MEMO/07/569

Brussels, 11^th December 2007

[Graphic in PDF & Word format]

Lisbon Strategy for Growth and Jobs: 2007 Strategic Report Country – Assessment of the National Reform Programmes

Main conclusions

Belgium

1. In the light of Belgium's 2007 Implementation Report and the Commission's assessment of progress made to implement key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Belgium has made good progress in implementing its National Reform Programme over the 2005-2007 period. Belgium has shown some progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows some policy response to the Council recommendations, but further reform is still necessary. There has been some response on the additional areas identified in the Council conclusions as requiring attention. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Among the strengths shown by the Belgium's 2007 Implementation Report are the emission reduction policies and the promising results of the guidance and monitoring system of unemployed people.

5. The policy areas in the Belgian National Reform Programme where challenges need to be tackled with the highest priority are reducing the tax burden on labour whilst strengthening fiscal consolidation and improving labour market performance. Against this background it is recommended that Belgium:

• continues efforts to further reduce the tax burden on labour towards the average of its neighbouring countries, especially by reducing the tax wedge on low skilled workers, while strengthening fiscal consolidation;
• reinforces the policy measures to improve the performance of its labour market through a comprehensive strategy, in accordance with an integrated flexicurity approach, to enhance labour market participation, lower regional disparities, and increase participation in lifelong learning.

6. In addition, it will be important for Belgium to focus on the following challenges: to fully implement the strategy aiming to ensure the long term sustainability of public finances, including expenditure restraints, fiscal surpluses, and a persistent reduction of government debt; urgently take further measures to improve competition in gas and electricity markets, including through independent and effective regulators and additional measures concerning transmission and distribution operators; to increase substantially its commitment to stimulating R&D and innovation notably by increasing both the level and impact of public funding and developing a coordinated policy mix at all levels; continuing the implementation of the measures to increase the employment rate for older workers and vulnerable groups, monitor their impact and, if need be, take further activation measures.

Note: There is a slight rephrasing of the country specific recommendations. Th number of recommendations (2) stays the same. The number of points to watch stays the same, but last year's point to watch on identifying further emission reduction policies and measures is removed. A new point to watch on increasing R&D and innovation has been added.

Bulgaria

1. In the light of Bulgaria’s 2007 Implementation Report and the Commission's assessment of its National Reform Programme and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate:

2. Overall, the National Reform Programme focuses on the right challenges, but in some areas lacks concrete and substantial measures in particular as regards strengthening administrative capacity. Furthermore the National Reform Programme lacks measures aimed at urgently and significantly reducing red tape to make the business environment more dynamic and competitive. Given the growing economic imbalances it is particularly important for Bulgaria to accelerate the implementation of its National Reform Programme in order to create the necessary conditions for sustainable growth and jobs in the medium to longer term.

3. The National Reform Programme's strengths include a clear problem analysis and right prioritisation and sequencing of reforms as well as strong political ownership. Important provisions for a tight monitoring of progress at the highest political level have been put in place, which should prove an effective tool for ensuring a rapid and effective implementation of the National Reform Programme. The National Reform Programme is furthermore underpinned by a tight fiscal policy which offers a solid basis for accelerating the needed structural reforms to ensure long-term growth.

4. The policy areas in the Bulgarian National Reform Programme where challenges need to be tackled with the highest priority and budgetary impacts of measures and details on the monitoring and evaluation procedures should be clearly spelled out are: administrative capacity; macro-economic imbalances; red tape; and the functioning of the labour market. Against this background, Bulgaria is recommended to:

• urgently strengthen administrative capacity in particular focus on key government functions, including regulatory authorities, and the judiciary.
• contain the growing current account deficit and inflationary pressures, in particular by a tight fiscal policy, improving the quality of public expenditure and promoting wage moderation in order to keep wage developments in line with productivity gains;
• take rapid measures substantially to cut red tape and shorten procedural delays in order to improve the business environment (in particular for SMEs and facilitating start-ups), which will also help in the fight against corruption;
• increase the quality of labour supply and the employment rate by improving the efficiency and effectiveness of active labour market policies and further reform the education system to raise skills to levels that better match labour market needs and reduce early school leaving.

5. In addition, it will be important for Bulgaria over the period of the National Reform Programme to focus on: taking further measures to ensure the long-term sustainability of public finances, in particular with regard to potential risks in terms of adequacy and sustainability of pensions; creating all necessary pre-conditions for strong competition in network industries; elaborating an integrated policy for R&D and innovation notably aimed at reforming the public R&D system, shifting public support to R&D- based on an overall R&D intensity target for 2010- towards more competitive funding focused on key priorities; tackling undeclared work by strengthening institutional capacity to perform inspections and ensure legal enforcement; completing the lifelong learning strategy and increasing participation.

Note: Since the Bulgarian National Reform Programme was submitted in March 2007, the Commission's assessment is mainly based on the quality of the policy response as well as on first steps taken towards its implementation.

Czech Republic

1. In the light of the 2007 Czech Republic Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. The Czech Republic has made some progress in implementing its National Reform Programme over the 2005-2007 period. The Czech Republic had made some progress on meeting the specific commitments agreed at the 2006 Spring European Council in the priority action areas.

3. The Implementation Report shows some policy response to the recommendations adopted by the Council. There has been some policy response on the additional areas requiring attention, as identified in the Council conclusions.

4. Among the strengths shown by the 2007 Czech Republic Implementation Report are the coherent strategy to improve the regulatory framework for enterprises, reforms to make work pay, of the curricula for primary and secondary education, to increase participation in tertiary education, and the adoption of the lifelong learning strategy.

5. The policy areas in the Czech Republic National Reform Programme where challenges need to be tackled with the highest priority are the long-term sustainability of public finances in the context of an ageing population, fulfilling the commitments for public R&D expenditure and further increasing its effectiveness, improving security and flexibility in the labour market, improving the efficiency and equity in education and training and increasing participation in lifelong learning. Against this background it is recommended that the Czech Republic:

• with a view to improving the long-term sustainability of public finances, implements the announced reform programme of the pension system without delay, and implements reforms announced in the healthcare system;
• meets the targets for public R&D expenditure and increases its effectiveness, notably by promoting a better collaboration between business, universities and public R&D institutions, and by providing the necessary human resources for research and development;
• within an integrated flexicurity approach, further modernises employment protection, including legislation, improves the efficiency and equity of education and training, especially its responsiveness to labour market needs, provide incentives to invest in training particularly for older workers and the low-skilled, and increases the diversification of tertiary education supply.

