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Q+A: A new start for the Lisbon Strategy

European Commission - MEMO/05/34   02/02/2005

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MEMO/05/34

Brussels, 2 February 2005

Q+A: A new start for the Lisbon Strategy

Why do we need a new start for Lisbon?

Insufficient progress has been made to reach the Lisbon objectives.

Although EU productivity levels were growing faster than those in the US for five decades, since 1996 the EU has been lagging the US every single year. Labour productivity in the US is now growing twice as fast as in Europe. As a result our relative levels of wealth have also started slipping.

Europe is not investing enough: investment has – on average – been growing by only 1.7% per year compared with 5.4% per year in the USA.

We are not spending enough on Research & Development: the USA is spending about € 100 billion more on R&D than Europe. The EU has only 25% of the number of patents per head of population found in the USA.

Finally, while in the USA 32% of population has university or similar degree, this percentage stands at only 19% in Europe. In addition, the USA is also investing about twice the amount per student as most European countries.

These trends, if not addressed, will drag down the potential growth rate to slightly over 1% - or a third of the Lisbon objective.

2004, the average growth of the Euro area was a meagre 2.2%, while the US economy grew by 4.3%, Japan by 4.4%, India by 6.4% and China by 9%.

We need to revamp the Lisbon Strategy because the delivery process which has become too complicated and is poorly understood. It generates much paper, but little action. Responsibilities between the national and the European level have become blurred. Limited ownership of member states is the result.

What’s really new in the Commission proposal?

1. A new Action Programme focused on Growth and Jobs

The action programme sets out priorities which will help the Union and its Member States drive up productivity and create more and better jobs. It is more focussed The Commission has identified flagship actions which will boost growth, such as:

- Extend and deepen the single market

  • Improve regulation and cut red-tape
  • Improve and expand EU infrastructure
  • Boost investment and improve tax environment for R&D
  • Gear EU state aid framework more toward R&D and innovation
  • Create regional innovation poles and an “EU Institute for Technology”
  • Step up promotion of environmental technologies
  • Set up European Technology Initiatives
  • Combat youth unemployment through an EU Youth Initiative
  • Gear EU cohesion and structural funds more toward innovation, training and infrastructure

2. A new, simple delivery mechanism to better involve member states

The Commission proposal identifies responsibilities, sets deadlines and measures progress. It makes a clear distinction between actions at Member States and European Union level. The Commission proposes a complete overhaul of how the renewed Lisbon Strategy is implemented:

  • A single National Action Programme for growth and jobs, adopted by national governments after discussion with their parliaments.
  • Member States would appoint a Mr or Mrs Lisbon at government level charged with co-ordinating the different elements of the strategy and presenting the Lisbon programme.
  • The National Lisbon programmes for growth and jobs would become the major reporting tool on economic and employment measures. This will greatly simplify the myriad of existing reports under the Open Method of Co-ordination (OMC), which the Commission will review.
  • The simplification in reporting structures would be mirrored at Community level by integrating in a single package the existing Treaty based economic and employment co-ordination mechanisms (under the Broad Economic Policy Guidelines and Employment Guidelines): this will be done in a Strategic Annual report which will be published annually in January.

Why do you think that it will work this time around?

There is a sense of urgency, both at EU level and in the member states. "Business as usual” will lead to economic decline, and put existing social and environmental standards under pressure. There is a clear political consensus that the growth and jobs problem has to be tackled now.

The new growth and job strategy is based on a clear division of responsibilities between the EU level and the Member States. While the European Commission can act as a facilitator, the main responsibility for the economic reform process lies with the Member States.

The closer involvement of the Member States should enhance their ownership of the reform process and thereby contribute to a better implementation of the renewed strategy. However, Member States will have to make a serious commitment to economic reform and explain their citizens why these reforms are necessary.

What will be the Commission’s role in all this?

As regards the EU level, the Commission will play its central role of initiating policy and ensuring implementation. It will do so working closely with the Parliament and Council, as well as drawing on the expertise of other EU institutions such as the European Economic and Social Committee, the Committee of the Regions or in the financial field the European Investment Bank.

As regards the national level, the Commission will be a facilitator through benchmarking, financial support, promotion of social dialogue or by setting up best practices. But success on the ground is where the first phase of Lisbon has fallen down. This is why the Commission is setting out where Member States, taking account of their specific situation, are expected to make firm commitments within their own National Lisbon programmes. These should cover concrete measures, including a time-table and progress indicators. The Commission will continue to monitor and assess the progress made, using the new method of reporting and coordination described below.

Isn’t the new focus on growth and jobs sidelining the environment and social aspects?

