Growth and jobs: Reshaping the EU's 'Lisbon Strategy'
As the recession bites, the European Commission and national governments have begun to reflect on replacing the EU's overarching strategy for growth and jobs, known as the Lisbon Strategy. 'Green growth', innovation and education are likely to feature highly among the strategy's new priorities.
In 2000, the EU launched its ambitious 'Lisbon Strategy' to become "the world's most dynamic knowledge-based economy by 2010".
After five years of limited results, EU leaders re-launched the strategy in March 2005, placing greater emphasis on growth and jobs and transferring more ownership to member states via national action plans (see EurActiv LinksDossier).
In March 2008, EU leaders endorsed the priorities for the last three years of the strategy and instructed the European Commission to start reflecting on the period after 2010.
In response to public concern about climate change, ageing populations and social exclusion, EU heads of state and government agreed to shift the Lisbon Agenda away from the purely "growth and jobs" focus of the past three years, putting the environment and citizens in the foreground instead (EurActiv 18/03/08).
Given the current economic turmoil, the pendulum seems to have swung back again, making job creation and increasing competitiveness the bloc's key priorities.
The priorities for 2008-2010 were identified as:
- Investing in knowledge and innovation: Member states are invited to report on progress made towards national R&D and innovation strategies in their National Reform Programmes.
- Unlocking the business potential, especially of SMEs: Continued efforts to cut the administrative burden ('Better Regulation' agenda), and improving companies' access to EU and international markets.
- Investing in people and modernising labour markets: Facilitating the move towards a 'knowledge-based economy' and strengthening the social dimension of the strategy ('Social Agenda') by investing more in skills and moving towards more flexible yet secure jobs (see EurActiv LinksDossier on 'Flexicurity').
- Energy and climate change: Agreeing and implementing the EU's energy and climate change package for 2020 (see EurActiv LinksDossier).
The European Commission is preparing a broad Internet consultation on revising the Lisbon Strategy for autumn 2009. The revised strategy is expected to build on previous achievements, with existing priorities for the most part likely to be maintained, including the overall objectives of boosting growth, jobs and environmental sustainability.
A higher political profile?
But a number of new items are making their way up the agenda, with the ongoing economic recession and financial crisis primary among these.
Both the Commission and EU leaders' views seem to be converging on the need to give a greater political dimension to the Lisbon Strategy, which has been undermined by its low-profile at national level.
"The strategy should be more political," reads a working document from the EU executive and seen by EurActiv, calling for EU heads of state and government to be given "a leading role" on the matter.
Speaking at the Brussels Economic Forum in May, EU Economy Commissioner Joaquín Almunia said the economic and financial crisis was adding a new sense of urgency to the strategy's revision. "Stronger economic policy coordination will be crucial" with the ongoing recession, Almunia said. "If we are honest, the initial crisis response in Europe lacked the necessary coordination," he added, echoing criticism from big countries such as France.
"Enhanced coordination coupled with more effective surveillance will be key to putting exit strategies in place and ensuring their success," Almunia stressed.
Echoing the commissioner's comments, Spanish Prime Minister José Luis Rodriguez Zapatero said he would seek a greater political dimension to the EU's economic policy when his country takes over the EU helm in the first half of 2010 (EurActiv 29/04/09).
Speaking at a joint news conference with French President Nicolas Sarkozy in late April, he said: "I agreed with President Sarkozy that if the European Union really wants to be a political union, which works for its citizens, it has to have a much more solid economic government [...] with tools," Zapatero said. "I can't see a single market, a single currency, then not see an economic government with powers, with tools," he added.
Almunia highlighted four priority areas for building a European economic policy:
- Consolidation of the EU's voice in international financial institutions, in particular the International Monetary Fund (IMF), where he advocated a single seat for the euro area;
- strengthening dialogue and co-ordination in the G8 and G20;
- more participation in key international financial bodies like the Financial Stability Board; and;
- continuing to develop the leading role the EU has been taking in the fight against climate change.
Fighting the crisis: The EU's 'exit strategy'
Almunia further warned that EU companies will have to rely less on financial institutions in the future as a result of the credit crunch. "So the dynamism that previously came from the financial markets will have to be found elsewhere."