6. In addition, it will be important for the Czech Republic to focus over the period of the National Reform Programme on the following challenges: improving the protection of intellectual property rights; speeding up progress in the ICT area, including by implementing and monitoring a fully enabled legal environment for e-government; improving access to finance for innovative companies, in particular through further developing the venture capital market; increasing the coverage of entrepreneurship education; better integrating disadvantaged groups into the labour market; reducing regional disparities; reconciling work and family life; tackling the gender pay gap; and implementing the active ageing strategy.

Note: There is a slight rephrasing of the country specific recommendations, but the number of recommendations stays the same (3). The number of points to watch goes down to 9 (from 10) compared to last year's assessment. The point to watch on reducing the administrative burden on enterprises has been removed.

Denmark

1. In the light of the 2007 Danish Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Denmark has been making very good progress in implementing its National Reform Programme over the 2005-2007 period. Denmark has shown good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a good policy response to the areas identified by the Council as requiring attention.

4. Among the strengths shown by the 2007 Danish Implementation Report is the comprehensive and integrated approach to reform planning and implementation, within a framework for ensuring long-term fiscal sustainability, combined with the active participation of stakeholders.

5. It will be important for Denmark over the period of the National Reform Programme to focus on the following challenges: continuing to implement measures on energy interconnection in order to improve the functioning of the electricity and gas markets; increasing labour supply and hours worked over the medium term, including further initiatives to work and additional steps to integrate older workers, immigrants and their descendants into the labour market; reinforcing, in a cost-effective manner, measures to improve primary and secondary education and the number of students finalising upper-secondary or tertiary education to reach the ambitious targets set.

Note: The number of points of watch goes down to 3 (from 5) compared to last year's assessment. The points to watch on competition law and emissions have been removed.

Germany

1. In the light of Germany’s 2007 Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Germany has made good progress in implementing its National Reform Programme over 2005-2007 and good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows that there has been some policy response to the recommendations adopted by the Council. There has been a good response in consolidating public finances, and a more limited response regarding competition in services and on tackling structural unemployment. There has been some response on the additional areas identified in the Council conclusions as requiring attention. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Among the strengths shown by the 2007 German Implementation Report are: the consolidation of public finances; the strengthening of high-class research and innovation; the progress in tackling youth unemployment; and the determined approach to increasing childcare facilities.

5. The policy areas in the German National Reform Programme where challenges need to be tackled with the highest priority: are competition in services and structural unemployment. Against this background it is recommended that Germany:

• improve the framework for competition in services, notably by continuing to relax restrictive rules in regulated trades and professions, improving public procurement procedures, without exempting new telecom markets from regulation and effectively regulating wholesale bitstream access;
• tackle structural unemployment by maintaining the path of the reforms outlined in the National Reform Programme. Focus should be placed on integrating the low skilled into the labour market through a flexicurity approach combining better access to qualifications with the implementation of the announced comprehensive tax and –benefit reform and more effective employment services for unemployed recipients of basic income support.

6. In addition, it will be important for Germany over the period of the National Reform Programme to focus on the following challenges: securing the long-term sustainability of public finances by firmly locking in the achieved fiscal consolidation, including in the ongoing revision of budgetary institutions in the federal system, and by carefully monitoring the impact of the health care reform to keep expenditure growth in check and strength efficiency in the health sector; improving the framework for competition in the rail sector, and in the gas and electricity networks, where competition remains insufficient due to high concentration; continue further with the establishment of one-stop-shops and the improvement of start-up times; and in the context of the planned measures to promote lifelong learning, enhance continuing vocational training.

Note: The number of country specific recommendations has been reduced from 3 to 2 compared to last year's assessment. The country specific recommendation on sustainability of public finances has been removed (and has become a point to watch) after a good policy response. The number of points of watch stays the same (4) compared to last year's assessment but the point to watch on increasing the provision of childcare facilities has been removed.

Estonia

1. In the light of the 2007 Estonian Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Estonia has been making very good progress in implementing its National Reform Programme over the 2005-2007 period. Estonia has shown good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation report shows some policy response to the areas identified by the Council as requiring attention. There has been some policy response on competition policy, active labour market policies and educational policy. The most substantial response has been on R&D and Innovation policy. Estonia has not moved significantly forward on the modernisation of labour law.

4. Among the strengths shown by the Estonian Implementation Report are: the establishment of an ambitious long-term and systematic new R&D and Innovation strategy; the measures to facilitate start-ups and financing of innovative SMEs; a strong increase in the employment rate and the measures for raising the quality of higher and vocational education.

5. The policy areas in the Estonian National Reform Programme where challenges need to be tackled with the highest priority are: the employment area where progress on the modernisation of labour law has been limited.

6. It will be important for Estonia over the period of the National Reform Programme to focus on the following challenges: improving macro-economic stability and containing inflation through adequate structural reforms and determined fiscal policy; reinforcing efforts to ensure that R&D results are translated into innovative services or products; encouraging closer cooperation between universities and enterprises; launching the new immunity and leniency programme and strengthening competition enforcement; reinforcing active labour market policies and increasing the supply of skilled labour by implementing a comprehensive lifelong learning strategy that responds to labour market needs; reducing labour market rigidities by urgent progress towards labour law modernisation and by promoting flexible forms of work.

Note: The number of points of watch stays the same (6) compared to last year's assessment but the point to watch on more effective use of R&D and innovation expenditure is removed and a new point to watch on improving macro-economic stability is added.

Ireland

1. In the light of the 2007 Irish Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Ireland has been making very good progress in implementing its National Reform Programme over the 2005-2007 period. Ireland has been showing good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a good policy response to the areas identified by the Council as requiring attention. The Implementation Report does not however specifically address the recommendations issued to the euro area countries.

4. Among the strengths of the Irish National Reform Programme and its implementation is the comprehensive and coherent national strategy. The document also highlights the usefulness of the Lisbon process through its role in focussing on the prioritisation and implementation of specific actions, and emphasising its key role in addressing the challenges and opportunities associated with globalisation.

5. It will be important for Ireland over the period of the National Reform Programme to focus on the following challenges for the future: speeding up progress in formulating concrete measures to reform pension arrangements; an intermediate target for R&D investment should be set for 2010; accelerating progress in increasing labour market participation, including by establishing a comprehensive childcare infrastructure; further developing the policy framework for the labour market and social integration of migrants and placing a particular emphasis on support to older and low-skilled workers; and developments in the housing market, affecting short and medium-term growth, should be carefully monitored.

Note: There is a slight rephrasing of the points to watch. The number of points to watch (5) stays the same compared to last year's assessment.

