcriteria. It is very dangerous to be too optimistic skill shortages will arise. This will not limit itselfin this field. But that is certainly not the case in to doctors and nurses, but will exist in manythe European Union. more sectors. It is absolutely urgent to put all the data together and make policy decisionsThe tone in the European Union is very gloomy. about how to cope with demographic changeImprovements in competitiveness are never in the next 10 years.mentioned; always more has to be done. Fig-ures are often presented in such a way that Eu- Also the question of immigration has to be tak-rope looks inferior to others. The consequence en into account. Immigration cannot solve theof this pessimism is that people lose heart and problems of demographic change in Europe.also lose confidence in the European and na- However, an intelligent system of work permitstional institutions, which are responsible for so- will help to maintain Europe’s productivity incial and economic policy. It can even lead to future years. Opening up our university systemblind resistance against necessary measures to students and professors from abroad 111 Volume 1 - Spring 2005
    • The Lisbon Process - Impossible Dream? may also help in this respect. It seems strange to look at these new proposals in a time of high unemployment. But it is absolutely necessary if we look to the demographic changes expected in the next 10 years. We then see that the number of people retiring will be greater than the number of people enter- ing the labour market. In the first few years of this process, change will be very slow because people will start retiring later but there will still be a lot of unemployed, among which many young people; there is then, still, a hidden la- bour reserve. But when the reserve is depleted, the process will suddenly accelerate, and the whole labour market will change. Employers will not be able to find new work- ers with the right qualifications. SMEs will have to close because there will be no successors to take them over. New SMEs will not be founded because people prefer to accept a good job of- fer in an existing company. In short, the econo- my will stagnate. It is possible to avoid this, but only when we take the human factor more into consideration than was the case in the past. Pos- sibly this is the greatest challenge for the Lisbon process in the future. Bartho Pronk is a former Member of the Europe- an Parliament and Co-Chairman of the Social and Economic Policy Committee of the EPP.112 European View