He said this is where the revised strategy will come into play, with "an acceleration of structural measures" focusing on the following areas:
- Reform of product and labour markets,
- R&D and innovation,
- education and skills, and;
- green growth.
Almunia admitted that "most of these initiatives are not new" and have formed "the core recommendations of the EU's Lisbon Strategy for some time". Yet "the crisis makes an ambitious and coordinated implementation of this agenda more necessary than ever," he added.
"The Lisbon Strategy is the Union's exit strategy from the current crisis," said European Commission President José Manuel Barroso at a Prague meeting of national Lisbon coordinators in April 2009. "So Lisbon post-2010 cannot be about business as usual. We should keep the focus on growth and jobs – but these must be environmentally, socially and economically sustainable growth and jobs."
New branding and communications
If the revised agenda is unlikely to revolutionise the EU's existing policy toolbox, perhaps its branding could. 'Selling' the Lisbon Agenda to citizens and civil society organisations has proved to be particularly difficult for national politicians as the strategy is often perceived as too complex and business-driven.
"The current vocabulary used for describing reforms – competitiveness, liberalisation, better regulation, pro-business, pro-market – are an obvious turn off," says Ann Mettler, executive director of the Lisbon Council, a think-tank. "These phrases are utterly – and demonstrably – unsuitable to appeal to society at large."
As a result, she says media coverage has invariably tended to be negative. "In an increasingly commercial media business, news is what sells, and what sells are big headlines and controversial statements," says Mettler, adding that it can be very difficult, "indeed impossible, for reformers to get a fair hearing" as a result of the inevitable negative press.
Finding a new "narrative" for the new strategy is therefore at the centre of EU officials' concerns. "Communication efforts should be stepped up to emphasise the positive role reforms can play," reads a Commission document circulated at an April meeting of national coordinators in charge of the Lisbon Agenda.
Alexandr Vondra, Czech deputy prime minister for European affairs, suggested renaming the strategy altogether. Speaking at the meeting in Prague, he said: "I have suggested today, as one of the measures to improve the communication, that the Lisbon Strategy should be renamed in future, as people still tend to confuse it with the Lisbon Treaty". But concrete ideas have so far not filtered through.
Creating broad-based support for reforms "within the member states" is also considered key to the success of the new strategy. "Associating stakeholders (in particular the social partners) at an early stage is key to building support and achieving results," the Commission document reads.
The answer, Mettler suggests, is to build support for reforms early on by involving civil society. "Every reformer must figure out early on which organised interest will support a reform publicly, and as vocally as the opponents will fight it. In the absence of publicly supportive interest groups, it can be better not to pursue a reform because the political cost and collateral damage can be extraordinary, while the chances of success are minimal."
Green growth: The new narrative?
For Swedish Prime Minister Fredrik Reinfeldt, who assumes the EU's rotating presidency in the second half 2009, green growth could provide this new narrative. Presenting the priorities of the Swedish Presidency in June (EurActiv 10/06/09), he said crisis-hit European economies could improve their strained public finances by moving away from the oil-based economy and switching to low-carbon energy instead. Efforts to curb emissions of greenhouse gases and boost renewable energy sources are part of a potential win-win mix, he said.
EU Economics Commissioner Almunia agrees. "Our exit strategy in terms of structural policy must put green growth at the heart of the agenda," he told the Brussels Economic Forum in May. "The world's shift to low carbon offers huge possibilities for business and industry. Only by investing in renewable energies, low-carbon technologies and green infrastructure will Europe maintain its place at the frontier of this revolution."
'Shaping forces' in the post-2010 agenda
Besides the economic recession, EU officials have already identified a number of underlying challenges and opportunities that will shape the future Lisbon Agenda after 2010:
- Globalisation: The rapid emergence of new economic powers implies a fundamental shift in the balance of power between industrialised nations and the developing world, according to the Commission. Countries such as China are now starting to move from low-tech, cheap manufacturing and assembly to high-tech products. The EU should enhance its relations with such players, EU officials believe.
- The ICT revolution: Information and communication technologies such as the Internet and mobile phones are creating new opportunities for business. As the Internet knows no frontiers, SMEs in particular can now aspire to become global, the Commission believes.