Greece

1. In the light of the 2007 Greek Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Greece has made steady progress in implementing its National Reform Programme over the period 2005-2007. Greece has shown some progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows there has been some policy response to the recommendations adopted by the Council. There has been some response on the additional areas identified in the Council conclusions as requiring attention. The Implementation Report does not however specifically address the recommendations issued to the euro area countries.

4. Amongst the strengths shown by the 2007 Greek Implementation Report are: good progress made to consolidate public finances, promoting female employment, implementing internal market legislation, and improving the business environment. There are promising signs of progress to fix a timetable to implement pension reforms designed to improve long-term fiscal sustainability.

5. Policy areas in the Greek National Reform Programme where challenges need to be tackled with the highest priority are: long-term fiscal sustainability, implementation of the public administration reform agenda, the consolidation of active labour market policies, tackling high youth unemployment, tackling undeclared work and acceleration of education and life-long learning reforms. Against this background it is recommended that Greece:

• pursue fiscal consolidation and debt reduction, and proceeds rapidly with the implementation of the pension reform, with a view to improving long-term fiscal sustainability;
• implement the reform of its public administration, by building up effective regulatory, control and enforcement capacities, by modernising its human resources policy; and through effective use of the Structural Funds;
• within an integrated flexicurity approach, modernise employment protection including legislation, reduce the tax burden on labour, strengthen active labour market policies and transform undeclared work into formal employment;
• accelerate the implementation of reforms on education and lifelong learning, in order to improve quality and responsiveness to labour market needs, increase participation, and allow for a smooth transition into employment, particularly for the young.

6. In addition, it will be important for Greece over the period of the National Reform Programme to focus on the following challenges: contain inflationary pressures and the current account deficit; accelerate efforts to set up a research and innovation strategy and increase investment in R&D; improve further the transposition of internal market legislation; speed up progress towards meeting the SME policy targets set by the 2006 Spring European Council; strengthen competition in the area of professional services; protect the environment by prioritising effective solid and water waste management and curb greenhouse gas emissions; encourage further female participation in employment; reduce early school leaving and put in place a coherent active ageing strategy.

Note: Aside from a slight rephrasing of the country specific recommendations, the number of recommendations stays the same (4). The number of points to watch increases to 7 (from 5) compared to last year's assessment. New points to watch on containing inflationary pressures and the current account deficit and strengthening competition in professional services have been added. The country specific recommendation on the labour market has been rephrased to account for the good policy response to tackling early school leaving - which has become a point to watch.

Spain

1. In the light of Spain's 2007 Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Spain has made good progress with implementing its National Reform Programme over the 2005-2007 period. Spain has shown good progress in fulfilling the commitments agreed by the 2006 Spring European Council in three of the four priority action areas.

3. The Implementation Report shows a good policy response to the recommendations adopted by the Council. With regard to the other areas on which Spain was asked to focus, there has been a limited response in the macro-economic domain. The points to watch in the micro-economic and employment domains have been partially addressed. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Among the strengths shown by Spain’s 2007 Implementation Report are: a faster than targeted reduction of government debt; good progress on implementation of the R&D and innovation plan; and satisfactory progress towards the employment rate objective, in particular for female employment.

5. The policy areas in the Spanish National Reform Programme where challenges now need to be tackled with the highest priority are improving competition in electricity markets and further improvements to education and training. Against this background it is recommended that Spain:

• take further measures to increase competition in the energy sector, notably by eliminating the distorting price setting mechanisms and improving cross-border interconnection capacity to ensure security of supply;
• ensure the effective implementation of education reforms, also at regional level, to reduce early school leaving

6. In addition, it will be important for Spain over the period of the National Reform Programme to focus on the following challenges: contain the current account deficit and inflationary pressures and monitor developments in the housing market; raising competition in professional services and retail markets; improving the regulatory framework; implementing environmental measures, in particular to reduce CO2 emissions; further modernise employment protection, including legislation, in order to foster flexicurity in the labour market to counter segmentation and promote the attractiveness of part-time work; raising productivity by raising skill levels and innovation; integrating immigrants into the labour market; further increase of access to childcare; and implement pension and healthcare reforms so as to improve long term fiscal sustainability.

Note: The number of country specific recommendations goes down from 3 to 2. The country specific recommendation on modernising employment protection has been removed. The number of points of watch increases to 9 (from 7) compared to last year's assessment. A new point to watch on modernising employment protection has been added.

France

1. In the light of France's 2007 Implementation Report and the Commission's assessment of progress made in implementation of key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate:

2. France has made steady progress in implementing its National Reform Programme over the 2005-2007 period. France has shown some progress in fulfilling the commitment agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a limited policy response to the recommendations issued to France by the Council. There has been some policy response on the other areas identified in the Council conclusions as requiring attention in particular an important reform has been undertaken with regard to stimulating and supporting entrepreneurship and young businesses. The Implementation Report does not however specifically address the recommendations issued to the euro area countries.

4. Among the strengths shown by French 2007 Implementation Report are: the reform of R&D and innovation strategies, the concrete results of measures in the area of ICT, and the announced, comprehensive set of measures to improve the functioning of the labour market, including through changes in legislation.

5. The Implementation Report presents a noticeably modified strategy in which employment is to become a factor of economic policy aiming at enhanced growth. The extent to which increased competition is integrated in this new policy framework is, as yet, less clear. It is important that France strengthens its budgetary efforts in order to simultaneously implement a concerted reform strategy and further consolidates public finances. Significant or sustained further measures are needed to achieve budgetary consolidation, to increase competition in network industries and to improve labour market performance. Against this background, it is recommended that France:

• ensures the sustainability of public finances, taking into account the ageing of the population, by considerably strengthening budgetary consolidation and debt reduction, and with a view to achieving a balanced budget in 2010. The negotiation on pension systems scheduled for 2008 will have to build on the gains made following the introduction of the 2003 reform.
• improves the framework for competition in the gas, electricity and rail freight sectors.
• within an integrated flexicurity approach, improves the efficiency of lifelong learning and modernises employment protection, in order notably to combat labour market segmentation among contract types, and make it easier to switch between fixed term contracts and permanent contracts.

6. In addition, it will be important for France over the period of the National Reform Programme to focus on the following challenges: further strengthening competition in regulated trades and professions, further enhancing better regulation policies by including impact assessments; continuing to increase labour supply and making work pay.

Note: There is a slight rephrasing of the country specific recommendations. The number of recommendations (3) and points to watch (3) stays the same (3).

Italy

1. In the light of the 2007 Italian Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate:

2. Italy has made good progress in implementing its National Reform Programme over the 2005-2007 period. There has been some response in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority areas.

