Brussels readies plans for EU ‘economic governance’

european_flag1.jpg [Reuters]

The European Commission wants to strengthen economic policy coordination between the 27 EU member states by linking national fiscal stabilisation programmes to expenditure in "growth-friendly" areas such as R&D and education, according to a draft proposal seen by EURACTIV.

In a draft ten-year economic plan called 'Europe 2020', due to be presented on 3 March, the European Commission argues that EU nations have become more interdependent, "particularly in the euro zone".

"Reforms, or the lack of them, in one country affect the performance of all others, as recent events have shown," the Commission says, in a reference to the Greek debt crisis, which has fuelled speculative attacks on the euro (EURACTIV 17/02/10).

The EU, it argues, proved its added value in facing global challenges during the economic crisis by taking common action to stabilise the banking system and adopting a European economic recovery plan.

But it says exceptional measures adopted during the turmoil, which brought some countries to the brink of bankruptcy, need to be rolled back to preserve financial stability.

"For most countries, the onset of fiscal consolidation should normally occur in 2011," the Commission says, adding that "the process of bringing the deficit to below 3% of GDP should be completed, as a rule, by 2013".

In its new strategy, the Commission proposes linking national fiscal consolidation programmes with "growth-enhancing items such as education and skills, R&D and innovation and investment in networks" like high-speed Internet and energy interconnections.

"What is needed is a strategy to turn the EU into a smart, green and inclusive economy delivering high levels of employment, productivity and social cohesion. This is the Europe 2020 strategy," it says.

Five 'headline targets' and nine 'flagship initiatives'

The draft strategy proposes a "thematic approach" to reform, with a focus on five "headline targets" to be adapted to each member state in order to reflect different national situations:

  • Raising the employment rate of the population aged 20-64 "from the current 69% to at least 75%".
  • Increasing R&D investment "from the current 1.9% of EU GDP to 3%" with an alternative target combining R&D and "innovation performance".
  • Reducing CO2 emissions by 20% by 2020 and increasing the share of renewable energies to 20% by the same date while lowering energy consumption by 20%.
  • Increasing the share of the population aged 30-34 to have completed tertiary education from the current 31% to "at least 40% in 2020".
  • Reducing the rate of poverty from the current 17% to an as-of-yet unspecified percentage.

Some of these targets are not new and were already in the EU's previous long-term economic strategy, the Lisbon Agenda for growth and jobs. Others, such as the 20% renewable energy and CO2 emission reduction targets, have already been endorsed by EU member states and put down into legally-binding EU directives.

The plan also includes nine "flagship initiatives" ranging from a European "innovation union" to a new "industrial policy for the globalisation era".

'Country surveillance'

The novelty would come from so-called "country surveillance" schemes that would encompass fiscal stabilisation programmes and macroeconomic issues related to growth and competitiveness, taking into consideration national constraints on public finances.

"To achieve this, the Europe 2020 and Stability and Growth pact reporting and evaluation will be done simultaneously to bring the means and the aims together," the Commission says.

Policy recommendations could then be made to member states both under the Stability and Growth Pact – which carries legal weight – and under the thematic parts of national policy programmes, representing the softer kind of approach that characterised the Lisbon Agenda.

Member states in control

To ensure greater ownership of the strategy at national level – one of the greatest weaknesses of the Lisbon Strategy – the Commission proposes putting member states firmly in control of monitoring implementation at national level.

Progress would be reviewed by EU leaders at regular intervals during summit meetings, with the Commission stressing "the central role of the European Council" of heads of state and government chaired by Herman Van Rompuy.

"Contrary to the present situation, where the European Council is the last element in the decision-making process of the strategy, the European Council should lead the strategy and monitor its implementation on the basis of Commission proposals and reports," the Commission says.

The European Parliament, as co-legislator, and civil society would also be more involved.

Governments will have to agree on five targets at a summit meeting in March. National targets will be prepared for the June Council meeting, with discussions on specific policy issues – such as research and development – expected in the autumn.

National governments will then have to submit tailor-made plans specific to their stage of development in terms of research infrastructure and spending. A one-size-fits-all target has been excluded given the differences between the most and least-developed member states.

The EU's new strategy for sustainable growth and jobs, called 'Europe 2020', comes in the midst of the worst economic crisis in decades.

The new strategy replaces the Lisbon Agenda, adopted in 2000, which largely failed to turn the EU into "the world's most dynamic knowledge-based economy by 2010".

The new agenda puts innovation and green growth at the heart of its blueprint for competitiveness and proposes tighter monitoring of national reform programmes, one of the greatest weaknesses of the Lisbon Strategy.

During a summit on 11 February, EU leaders broadly endorsed a paper by European Council President Herman Van Rompuy, which called for more rigorous implementation and monitoring procedures for the new strategy (EURACTIV 11/02/10).

It called on the Commission to come up with proposals before the next EU summit on 25-26 March.

  • 3 March 2010: European Commission expected to present final proposal for 'Europe 2020'.
  • 25-26 March 2010: EU summit to adopt main policy orientations, based on a limited set of objectives tabled by the European Commission.
  • 17-18 June 2010: National governments to endorse guidelines for 'Europe 2020' and country-specific targets.
  • Autumn 2010: Member states to submit stability and convergence programmes, as well as national reform programmes.

Subscribe to our newsletters