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E UROPEAN V IEW                                                     Volume 1 - Spring 2005EUROPE’S ECONOMY AND THE CHALLEN...
EUROPEAN VIEW        European View is a Journal of the Forum of European Studies, published by the European People’s      ...
CONTENTS• Preface ...........................................................................................................
Preface                                    By Antonio López-IstúrizDear Readers,It is with great pleasure that I present t...
Editorial                                                 By Wilfried MartensThere are many reasons to be optimistic about...
for the European economies in years to come.        Globalisation, the emerging economic powers        of Asia and changes...
José Manuel Durão Barroso                         Working Together for Europe’s Future:                          A New Sta...
Working Together for Europe’s Future: A New Start for the Lisbon Strategy         some Member States have dragged their fe...
José Manuel Durão Barroso• The Lisbon Strategy offers intelligent solu-                 • making Europe an attractive plac...
Working Together for Europe’s Future: A New Start for the Lisbon Strategy         the Doha Development Round, which includ...
José Manuel Durão Barrosolar role to play in taking Lisbon forward in this       by Member States only after broad consul-...
Angela Merkel                          Tapping Germany’s Potential                            for a Prosperous Europe     ...
Tapping Germany’s Potential for a Prosperous Europe         ciety that permits unemployment to any signifi-        staff. I...
Angela Merkelthen will we be able to continue to guaran-            who returns to employment becomes a taxpayertee social...
Tapping Germany’s Potential for a Prosperous Europe         Nothing threatens our prosperity and our social       modern p...
Angela MerkelTapping PotentialGermany is standing at crossroads. The chal-lenge is to set a new course for the years ahead...
José María Aznar        Europe’s Challenge for Growth: The Path to Follow                                       By José Ma...
Europe’s Challenge for Growth: The Path to Follow         Generally speaking, the European economy has          Worse stil...
José María Aznar• a new regulatory framework has been                 • The second reason is related to the method  adopte...
Europe’s Challenge for Growth: The Path to Follow             economic and social reforms have a political      areas (wit...
José María Aznarbetter alternative, one that is compatible with       main political families in the European Parlia-the t...
Europe’s Challenge for Growth: The Path to Follow            ogy/business system.                                  EU - an...
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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  1. 1. 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
  2. 2. 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
  3. 3. 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
  4. 4. 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
  5. 5. 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
  6. 6. 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
  7. 7. 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
  8. 8. 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
  9. 9. 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
  10. 10. 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
  11. 11. 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
  12. 12. 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
  13. 13. 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
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. 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
  20. 20. 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
  21. 21. 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
  22. 22. 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

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