3. The Implementation Report shows some policy response to the recommendations adopted by the Council. Given the scale of the challenge, significant further reforms are needed. There has been some policy response on the additional areas identified in the Council conclusions as requiring attention. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Among the strengths shown by the 2007 Italian Implementation Report are the initial steps to improve the business environment, measures to enhance competition in professional and financial services and retail distribution, recent improvements in its transposition deficit of EU legislation; and e-government actions to modernise the public sector.

5. The policy areas in the Italian National Reform Programme where challenges need to be tackled with the highest priority are: fiscal sustainability, where efforts need to be pursued and the pension reform process needs to be completed; enhanced competition in product and service markets and pursuing the full implementation of announced reforms; further fighting regional disparities in the employment; and improving education and lifelong learning. Against this background it is recommended that Italy:

• rigorously pursues fiscal consolidation, in particular by curbing growth in current primary expenditure, and completes the pension reform process with a view to improving the long-term sustainability of public finances;
• continues the progress made to enhance competition in product and services markets and vigorously pursues the implementation of announced reforms;
• improves the quality and labour market relevance of education, promotes lifelong learning, tackles undeclared work and ensures the efficient operation of employment services, within a flexicurity approach and with a view to reducing regional disparities.

6. In addition, it will be important for Italy to focus over the period of the National Reform Programme on the following challenges: increasing R&D investment and efficiency, where despite welcome policy developments, further efforts are needed to reach the 2010 target and to enhance the efficiency of public spending; increasing efforts to meet the CO2 emission reduction targets; improving the quality of regulation by strengthening and fully implementing the system of impact assessment, notably for SMEs; implementing plans to improve infrastructure; increasing childcare provision with a view to reconciling work and family life and fostering labour market participation of women; and putting in place a consistent active ageing strategy to increase employment of older workers, and with a view to improving pension adequacy.

Note: The number of country specific recommendations goes down from 4 to 3. The country specific recommendations on reducing regional disparities in employment and developing a comprehensive lifelong learning strategy have been merged, while the childcare element of the country specific recommendation has been added as a point to watch because of a promising policy response. The number of points of watch increases to 6 (from 5) compared to last year's assessment. The point to watch on sustainable use of resources has been removed. New points to watch on CO2 emission reduction targets and active ageing have been added.

Cyprus

1. In the light of the 2007 Implementation Report for Cyprus and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Cyprus has made good progress in the implementation of its National Reform Programme over the 2005-2007 period. Cyprus had made good progress in fulfilling the specific commitments agreed at the 2006 Spring European Council in the priority areas.

3. The Implementation Report shows a good policy response to the recommendations adopted by the Council. With a view to the long term sustainability of public finances there has been a satisfactory initial response in reforming the health care system but a limited response on pension reform, enhancing lifelong learning and reforming the vocational education and training system. There has been some policy response on the additional areas identified in the Council conclusions as requiring attention.

4. Amongst the strengths of the Implementation Report is progress in the field of fiscal consolidation, in both deficit and debt reduction; a new policy to develop a comprehensive research and innovation system; and the maintenance of a good overall employment performance supported by a broad range of active labour market measures.

5. The policy areas in the Cypriot National Reform Programme where weaknesses need to be tackled with the highest priority are: addressing ageing-related expenditure; implementing a lifelong learning strategy and increasing training and labour market opportunities for young people. Against this background, it is recommended that Cyprus:

• take steps to implement reforms of the pension and health care systems and sets a timetable for their implementation with a view to improving fiscal sustainability;
• enhance life long learning, and increase employment and training opportunities for young people by implementing the reforms of the vocational, education, training and apprenticeship system.

6. In addition, it will be important for Cyprus over the period of the National Reform Programme to focus on measures to: improve competition in the area of professional services; further stimulate private sector R&D; and address the very high gender pay gap.

Note: The number of country specific recommendations stays the same (2) compared to last year's assessment. The number of points to watch increases to 3 (from 2) compared to last year's assessment. Last year's point to watch on venture capital investments has been removed. New points to watch on private sector R&D and the gender pay gap have been added.

Latvia

1. In the light of Latvia's 2007 Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Latvia has made some progress in implementing its National Reform Programme over the 2005-2007 period and some progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows that there has been some progress in responding to the recommendations adopted by the Council. There has been a mixed response to the additional areas identified by the 2007 Spring European Council as requiring attention.

4. Among the strengths shown by the Implementation Report are: the first positive steps in the field of knowledge and innovation; the progress achieved on certain SME and entrepreneurship issues; the strengthened role of the Competition Authority in market surveillance; and further measures to promote energy efficiency and the use of renewable energy resources. Latvia has also implemented a set of measures that have successfully supported labour market performance.

5. The policy areas in the Latvian National Reform Programme where weaknesses need to be tackled with the highest priority are: more concrete measures to secure macroeconomic stability in the face of overheating pressures; further development of the R&D strategy to improve prioritisation and increase private sector involvement; and stronger measures to increase labour supply and strengthen the skills of the labour force. Against this background, it is recommended that Latvia:

• pursue a more restrictive fiscal policy, with a careful prioritisation of expenditures and wage developments that are in line with productivity, in order to contribute to correcting overheating pressures and reducing the risk of macroeconomic instability;
• make faster progress in the implementation of the research and innovation policy reforms, in order to meet the ambitious targets set. This concerns especially policies to stimulate partnerships between research and education institutions and businesses;
• within an integrated flexicurity approach, intensifies efforts to increase labour supply and productivity by improving regional mobility and, enhancing the responsiveness of education and training systems to labour market needs, by putting in place a lifelong learning system and pursuing active labour market policies.

6. In addition, it will be important for Latvia over the period of the National Reform Programme to focus on: improving further the regulatory environment, notably by means of an explicit better regulation policy; and improving access to childcare.

Note: Aside from a slight rephrasing, the number of country specific recommendations (3) stays the same compared to last year's assessment. The number of points to watch decreases to 2 (from 4) compared to last year's assessment. The point to watch on promoting entrepreneurship education has been removed and the point to watch on pursuing active labour market policies has been included in the country specific recommendation.

Lithuania

1. In the light of the 2007 Lithuania's Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Lithuania has made good progress in implementing its National Reform Programme over 2005-2007. Lithuania has also been showing some progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a limited policy response to the recommendations adopted by the Council. There has been some policy response on the additional areas identified by the Council as requiring attention.

4. Among the strengths shown by the 2007 Lithuania's Implementation Report are: approval of priority areas for R&D development and adoption of the Vocational Training Law.