    • Bartho PronkANNEX I Source : EurosignalTOTAL EMPLOYMENT RATE % 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003EU (25 countries) : : : : : 60.6 61.2 61.9 62.4 62.8 62.9 63EU (15 countries) 61.2 60.1 59.8 60.1 60.3 60.7 61.4 62.5 63.4 64.1 64.3 64.4Euro-zone 59.5 58.3 57.9 58.1 58.2 58.6 59.3 60.5 61.6 62.1 62.4 62.6Euro-zone (12 countries) 59.3 58.2 57.8 58 58.1 58.4 59.2 60.3 61.4 62.1 62.4 62.6Belgium 56.3 55.8 55.7 56.1 56.2 56.8 57.4 59.3 60.5 59.9 59.9 59.6Czech Republic : : : : : : 67.3 65.6 65 65 65.4 64.7Denmark 73.7 72.1 72.3 73.4 73.8 74.9 75.1 76 76.3 76.2 75.9 75.1Germany 66.4 65.1 64.7 64.6 64.1 63.7 63.9 65.2 65.6 65.8 65.4 65.1Estonia : : : : : : 64.6 61.5 60.4 61 62 62.9Greece 53.7 53.7 54.2 54.7 55 55.1 55.5 55.3 55.7 55.4 56.7 57.8Spain 49 46.6 46.1 46.9 47.9 49.4 51.2 53.7 56.2 57.7 58.4 59.7France 59.9 59.3 59.1 59.5 59.5 59.6 60.2 60.9 62.1 62.8 63 63.2Ireland 51.2 51.7 53 54.4 55.4 57.6 60.6 63.3 65.2 65.8 65.6 65.4Italy : 52.3 51.4 51 51.2 51.3 52 52.7 53.7 54.8 55.5 56.1Cyprus : : : : : : : : 65.7 67.8 68.6 69.2Latvia : : : : : : 59.9 58.8 57.5 58.6 60.4 61.8Lithuania : : : : : : 62.3 61.7 59.1 57.5 59.9 61.1Luxembourg 61.4 60.8 59.9 58.7 59.2 59.9 60.5 61.7 62.7 63.1 63.4 62.7Hungary : : : : 52.1 52.4 53.7 55.6 56.3 56.2 56.2 57Malta : : : : : : : : 54.2 54.3 54.4 54.2Netherlands 64 63.6 64 64.7 66.3 68.5 70.2 71.7 72.9 74.1 74.4 73.5Austria : : 68.5 68.8 67.8 67.8 67.9 68.6 68.5 68.5 68.7 69Poland : : : : : 58.9 59 57.6 55 53.4 51.5 51.2Portugal 66.6 65.1 64.1 63.7 64.1 65.7 66.8 (b) 67.4 68.4 69 68.8 68.1Slovenia : : : : 61.6 62.6 62.9 62.2 62.8 63.8 63.4 62.6Slovakia : : : : : : 60.6 58.1 56.8 56.8 56.8 57.7Finland 65.1 61 60.3 61.6 62.4 63.3 64.6 66.4 67.2 68.1 68.1 67.7Sweden 75.9 71.3 70.2 70.9 70.3 69.5 70.3 71.7 73 74 73.6 72.9United Kingdom 67.9 67.4 67.9 68.5 69 69.9 70.5 71 71.5 71.7 71.7 71.8Bulgaria : : : : : : : : 50.4 49.7 50.6 52.5Croatia : : : : : : : : : : : 53.4Romania : : : : : 65.4 64.2 63.2 63 62.4 57.6 57.6Turkey : : : : : : : : 48.8 47.8 46.9 45.8Iceland : : : : : : : : : : : :Norway : : : : : : : : 77.5 77.2 76.8 75.5United States 70.8 71.2 72 72.5 72.9 73.5 73.8 73.9 74.1 73.1 71.9 71.2Japan 69.6 69.5 69.3 69.2 69.5 70 69.5 68.9 68.9 68.8 68.2 68.4 113 Volume 1 - Spring 2005
    • The Lisbon Process - Impossible Dream? ANNEX II Source : Eurostat TOTAL UNEMPLOYMENT RATE % 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 EU (25 countries) : : : : : 9.4 9.2 8.8 8.5 8.9 9.1 9.0 EU (15 countries) 10.1 10.5 10.1 10.2 10.0 9.4 8.7 7.8 7.4 7.7 8.1 8.1 Euro-zone 10.2 10.9 10.6 10.8 10.8 10.2 9.3 8.4 8.0 8.4 8.9 8.9 Euro-zone (12 countries) 10.1 10.8 10.6 10.8 10.8 10.2 9.4 8.5 8.0 8.4 8.9 8.9 Belgium 8.6 9.8 9.7 9.5 9.2 9.3 8.6 6.9 6.7 7.3 8.0 7.8 Czech Republic : : : : : 6.4 8.6 8.7 8.0 7.3 7.8 8.3 Denmark 9.6 7.7 6.7 6.3 5.2 4.9 4.8 4.4 4.3 4.6 5.6 5.4 Germany 7.7 8.2 8.0 8.7 9.7 9.1 8.4 7.8 7.8 8.7 9.6 9.8 Estonia : : : : 9.6 9.2 11.3 12.5 11.8 9.5 10.2 9.2 Greece 8.6 8.9 9.2 9.6 9.8 