- Demographic change: As the baby-boomer generation begins to retire, the strain on public finances will grow heavier, as fewer people will be at work to support them.
- Climate change and access to natural resources: Rising demand for natural resources from emerging economies could put some energy-intensive industries at risk and threaten vulnerable parts of the population. Food prices and the cost of raw materials are of particular concern.
According to Commission sources, a number of topics are likely to feature in the EU policy response. They include:
- Opening up markets to unlock business potential;
- Investing in knowledge (education, research and innovation 'triangle');
- Investments in energy infrastructure, and;
- Investing in human capital with skills training and a more flexible yet secure labour market (flexicurity).
Foreign policy and trade dimension
Among the new elements, the revised agenda is expected to give more emphasis to the foreign policy dimension. For example, co-operation on regulatory issues with other major economies such as the United States and China is seen as increasingly important to bring down non-tariff barriers and improve European companies' access to world markets. Climate change and energy technologies are a good example of such possible areas of cooperation.
Attempts to shape globalisation rather than giving in to external pressure will also form an important part of the new strategy. Here, the revised strategy will build on the 'Global Europe' initiative tabled in 2006 by then EU Trade Commissioner Peter Mandelson, which set out an external 'competitiveness agenda' featuring the following elements:
- Completing the Doha round of WTO talks and bilateral free trade agreements;
- A greater focus on China, with a "comprehensive new strategy";
- Co-operation on intellectual property rights with partners in Asia, Russia and Latin America;
- A market access strategy to focus on non-tariff barriers in key sectors as well as ensuring European companies get better access to public procurement markets abroad, and;
- Anti-dumping and other "trade defence instruments".
On the international stage, the EU has already shown increasing leadership with the financial crisis, placing itself at the forefront of global initiatives to regulate financial markets and taking a leading role at the G20 summit in London.
But the bloc also showed its limits, as all the largest EU countries are jealous of keeping their seats in key international institutions such as the United Nations Security Council or the International Monetary Fund.
More international clout for the euro?
The euro currency and the European Central Bank (ECB) are also set to gain importance on the international stage as more countries in Eastern Europe ask to join the club. The financial and economic crisis has highlighted the merits of euro membership, with the single currency offering remarkable protection from the storm to countries such as Italy or Ireland, who would have otherwise suffered currency devaluations.
But analysts are quick to point to obstacles on the euro's course to becoming a true global currency. First, the euro zone lacks proper governance rules and tools and does not have effective representation at global level in forums such as the International Monetary Fund. Second, although monetary integration has worked well, economic integration is still lagging behind, with major countries still pursuing largely independent policies in key areas such as taxation or social policy (see Jean-Pisani-Ferry and Adam S. Posen's book: 'The euro at ten: the next global currency?').
Moreover, discussion of a greater "politicisation" of the euro area and monetary policy in general - a measure called for by French President Nicolas Sarkozy - is certain to meet resistance from Germany, which gives utmost priority to inflation and budgetary orthodoxy.
Social dimension: The sick child
With the recession, the social dimension of the Lisbon Strategy is also expected to climb its way up the agenda. "The fight against unemployment remains a major priority," EU leaders agreed at their June 2009 summit.
But they were quick to add that "action in this field lies first and foremost with the member states," with the European Union's role confined to ensuring that measures taken "are coordinated, mutually supporting and in line with single market rules".
The European Commission unveiled a new jobs plan in June, redirecting €19 billion of planned expenditure under the European Social Fund to help people stay in work or move towards new jobs via skills upgrades. Business and NGO lobbies, however, dismissed the plan as lacking ambition and mainly re-hashing existing measures (EurActiv 04/06/09).
In this context, the Commission's role is mostly confined to benchmarking and exchange of best practice between countries, and providing coordination in areas where EU member states believe it can add value. Moreover, the few concrete legislative proposals that the Commission did put forward in recent years were usually met with opposition. In July 2008, the EU executive tabled new proposals to tackle discrimination and improve workers' rights and cross-border healthcare (EurActiv 02/07/08), but both were put on the back-burner due to the recession and persisting disagreements over social policies, which remain firmly under national control (EurActiv 05/06/09).