5. The policy areas in the Lithuanian National Reform Programme where challenges need to be tackled with the highest priority are implementing measures: increasing and improving the efficiency of investment in R&D and support for innovation; to increase internal mobility of labour, promote adult participation in lifelong learning, especially among older workers, and reform the education and training systems to ensure quality and labour market relevance. Against this background it is recommended that Lithuania:

• accelerates the implementation of the structural reform of its R&D and innovation system so as to raise the efficiency of public spending and create conditions favourable to increased private investments in this area, including for innovation in traditional and low-tech sectors;
• intensifies efforts to increase the supply of skilled labour, with a special focus on the participation of older workers by: improving the regional mobility, reforming the education and training systems to ensure their quality and relevance to the labour market needs and implementing the revised lifelong learning strategy.

6. In addition, it will be important for Lithuania to focus over the period of the National Reform Programme on the following challenges: improving macro-economic stability and containing inflation; increasing foreign direct investment; improving the efficiency of regulatory environment with particular focus on legislative simplification; improving youth employability; expanding entrepreneurship education; increasing the availability of childcare; and strengthening occupational health and safety.

Note: Despite a slight rephrasing, the number of country specific recommendations (2) stays the same compared to last year's assessment. The number of points of watch decreases to 7 (from 8) compared to last year's assessment. The point to watch on environmental protection has been removed.

Luxembourg

1. In the light of the Luxembourg 2007 Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Luxemburg has made very good progress in implementing its National Reform Programme over the 2005-2007 period. Luxembourg has shown some progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a mixed policy response to the areas identified by the Council as requiring attention. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Among the strengths shown by the Luxembourg's 2007 Implementation Report are: investments to integrate the economy into the international context, efforts to develop an extensive simplification policy focussed on business needs, the development of childcare infrastructures, reform of professional training, and the introduction of new forms of employment.

5. It will be important for Luxembourg over the period of the National Reform Programme to focus on the following challenges: accelerate the implementation of measures aimed at increasing the employment rate of older workers, in particular through reform to discourage early retirement; take further measures to reduce the number of early school leavers, and to remove the artificial barriers between different types of education; closely monitoring the impact of recently adopted measures to reduce unemployment amongst the young; and in order to deliver a more attractive economic environment, greater support is needed to deliver competitive markets, improve the transposition of EU legislation, and support SMEs.

Note: The number of points to watch has been reduced to 4 (from 5) compared to last year's assessment. The points to watch on increasing the employment rate of older workers and reforming the early-retirement system have been merged.

Hungary

1. In the light of the 2007 Hungarian Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Hungary has made limited progress in implementing its National Reform Programme over 2005-2007. Hungary has shown limited progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3 The Implementation Report shows a mixed policy response to the recommendations adopted at the Council. There has been some policy response on the additional areas identified in the Council conclusions as requiring more attention.

4. Among the strengths shown by the 2007 Implementation Report are: strong improvements on fiscal consolidation, the adoption of various structural reform steps, the shortening of the setting-up time for businesses and the efforts to reduce administrative costs, the introduction of further incentives to work and to remain on the labour market and the transformation of undeclared work into formal employment.

5. The policy areas in the Hungarian National Reform Programme where challenges need to be tackled with the highest priority are: correcting the excessive deficit as planned, further improving the sustainability of public finances, improving the labour market situation of disadvantaged groups, reducing persistent regional disparities in employment and reforming the education and training systems. Against this background, it is recommended that Hungary:

• continues to implement the necessary measures to ensure a durable reduction of the government deficit and of the public debt ratio, with increased reliance on the expenditure side, including through the establishment of more thorough and comprehensive expenditure rules;
• continues to reform the public administration, health care, pension and education systems with a view to ensuring long-term fiscal sustainability and improving economic efficiency. This should include steps to further limit early retirement, reduce the number of new recipients of disability pensions and further restructure health care;
• reinforces active labour market policies to improve the labour market situation of disadvantaged groups; and reduces persistent regional disparities in employment;
• ensures access to high quality education and training for all, upgrade skill levels, and increases responsiveness of education and training systems to labour market needs.

6. In addition, it will be important for Hungary over the period of the National Reform Programme to focus on the following challenges for the future: further reforming the public research system, increasing the effectiveness of public R&D expenditure and improving linkages between public and private R&D; reducing and redirecting state aids; improving the regulatory environment through further reducing administrative burden and legislative simplification; introducing further incentives to work and to remain in the labour market; ensuring better reconciliation of work and private life; completing the establishment of the integrated employment and social services system; transforming undeclared work into formal employment; and implementing the lifelong learning strategy.

Note: Despite some slight rephrasing, the number of country specific recommendations (4) has stayed the same as last year's assessment. The number of points (8) to watch has also stayed the same.

Malta

1. In the light of the 2007 Maltese Implementation Report and the Commission’s assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Malta has made good progress in the implementation of its National Reform Programme over the 2005-2007 period. Malta has shown good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a limited policy response to recommendations adopted by the Council. There has also been a limited policy response to the additional areas identified by the Council as requiring attention.

4. Among the strengths of the Maltese National Reform Programme and its implementation are its governance and the progress achieved in fiscal consolidation as well as progress in strengthening the business environment, liberalising certain markets (e.g. ports), reforming education and increasing ICT use.

5. The policy areas in the National Reform Programme where weaknesses need to be tackled with the highest priority are competition policy and persistent labour market problems. Against this background, it is recommended that Malta:

• strengthens competition, notably by reducing state aids and redirecting them towards horizontal objectives as well as by reinforcing the competition authority and by further steps in opening up professional services;
• steps up efforts to attract more people into the labour market, particularly women and older workers; maintain efforts to tackle undeclared work and take further action on the benefit system to make declared work more attractive.

6. In addition, it will be important for Malta over the period of the National Reform Programme to focus on: continue implementing and reinforcing measures on health care reform; further improving the regulatory environment by continuing simplifying legislation, by introducing systematic impact assessments and effective one stop shops for business start-ups; diversifying its energy sources, including enhancing energy efficiency and renewable energy and connecting Malta to Europe’s energy networks; continuing efforts to raise educational attainment and reduce early school leaving.

Note: Despite a slight rephrasing (the employment rate of older workers becomes part of the recommendation), the number of country specific recommendations (2) has stayed the same compared to last year's assessment. The number of points to watch has decreased to 4 (from 6) compared to last year's assessment. The points to watch on measuring R&D expenditure and increasing the employment rate of older workers have been removed.

The Netherlands

1. In the light of the 2007 Dutch Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate:

2. The Netherlands has made significant progress in implementing its National Reform Programme over the 2005-2007 period. The Netherlands has shown a good response to fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows some policy response to the recommendation adopted by the Council. There has been a limited policy response on the additional areas identified in the Council conclusions as requiring attention. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Among the strengths of the National Reform Programme and its implementation are: the efforts to reduce administrative burden and to improve the business climate; the ambitious plans in the area of energy and climate change; and incentives to improve childcare provision.

