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Brussels, 11th December 2007

The renewed Lisbon Growth and Jobs Strategy is working, but the EU must reform further to succeed in a globalised age, says key Commission Report

Three years after it was relaunched in 2005, the Lisbon Growth and Jobs Strategy is working. That is the main conclusion of the Commission's Strategic Report on economic reform across Europe, published today. The report demonstrates that the Lisbon Strategy is contributing to the recent much improved performance of the EU economy. Structural reforms are also starting to raise potential future growth, improving the long-term prospects for prosperity. However, some Member States have responded more robustly than others and some signs of "reform fatigue" have become apparent over the last twelve months. Europe will need to press ahead with further economic reforms at both Community and national level in the next cycle of the Lisbon Strategy to help it weather the impacts of global financial turmoil and higher commodity prices. The report sets out a series of new policy initiatives to respond to this challenge and to reinforce Europe's efforts to shape and respond to globalization. It will be submitted to the Spring European Council in March 2008.

Commission President José Manuel Barroso said: "The Lisbon Strategy is working. It is creating growth and jobs. It is helping position Europe and European citizens to succeed in the age of globalization. It has given Europe a common, pragmatic economic agenda, fully respecting national differences. But complacency would be fatal to Europe's prospects of shaping globalisation. Much more remains to do. Progress is uneven between policy areas and some Member States are moving much faster than others. Today's package responds to the need for Europe to act to face up to growing uncertainties in the global economy. And to the need for an even higher priority for the social dimension, education and skills, information and communication technologies, flexicurity, energy and climate change."

Vice President Günter Verheugen, responsible for enterprise and industrial policy, said: “To ensure continued success, the Lisbon Strategy for growth and jobs needs to be a true partnership between Member States and the EU itself. A key innovation of today’s package is a new Community Lisbon Programme providing ten top priorities for EU-level reforms. These include measures to unlock the growth potential of our small and medium sized enterprises and better regulation to cut red tape. Furthermore, we want to give even stronger emphasis to education and research and development. The new CLP also further emphasises the external dimension of the strategy for growth and job. A level playing field at international level will become increasingly important. These reforms are essential to boost the European economyand to address the daily concerns of citizens.”

Some very important successes

Economic growth was 3.0% in EU-27 in 2006 and is expected to remain at 2.9% in 2007. Structural reforms have helped increase the potential estimated growth rate of GDP in the euro zone by 0.2 percentage points since 2005 to some 2.25% in 2007.

Almost 6.5 million new jobs have been created in the last two years. Another 5 million jobs are expected to be created up to 2009. Unemployment is expected to fall to under 7%, the lowest since the mid 1980s. For the first time in a decade, strong increases in employment have gone hand in hand with robust productivity growth.

EU 27 budget deficits have been significantly reduced, from 2.5% of GDP in 2005 to a forecast 1.1% in 2007. EU27 public debt has declined from 62.7% in 2005 to just below 60% in 2007.

It is now possible in all but a few Member States to start up a business within one week by means of a "one-stop shop" and there have been important steps in implementing the EU’s better regulation agenda.

About half of the Member States have developed - or are developing - policies based on a flexicurity approach. Agreement has been reached on a common set of flexicurity principles which Member States should now implement, tailoring them to their own specific situations.

All Member States have now set a national R&D investment target. If all of these targets are met, the EU will reach an R&D level of 2.6% of GDP in 2010 (up from 1.9% in 2005). This would be a significant improvement even if the key EU target of 3% (with the private sector contributing 2%) were only reached later.

But still much more to be done

However, the proportion of GDP spent on R&D in the EU has recently failed to keep up with stronger economic growth rates and decreased to 1.85 % in 2006, with large differences between Member States. This trend moves the EU further away from 3% target.

Despite the deficit and debt improvements, the opportunity to use the relatively strong growth conditions to reduce structural deficits has not been fully seized, especially in the euro area.

There is much remaining potential to reduce administrative burdens and improve the business environment, especially for SMEs. Opening up network industries and services to competition has been slow.