The Commission proposes to refocus the Lisbon agenda on actions that promote jobs and growth in a manner that is fully consistent with sustainable development. The actions falling under this strategy should reinforce the Union potential to meet and further develop our environmental and social objectives. However, the challenge is to define now a strategy that addresses the areas in which Europe is not performing well (for example, our stagnant growth and insufficient job creation).

The focus on growth and jobs clearly incorporates a social dimension. Amongst other things, policy actions are planned in order to diminish unemployment, especially for young people and women and improve the functioning of the labour market.

The renewed Lisbon strategy does not roll back the existing policies and commitments with regard to environment. The renewed focus will be pursued while respecting the existing policies and regulations concerning environmental protection. The Commission will step up its promotion of environmental technologies. It will also take necessary steps to promote the development of approaches and technologies that allow the EU to make the structural changes needed for long term sustainability, for example in the areas of sustainable resource use, climate change and energy efficiency. These are needed both for use within the EU and to meet demand in expanding markets worldwide. There is significant potential for economic, environmental and employment synergies from environmental technologies and energy efficiency. These will be supported by increased research and technology dissemination efforts, including leveraging private finance through the European Investment Bank, to promote the development and uptake of low carbon technologies.

Is the EU trying to emulate the American model to create Mc Jobs?

No, we in Europe are and will be more ambitious and demanding when it comes to high social standards, healthcare, a proper social net. The quality of life, the quality of our jobs (not Mc Jobs) and products must and will be our trade mark. But this will not happen, unless we boost growth.

People care about the EU social model, their socials security, their pensions. Aren’t you ignoring these concerns by advocating trimming unemployment benefits and increase labour market flexibility?

Because we care about our social achievements, we have to make changes. In many EU Member States, the system of social security and the levels of unemployment have become unsustainable. The rationalisation of social security and pension systems and the improvement of the labour market are exactly aimed at addressing the real concern of the European citizens: guaranteeing the sustainability of the EU social model, giving people quality jobs and decent pensions.

What are the economic benefits of your proposal? How much more growth and jobs do you expect?

We expect the full Lisbon Action Plan - once all its constituent components have been implemented - to at least boost the EU’s GDP by 3% by 2010, thereby adding over six million jobs.

This would be the combined effect of measures such as:

  • The increase of one year in the average education levels of the labour force population alone can be shown to stimulate GDP growth by over 0.3 percentage points every year.
  • Increasing the total EU R&D spending from 2% to 3% of GDP would boost the GDP level by 1.7% by 2010, or raise the average annual GDP growth rate by 0.25%.
  • The full liberalisation of the telecommunication and electricity markets could lead to 0.6% increase in the GDP level in the long-run, while greater financial integration would boost employment level by 0.5% and the level of GDP by 1.1%.

What is the relation between the new Growth and Jobs agenda, the proposed financial framework and the Stability Pact?

You cannot create growth without a sound macro-economic environment, without sustainable public finances or without proper investments in innovation, research and development. In this respect, the Commission has already made its proposals.

Why are you refraining from « naming and shaming » Member States?

Member States are fully aware how urgent the situation is. They know and we know that without them delivering, we will fail. We are embarking on this strategy together. We opt for a partnership approach, with clear responsibilities and transparent commitments from member states in their national action plans. There will be reviews, benchmarks and progress indicators. The Commission will facilitate this process through benchmarking, best practices, dialogue and financial support. The new reporting system is much clearer and more transparent and will consequently make it easier for the citizens to judge the political commitment of their governments.

The Commission seems to advocate more legal migrants. Isn’t there already enough unemployment in the EU?

The Commission, most recently in its “Green Paper on an EU approach to managing economic migration”, does not say that the EU needs to open up its frontiers. It just takes into account economic and demographic forecasts: we already have important skill gaps in Europe and we have an ageing population and declining workforce.

This means that we may need more migrants in the future and we need to have more efficient and coherent procedures for admission with common definitions and criteria, in order to attract those who qualify for the jobs we are likely to have. We need to think out a medium to long term strategy.

But first of all, we must tap into our existing human resources: our citizens and third-country citizens who are already legally residing in Europe. Here, the fulfilment of the Lisbon objectives for raising employment levels is crucial.

Migrants generally take up jobs which our citizens do not want to do or, alternatively, fill in actual and serious skill gaps (e.g. nurses in the UK). Their work contributes substantially to our growth and competitiveness.

At this moment, in Europe supply and demand work does not match. We need to remember that migrants are more mobile than the EU citizens and therefore can add flexibility to the labour markets where is much needed.


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