5. The policy area in the Dutch National Reform Programme where challenges need to be tackled with the highest priority is in improving labour supply. Against this background it is recommended that the Netherlands:

• take further measures to improve labour supply of women, older workers and disadvantaged groups with a view to raising overall hours worked in the economy.

6. In addition, it will be important for the Netherlands over the period of the National Reform Programme to focus on the following challenges: stepping up efforts aimed at increasing private sector R&D expenditure by avoiding fragmented policy governance structures and putting in place a coherent strategy for R&D and innovation which addresses the interaction between private R&D and public research as well as foreign R&D investment.

Note: Despite a slight rephrasing (increasing number of hours worked has become part of the recommendation), the number of country specific recommendations (1) has stayed the same compared to last year's assessment. The number of points to watch has decreased to 1 (from 3) compared to last year's assessment. The points to watch on creating a single public administration point for the recruitment of the first employee and raising overall hours worked in the economy have been removed.

Austria

1. In the light of the 2007 Austrian Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate:

2. Austria has made significant progress in implementing its National Reform Programme over the 2005-2007 period. Austria has shown good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a limited policy response to the employment recommendation adopted by the Council. There has been some response on the additional areas identified in the Council conclusions as requiring attention. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Among the strengths shown by the 2007 Austrian Implementation Report are: good practices to boost innovation, such as the innovation voucher; increased budgets for R&D in line with the 3% target; the creation of a climate and energy fund; the successful implementation and further development of its flexicurity model.

5. The policy areas in the Austrian National Reform Programme where challenges need to be tackled with the highest priority are: increasing labour supply of older workers and improving the skills and employability of disadvantaged young people. Against this background it is recommended that Austria:

• further improve incentives for older workers to continue working by implementing a comprehensive strategy including enhanced job-related training, adaptation of working conditions and tightening the conditions for early retirement; and improve education outcomes for vulnerable youth.

6. In addition, it will be important for Austria to focus over the period of the National Reform Programme on the following challenges: strengthening the fiscal adjustment in order to achieve a balanced budget before 2010; increasing competition in services, in particular in professional services; strengthening entrepreneurship education; identifying further emission reduction policies and measures; tackling the gender segregation of the labour market, including by further improving the availability of childcare.

Note: Despite a slight rephrasing, the number of country specific recommendations (1) and points to watch (5) has stayed the same compared to last year's assessment.

Poland

1. In the light of the 2007 Poland's Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Poland has made limited progress in implementing its National Reform Programme over the 2005-2007 period and has shown limited progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a mixed policy response to the recommendations adopted by the Council. There has been some policy response on the additional areas identified in the Council conclusions as requiring attention.

4. Among the strengths shown by the 2007 Poland's Implementation report are: the attention paid to developing entrepreneurship; initial steps to bring down the tax burden on labour; the priority and funding allocated to active labour market measures; and the strong linkage of the National Reform Programme priorities with EU funding.

5. The policy areas in the Polish National Reform Programme where challenges need to be tackled with the highest priority are: a stronger commitment to address the sustainability of the public finances; vigorous actions to improve regulation and to promote opening of markets in network industries; rapid implementation of the R&D reforms; further measures to address the low employment rate of older workers; better focusing of active labour market policy on the most vulnerable groups; and putting in place the lifelong learning strategy. Against this background Poland is recommended to:

• strengthen the fiscal consolidation and supplement the nominal state budget deficit "anchor" (deficit ceiling) with further mechanisms to enhance control over expenditure;
• improve the framework for competition in network industries, including through a review of the role of regulators, and vigorously continue the process of the liberalisation of energy markets;
• pursue the reform of the public research sector with a view to R&D and innovation being boosted, and implementing the framework for private sector R&D, thereby maximising the benefits from foreign direct investment;
• with a view to developing an integrated flexicurity approach, increase the level and efficiency of active labour market policy, notably for older persons and groups vulnerable to poverty, review benefit systems to improve the incentive to work, put in place the lifelong learning strategy, and modernise education and training systems in view of labour market needs.

6. In addition, it will be important for Poland over the period of the National Reform Programme to focus on the following challenges: upgrading transport infrastructure; speeding-up the business registration process; ensuring timely implementation of the e-government programmes; improve the transposition of internal market legislation; and increasing the provision of childcare facilities.

Note: Despite a slight rephrasing, the number of country specific recommendations (4) has stayed the same compared to last year's assessment. The number of points to watch has decreased to 5 (from 7) compared to last year's assessment. The points to watch on improving environmental protection and ensuring an effective framework for competition in the financial sector have been removed. New points to watch have been introduced on e-government programmes and internal market legislation. The points to watch on state aids and ensuring the alignment of cohesion policy instruments with the priorities highlighted in the Implementation Report have been removed.

Portugal

1. In the light of the 2007 Portuguese Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Portugal has made good progress in implementing its National Reform Programme over the 2005-2007 period. Portugal has shown good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a good policy response to the recommendations issued by the Council. There has also been some policy response on the additional areas identified by the Council conclusions as requiring attention. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Some of the strengths shown by the 2007 Portuguese Implementation Report are: the progress achieved in correcting fiscal imbalances and promoting sustainable reforms of the public administration, on pension and health-care reform, progress on unlocking business potential and the implementation of the Technological Plan.

5. The policy areas in Portugal's National Reform Programme where challenges need to be tackled with the highest priority are: consolidating public finances, whilst improving its quality and sustainability, and gearing public spending towards raising Portugal's growth potential; improving the efficiency of the educational system notably by improving attainment levels and reducing early school leaving; modernising employment protection to curb the segmentation of the labour market. Against this background it is recommended that Portugal:

• in the context of the on-going correction of fiscal imbalances and public administration reform, redirect public spending towards uses more supportive to potential economic growth, while maintaining firm expenditure control overall;
• further implement measures to strongly improve the efficiency of the educational system notably by improving attainment levels of the young, fighting early school leaving and developing a vocational training system that is relevant to the labour market needs and based on the National Qualifications Framework;
• continue efforts to modernise employment protection, including legislation to reduce the high levels of labour market segmentation, within the flexicurity approach.

6. In addition, it will be important for Portugal over the period of the National Reform Programme to focus on the following challenges for the future: narrowing its current account deficit in a sustained way; pursuing the implementation of the Technological Plan, consolidating the linkages between research, higher education and industry, and involving the private sector further; ensuring effective competition, notably in energy and financial services markets; further implement a better regulation programme and in particular strengthen the impact assessment system; reducing the deficit in transposing EU legislation into national law; devising and implementing the measures needed to reduce green house gas emissions; and continuing to address factors undermining social cohesion.