"In view of increasing skills shortages in a number of sectors," EU leaders invited the Commission to "present a comprehensive assessment of the future skills requirements in Europe up to 2020, taking account of the impacts of technological change and ageing populations, and to propose steps to anticipate future needs".
"The education element of the knowledge triangle 'research-innovation-education' should be strengthened," EU leaders said at their summit in March 2008. Issues covered in the renewed strategy should include youth, education, migration and demography, they agreed.
Sweden: Open markets and 'green growth'
Swedish Prime Minister Fredrik Reinfeldt, whose country takes over the rotating EU presidency on 1 July, admitted that the strategy had been a failure, saying it needed rewriting. "As we look to the future, it is clear that Europe needs a revitalised strategy for sustainable growth and full employment - a strategy that transforms our Union and reaps the benefits of globalisation," Reinfeldt argued. "Specifically, this means promoting investment in human capital and research, advancing external and internal openness, and further improving the environment for business and innovation across our continent."
According to the Swedish premier, 'green growth' should be at the heart of Europe's revised strategy. "Over the last year I have often been told that, in the middle of deep economic crisis, countries cannot afford to spend money on 'green dreams'. I would argue the contrary. They cannot afford to keep their current costly energy sources," Reinfeldt said.
In a non-paper, Sweden outlined its vision for the Lisbon Strategy post-2010: "Facilitating the transition to an eco-efficient economy with an innovative and business-friendly environment is a vital step in keeping Europe competitive on a global market, coping with climate change and securing employment and welfare in the next decade. Europe must take the lead in promoting an eco-efficient and innovative business sector."
In Sweden's eyes, the EU's emissions trading scheme, which covers only 40% of the Union's greenhouse gas emissions, is not enough to address climate change effectively.
"We need a CO2 tax," Reinfeldt said, adding he would relate the positive experience of Sweden to his European counterparts (EurActiv 12/05/09). "If they tell me that they have huge deficits in their budget and lack resources, I will tell them this is the most efficient way to reshape the economy in a low-carbon direction," he said.
France: 'An economic strategy for Europe'
Meanwhile, French Prime Minister François Fillon outlined ambitious plans for Europe's economic renewal after a government meeting on 6 May. Topics to be highlighted include "financial regulation or the importance of the industrial dimension of economic policy," a source close to the matter told EurActiv France. But the details still need to be fleshed out, the source admitted.
According to one diplomatic source, the proposal will be in line with President Sarkozy's EU campaign speech of 5 May. Regarding European economic policy, the French president said Europe "could not do without an economic policy," saying it was "unreasonable" for countries that share the same currency not to have a "concerted economic policy". This, he said, "cannot be summarised to an inflation objective and respect of the criteria of the Stability Pact".
The crisis, Sarkozy continued, "provides us with the opportunity to go further in the reflection on economic policy as well as on competition policy". "We need debates on monetary policy. We need debates on budgetary policy. We need debates on competition policy," Sarkozy stressed. "We must end this single way of thinking that is afraid of discussion, that is afraid of confronting ideas," he added, in a thinly-veiled attack on the European Commission.
United Kingdom: For a 'European growth strategy'
In a commentary published in the Financial Times newspaper, Gordon Brown, the UK prime minister, said the global economic recession called for a "strengthened European growth strategy". Noting that trade with the EU was responsible for 60% of British trade and that 3m jobs depended on it, he said Britain should embrace its EU membership or face steeper economic decline. "I will be working with European leaders in advance of the European Council to advance on our decisions at the Group of 20 with a more focused Europe-wide strategy for growth."
Brown's key proposal is to provide greater funding capacity for the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD). The UK prime minister is proposing to increase the EIB's lending capcity by €50bn over the next two years and accelerate the rate of payments. On education, Brown called for "an ambitious EU target on apprenticeships," a proposal endorsed by Commission President José Manuel Barroso.
Ann Mettler, co-founder of the Lisbon Council, a think-tank, says Europe's political leaders must move on from explaining why reforms are necessary to showing how they can be implemented. Specifically, she says, this means shifting the Lisbon Strategy away from a purely business agenda to refocus it "on the needs and aspirations of the citizens of Europe".