Many labour markets remain segmented, with well-protected insiders and more precarious outsiders on contracts with uncertain prospects. Education systems are not doing enough to give young people the skills they and employers need. Worker mobility remains still relatively low. Only 2% of working age citizens live and work in another Member State. In some Member States workers still face significant barriers when changing jobs. The Commission has therefore proposed a Job Mobility Action Plan with 15 concrete actions. (See IP/07/1879)

Europe is still lagging behind other leading economies in investment in information and communication technologies and in their use to enhance productivity.

Many Member States are not on course to fulfil their Kyoto targets and will need to make a major effort to reach the ambitious targets agreed by EU leaders at the 2007 Spring European Council and to be implemented through the energy and climate change package the Commission will bring forward in January 2008.

Boosting the strategy in the next cycle

The Report sets out a series of new actions in each of the four priority areas agreed by the 2006 Spring European Council as the pillars of the renewed Strategy. The Commission will ask EU leaders to agree these at the March 2008 Spring Council.

On investing in people and modernising labour markets, the Report calls on Member States to draw up action plans and set targets to substantially reduce early-school leaving and improve basic reading skills.

As far as the business environment is concerned, the Report calls for an integrated policy approach through a European Small Business Act, to foster the development and growth of the millions of SMEs which create nine out of ten new jobs.

On knowledge (education, R&D and innovation), the Report proposes steps towards the "fifth freedom" – the free movement of knowledge - through the creation of a genuine European Research Area and an integrated patent jurisdiction with a single affordable patent. It calls on Member States to draw up national broadband strategies and set national targets for high-speed internet usage aiming at a 30% connection rate of the EU population and connection of all schools by 2010.

On energy and climate change, the Report emphasizes the importance of completing the internal market for energy and calls on Member States to set mandatory energy reduction targets for government buildings and systematically include energy efficiency as the one of the award criteria for public procurement.

The external dimension

The package reinforces the external dimension, combining openness with the legitimate defence of the European interest. Dialogue with third countries will be strengthened and streamlined, with a clearer focus on globalisation issues of mutual interest such as market access, regulatory convergence, migration and climate change. In future the Commission will adopt a single annual report on market access, identifying countries and sectors where significant barriers remain.

The Integrated Guidelines

The above adaptations of the Strategy are needed to respond to areas where progress has been limited, to emerging challenges and to new global circumstances. They do not require amendment of the Integrated Guidelines agreed unanimously by Member States in 2005, so the Commission is proposing those Guidelines should be unchanged for the next cycle. However, the text accompanying them is updated to reflect changing circumstances.

The Community Lisbon Programme

Today's Growth and Jobs package includes a new and innovative Community Lisbon Programme for priority EU level action over the next three year cycle. The new Programme sets out ten key priorities for EU level reforms to boost the European economy over the next three years. A Small Business Act, the better regulation agenda, the research and higher education area and patent initiatives are among these key objectives. Other priorities are investing more in people and enhancing employability; further steps to integrate EU financial services markets and enhance their stability in the light of the current turbulence; and the promotion of a new sustainable industrial policy.

Assessment of national level implementation

The package includes as usual "country chapters" assessing progress made by each Member State (and the euro area). Member States have continued to make progress, at differing rates. In most cases, steps have been taken towards meeting the commitments contained in the country specific recommendations agreed collectively by the Member States last year. However, more remains to be done and most of these recommendations remain in place. In a few cases - Germany, Italy and Spain - the number of recommendations has decreased while for Slovakia, last year's recommendation on tackling long-term unemployment has been replaced with a recommendation to improve the regulatory environment. No Member States have additional country specific recommendations. The conclusions of each country chapter are collected in MEMO/07/569

The European Union's Lisbon Strategy to modernize Europe was relaunched in 2005, with a clearer focus on growth and jobs. The Strategy is based on a close partnership between the Commission and Member States, which have unanimously agreed integrated policy guidelines, implemented at EU level in the Community Lisbon Programme and at national level in National Reform Programmes, updated annually through implementation reports. The Strategy is organised around three- year cycles. Further details, can be found in MEMO/07/568 and at

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