Note: Despite a slight rephrasing, the number of country specific recommendations (3) has stayed the same as in last year's assessment. The number of points to watch has increased to 6 (from 5) compared to last year's assessment. A new point to watch on better regulation has been added.

Romania

1. In the light of Romania’s 2007 Implementation Report and the Commission's assessment of the National Reform Programme and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Overall, the National Reform Programme focuses on the right challenges. However, in some critical areas, such as strengthening administrative capacity and improving the business environment, the programme lacks ambition. In other areas, information about the content of measures, their timelines and budgetary support is sometimes lacking which makes it difficult to assess whether measures will bring solutions to the problems and challenges identified.

3. The programme's strengths include initiatives aimed at implementing a medium-term expenditure framework, reducing non-wage labour costs and reforming research structures.

4. The policy areas in the Romanian National Reform Programme where weaknesses need to be tackled with the highest priority are: strengthening administrative capacity, addressing overheating and improving budget planning and the quality of expenditure; cutting red tape and activating labour supply and raising skill levels. Against this background, it is recommended that Romania:

• urgently strengthen administrative capacity at both central and local levels of government by building up effective regulatory, control and enforcement capacity;
• avoid pro-cyclical fiscal policy to contain the growing current account deficit and inflationary pressures, keep wage developments in line with productivity growth and improve budget planning and execution as well as the quality of public finances by reviewing the composition of public spending and by reducing and redirecting state aid to horizontal objectives.
• substantially reduce administrative procedures and delays to obtain authorisations as part of a coherent better regulation policy in order to improve the business environment.
• implement an integrated approach to increasing employment, activity rates and productivity levels, especially by accelerating reforms of the education system to respond better to labour market needs, by reducing early school leaving, by significantly increasing adult participation in education and training; and by transforming subsistence/semi-subsistence farming into sustainable employment.

5. In addition it will be important for Romania over the period of the National Reform Programme to focus on: taking further measures to ensure the long-term sustainability of public finances, in particular with regard to potential risks in terms of adequacy and sustainability of pensions; reinforcing measures to tackle fragmentation of the research base whilst ensuring that planned increases in public research funding yield effective returns by vigorously implementing the national R&D and innovation strategy and by regularly monitoring its results; pursuing a more integrated approach to infrastructure development and roll-out of ICT; intensifying efforts to tackle undeclared work; improving the effectiveness and geographical scope of public employment services, particularly to assist vulnerable groups.

Note: Since the Romanian National Reform Programme was submitted at the end of July 2007, the Commission's assessment is mainly based on the analysis of the main priorities and of Romania's proposed approach to sequencing its reforms.

Slovenia

1. In the light of the 2007 Slovenian Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Slovenia has made good progress in implementing its National Reform Programme over the 2005-2007 period. Slovenia has also been showing some progress in fulfilling the commitments agreed by the 2006 Spring European Council.

3. The Implementation Report shows some policy response to the recommendations issues by the Council. There has also been some policy response on the additional areas identified in the Council conclusions as requiring attention. The Implementation Report does not however specifically address the recommendations issued to the euro area countries.

4. Among the strengths shown by the 2007 Implementation Report are: the involvement of social partners in drafting all major labour market reforms; efforts to strengthen the link between education and scholarship systems and the economy; the shortening of business start-up times and the reduction of administrative burden. Slovenia’s entry into the euro area is the central achievement in the macro field.

5. The policy areas in the National Reform Programme where challenges need to be tackled with the highest priority are: further pension reform and effective implementation of the active ageing strategy; and a more flexible labour market combined with a more effective personalised approach in the implementation of active labour market policies. Against this background it is recommended that Slovenia:

• take further steps to strengthen the reform of the pension system and promote active ageing, with a view to increasing the employment rate of older workers and improving long-term sustainability.
• within an integrated flexicurity approach, promotes more flexible contractual arrangements and improves the effectiveness of employment services, particularly in relation to persons with low employment prospects, in order to counter labour market segmentation mainly affecting young people. 

6. In addition, it will be important for Slovenia to focus over the period of the National Reform Programme on the following challenges: develop an effective research and innovation strategy and ensure its effective implementation; also with a view to containing inflation, improve competition in the services sector, with particular emphasis on retail, financial services, utilities and professional services; improve implementation of energy efficiency measures, particularly with regard to CO₂ emissions and unfulfilled Kyoto targets; implement the ambitious plans to strengthen the link between the education system and the labour market.

Note: Despite a slight rephrasing, the number of country specific recommendations (2) has stayed the same compared to last year's assessment. The number of points to watch has decreased to 4 (from 8) compared to last year's assessment. The points to watch on intellectual property rights, business start-ups, youth employment and strengthening the role of the new Office for Growth and of the Slovenian Technology Agency have been removed. Youth employment has become part of the country specific recommendation.

Slovakia

1. In the light of the 2007 Slovak Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Slovakia has made some progress in implementing its National Reform Programme over the period 2005-2007. There has been a limited response in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority areas.

3. The Implementation Report shows a mixed policy response to the recommendations adopted by the Council. Further reforms are necessary to increase R&D and education expenditure, implement strategies in the micro-economic area, to tackle long-term unemployment and to complete education and training reform. There has been a mixed response on the additional areas identified in the Council conclusions as requiring attention.

4. Among the strengths shown by the 2007 Slovak Implementation Report are: the foreseen reduction of the public finance deficit to below 3% of GDP in 2007; the adoption of a number of strategy documents in the area of R&D and innovation, energy efficiency and renewably energy; the partial implementation of a one-stop-shop for start-up companies; the revision of employment legislation; the adoption of the lifelong learning strategy; and efforts to revise active labour market policies to better comply with labour market developments.

5. The policy areas in the Slovak National Reform Programme where challenges need to be tackled with highest priority are: increasing expenditure to education, R&D and innovation, improving the regulatory environment, tackling long-term unemployment, completing the reform of the education and training system and raising its quality in line with labour market needs. Against this background, it is recommended that Slovakia:

• reallocate resources to education, R&D and innovation, and duly implement a coherent R&D and innovation strategy with a particular focus on the institutional reform of the public research sector and substantial improvement of business-research cooperation;
• improve the regulatory environment, notably by implementing a comprehensive better regulation strategy covering both impact assessment and simplification of existing legislation;
• within an integrated flexicurity approach, ensures implementation of the lifelong learning strategy addressing the needs of the labour market, completes the reforms of primary, secondary and tertiary education to improve qualification and skill levels, and enhance access to employment, notably for the long-term unemployed and vulnerable groups.