10.9 12.0 11.3 10.8 10.3 9.7 : Spain 18.6 19.8 18.8 18.1 17.0 15.2 12.8 11.3 10.6 11.3 11.3 10.8 France 11.1 11.7 11.1 11.6 11.5 11.1 10.5 9.1 8.4 8.9 9.5 9.6 Ireland 15.6 14.3 12.3 11.7 9.9 7.5 5.6 4.3 3.9 4.3 4.6 4.5 Italy 10.1 11.0 11.5 11.5 11.6 11.7 11.3 10.4 9.4 9.0 8.6 : Cyprus : : : : : : : 5.2 4.4 3.9 4.5 5.0 Latvia : : : : : 14.3 14.0 13.7 12.9 12.6 10.4 9.8 Lithuania : : : : : 13.2 13.7 16.4 16.4 13.5 12.7 10.8 Luxembourg 2.6 3.2 2.9 2.9 2.7 2.7 2.4 2.3 2.1 2.8 3.7 4.2 Hungary : : : 9.6 9.0 8.4 6.9 6.3 5.6 5.6 5.8 5.9 Malta : : : : : : : 6.8 7.7 7.7 8.0 7.4 Netherlands 6.2 6.8 6.6 6.0 4.9 3.8 3.2 2.9 2.5 2.7 3.8 4.6 Austria 4.0 3.8 3.9 4.4 4.4 4.5 3.9 3.7 3.6 4.2 4.3 4.5 Poland : : : : 10.9 10.2 13.4 16.4 18.5 19.8 19.2 18.8 Portugal 5.6 6.9 7.3 7.3 6.8 5.1 4.5 4.1 4.0 5.0 6.3 6.6 Slovenia : : : 6.9 6.9 7.4 7.2 6.6 5.8 6.1 6.5 6.0 Slovakia : : : : : : 16.7 18.7 19.4 18.7 17.5 18.0 Finland 16.3 16.6 15.4 14.6 12.7 11.4 10.2 9.8 9.1 9.1 9.0 8.8 Sweden 9.1 9.4 8.8 9.6 9.9 8.2 6.7 5.6 4.9 4.9 5.6 6.3 United Kingdom 10.0 9.3 8.5 8.0 6.9 6.2 5.9 5.4 5.0 5.1 4.9 4.7 Bulgaria : : : : : : : 16.4 19.2 17.8 13.6 12.0 Croatia : : : : : : : : : : : : Romania : : : : 5.3 5.4 6.2 6.8 6.6 7.5 6.8 7.1 Turkey : : : : : : : 6.5 8.3 10.3 10.5 10.3 Iceland : : : : : : : : : : : : Norway 6.0 (b) 5.4 (b) 4.9 (b) 4.7 4.0 3.2 3.2 3.4 3.6 3.9 4.5 4.4 United States 6.8 6.1 5.6 5.4 4.9 4.5 4.2 4.0 4.8 5.8 6.0 5.5 Japan 2.5 2.9 3.1 3.4 3.4 4.1 4.7 4.7 5.0 5.4 5.3 4.7114 European View
    • Bartho PronkANNEX III Source : EurostatAVERAGE EXIT AGE FROM THE LABOUR FORCE: TOTALWEIGHTED BY THE PROBABILITY OF WITHDRAWAL FROM THE LABOUR MARKET 2001 2002 2003EU (25 countries) 59.9 (e) 60.4 (e) 61.0 (p)EU (15 countries) 60.3 60.8 (e) 61.4 (p)Euro-zone 59.9 60.4 (e) 61.0 (p)Euro-zone (12 countries) 59.9 60.4 (e) 61.0 (p)Belgium 56.8 58.5 58.7Czech Republic 58.9 60.2 60.0Denmark 61.6 60.9 62.1Germany 60.6 60.7 61.6Estonia 61.1 61.6 60.8Greece 59.4 61.8 63.2Spain 60.4 61.5 61.4France 58.1 58.8 59.6Ireland 62.8 62.4 64.4 (p)Italy 59.8 59.9 61.0Cyprus 62.3 61.4 62.7Latvia 62.4 : 60.3 (b)Lithuania 58.9 : 63.3 (b)Luxembourg 56.8 59.3 :Hungary 57.6 59.2 61.6Malta 57.6 58.2 58.8Netherlands 60.9 62.2 60.4 (p)Austria 59.2 59.3 58.8Poland 56.6 56.9 58.0Portugal 61.9 63.0 62.1Slovenia : 56.6 56.2Slovakia 57.5 57.5 57.8Finland 61.4 60.5 60.3Sweden 61.7 63.2 63.1United Kingdom 62.0 62.3 63.0Bulgaria : 58.6 58.7Croatia : : :Romania 59.8 : 62.8 (p)Turkey : : :Iceland : : :Norway 63.3 62.5 62.8United States : : : 115 Volume 1 - Spring 2005
    • European View c/o VZW Europese Volkspartij Aarlenstraat 67, Rue d’Arlon B-1040 Brussel / Bruxelles Phone: +32-2-2854-140 Fax: +32-2-2854-141 European View web version:url: www.epp-eu.org/europeanview 51 9 771781 685007 ISSN 1781-6858