"Whatever will follow the Lisbon Agenda post-2010, it will need to be – simply stated – more interesting, more visible, and more relevant to the lives of ordinary citizens," Mettler stated in a 2009 paper. She then makes recommendations for specific areas currently covered by the Lisbon Strategy:
- Innovation – economic and social: To date, policy prescription for innovation has tended to focus on research and development, patents and researchers, Mettler notes. This approach should be broadened, she says, as innovation is often not the result of R&D spending or long-standing research but is based on changes in processes and business models, making it a much broader, societal phenomenon. The vision must be "one where the citizen/consumer is an agent of change, a catalyst for innovation," she says.
- Consumers: Reforms that are undertaken with the citizen/consumer in mind have a far greater chance of being accepted and of being successful, Mettler believes. Consumer-oriented policies should therefore become a guiding principle for the new strategy, she argues.
- Education, skills and human capital: Education and skills are the responsibility of many actors – government ministries, employers and individuals themselves, Mettler notes. The question is who is going to pay for the massive investments in education and training that are needed to keep Europe at the cutting-edge. The Commission could refocus its social fund to "lead a campaign to invest in people," Mettler suggests.
- Sustainability and productivity: Europe has a "first mover advantage" on eco-innovation and environmental technologies, Mettler says. "As a next step, Europe should be leading a global debate on resource and energy productivity, and its importance to future growth and prosperity," she suggests. In parallel, as populations age, debate over the long-term financial sustainability of public finances will become even more important, she says. "As we move to get more out of fewer inputs, productivity will become a modern means of sustainability – for our social security systems and for our environment and natural resources."
- Migration and integration: Immigrants and ethnic minorities need to be better integrated, starting in schools and continuing in the labour market, where they often record twice the unemployment rate of the native population, Mettler says. Immigration must not only be considered as absorbing migrants from poorer neighbouring countries, but also as taking an active stake in the global war for talent, she says (see EurActiv LinksDossier on the 'Blue Card' scheme).
Speaking to Blogactiv at this year's European Business Summit (EBS) in Brussels, Maria Joao Rodrigues, one of the architects of the Lisbon Agenda, said that the economic recession had forced EU leaders to combine short-term with long-term priorities. "If you think about big stimulus packages which are there, they should be used to invest in the green economy and in the smart economy, so this is an opportunity not to be missed."
She believes a "new strategic consensus" has already emerged among EU leaders over the bloc's long-term priorities: "A smarter economy, a green economy and an economy which combines a high level of competitiveness with social cohesion. I think we need an agenda which is greener, with a stronger focus on climate change and energy. We need a very strong focus on the 'triangle of knowledge' - much more investment in innovation, education and research - but I think we need strong European instruments for that."
According to Rodrigues, the new dimension of the EU's 'green growth' strategy will be "to project our European agenda in our international cooperation with others". "Because we see that the American economy is now shifting in the same direction and the same can happen in China or India. We should encourage this convergence towards a model of development which combines competitiveness with sustainable development."
- March 2008: EU summit instructs the European Commission and stakeholders to start reflecting on the Lisbon Agenda post-2010.
- March 2009: EU summit delays detailed talks over the revised Lisbon Strategy until the new Commission takes office (EurActiv 24/03/09).
- 24 July 2009: Commission launches reflection on the EU's sustainable development strategy post-2010 (EurActiv 28/07/09).
- 24 Nov. 2009: Commission launches Internet-based consultation on the new strategy, now re-branded 'EU 2020' (EurActiv 25/11/09).
- 10-11 Dec. 2009: EU summit reviews priorities for EU 2020 strategy, voicing concern about worsening unemployment (EurActiv 10/12/09).
- 15 Jan. 2010: Consultation on EU 2020 strategy closes.
End Jan. 2010: New Commission to present its formal proposals for EU 2020 strategy.
- March 2010: EU summit to adopt main policy orientations.
- March 2010 / June 2010: EU summit to provide more detailed decisions, including integrated guidelines, country-specific recommendations, a new type of Community Lisbon Programme and more developed proposals in specific policy areas (such as the EU's innovation strategy).