6. In addition, it will be important for Slovakia over the period of the National Reform Programme to focus on: further developing ICT policies, especially for broadband infrastructure; full implementation of one-stop shops for start-up companies; introducing entrepreneurship education; increasing competition in power supply; addressing the gender gap in pay and employment; developing an active ageing strategy; and creating job opportunities for young people.

Note: The number of country specific recommendations (3) has stayed the same as in last year's assessment. However, last year's recommendations on employment have been merged and a new recommendation on the regulatory environment has been added. The number of points to watch has increased to 7 (from 4) compared to last year's assessment. New points to watch on one-stop shops for start-up companies, entrepreneurship education, competition in the power supply and youth employment have been added.

Finland

1. In light of the 2007 Implementation Report for Finland and the Commission’s assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate:

2. Finland has made very good progress in implementing its National Reform Programme over the 2005-2007 period. Good progress has been shown in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows some policy response on the additional areas identified by the Council as requiring attention. The Implementation Report also specifically addresses the recommendations issued to the euro area countries.

4. Among the strengths of the 2007 Implementation Report are the ongoing reforms to further improve the functioning of the national innovation system and the observed increase in the employment rate of older workers.

5. It will be important for Finland over the period of the National Reform Programme to focus on the following challenges: continue reforms to improve competition and productivity in services, and create the necessary leverage to reduce high price levels; implement announced measures to reach its Kyoto target; continue reforms to address bottlenecks in the labour market, with a particular view to tackling high structural unemployment, especially unemployment of low skilled workers, including young people, and taking into account the contribution economic migration can make.

Note: The number of points to watch (3) has stayed the same as in last year's assessment. The point to watch on encouraging local wage bargaining systems has been removed while a new point to watch on the Kyoto targets has been added.

Sweden

1. In the light of Sweden's 2007 Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate.

2. Sweden has made very good progress in implementing its National Reform Programme over the 2005-2007 period. Sweden has also shown very good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a good policy response to the areas identified by the Council as requiring attention.

4. Among the strengths shown by the 2007 Sweden's Implementation Report are: the action plan for regulatory simplification and the commitment to improve the impact assessment system; the progress with increasing labour supply and reducing unemployment; the sustainable use of energy; and the progress made on increasing public investment in R&D.

5. It will be important for Sweden to take further regulatory measures to increase competition, notably in services; and to focus on the implementation and impact evaluation of recent reforms to increase work incentives, to tackle youth unemployment, to raise the employment rate of immigrants and to reintegrate people on sickness-related schemes.

Note: The number of points to watch (2) has decreased compared to last year's assessment (4). The points to watch on the impact assessment system and better regulation have been removed.

United Kingdom

1. In the light of the UK’s 2007 Implementation Report and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate:

2. The UK has made significant progress in implementing its National Reform Programme over 2005-2007. The UK has shown good progress in fulfilling the commitments agreed by the 2006 Spring European Council in the four priority action areas.

3. The Implementation Report shows a good policy response to the recommendation issued by the Council. There has also been a good policy response on the additional areas identified in the Council conclusions as requiring attention.

4. Among the strengths shown by the 2007 UK Implementation Report are: the plans to provide an integrated approach to employment and skills, moves towards the creation of a business-friendly regulatory environment, and the forward-looking plans on energy policy.

5. The policy areas in the UK National Reform Programme where challenges need to be tackled with the highest priority are improving skills levels to increase productivity and reduce disadvantage in the labour market. Against this background it is recommended that the UK:

• implement recent plans to substantially improve skill-levels and establish an integrated approach to employment and skills in order to improve productivity and increase opportunities for the disadvantaged.

6. In addition, it will be important for the UK to focus on the following challenges for the future: progressively increase housing supply in order to meet medium term demand pressures; ensure progress towards the UK’s R&D intensity target through full implementation of the recent review of R&D and innovation policy, particularly taking fuller account of the specific needs of the services sector.

Note: Despite a slight rephrasing, the number of country specific recommendations (1) has stayed the same as in last year's assessment. The number of points to watch (2) has decreased compared to last year's assessment (4). The points to watch on access to childcare and pension reform have been removed.

Euro Area Member States

1. In the light of the 2007 Implementation Reports of the euro area Member States, and the Commission's assessment of progress made in implementing key structural reforms and based on the Integrated Guidelines for Growth and Jobs, the following conclusions are appropriate:

2. Based on their Implementation Reports, the euro area Member States have been making some progress in implementing policy measures that improve the functioning of the euro area.

3. Significant further reforms are necessary to fulfil the micro-economic and employment recommendations. The progress recorded in 2007 concerning the macro-economic area needs to be sustained.

4. Among the strengths shown by the 2007 Implementation Reports of the euro area Member States are: budgetary adjustment in 2007, the implementation of legislation to foster financial market integration, and wage bargaining systems more conducive to wage flexibility in some Member States.

5. The policy areas in the euro area where challenges now need to be tackled with the highest priority are: the sustainability of public finances and their contribution to growth; competition in product markets, especially in services, financial integration and competition in financial retail services, in order to facilitate adjustment and more flexible prices; adequate wage developments at the aggregate, sector, regional and occupational level; flexicurity in labour markets; and more labour mobility in order to foster labour market adjustment.

6. Against this background it is recommended that the euro area Member States together with their country specific recommendations:

• pursue budgetary consolidation towards their medium-term objectives in line with the Stability and Growth Pact, hence striving to achieve an annual structural adjustment of at least 0.5% of GDP as a benchmark;
• improve the quality of public finances by reviewing public expenditures and taxation, with the intention to enhance productivity and innovation, thereby contributing to economic growth and fiscal sustainability;
• effectively implement measures that improve competition, especially in services, and step up measures that promote the full integration of financial markets and the competition in retail financial services, whilst strengthening stability and supervisory arrangements;
• improve flexibility and security on labour markets inter alia by implementing "flexicurity" strategies, better aligning wage and productivity developments, and enacting measures to promote labour mobility across borders and between occupations.

7. For the future it will also be important for euro area to further strengthen governance to maximise policy synergies, which are stronger in a monetary union, and enhance political ownership of reforms. The Eurogroup's April 2007 Berlin orientations on public finances are a welcome step in this regard and a similar approach should be extended to other fields. A strengthening of the euro's representation in international financial institutions and fora would be in line with its potential as a pole of stability and growth in the global economy.

Note: Aside from a slight rephrasing, the number of specific recommendations (4) has stayed the same compared to last year's assessment.