The Lisbon strategy at midterm: Expectations and reality

This report by the Center for Social and Economic Research (CASE) sums up the conclusions of an extensive series of discussions in Poland about the goals, the objectives, the successes and the failures of the EU’s Lisbon Strategy.

CASE – Center for Social and Economic Research inspired an extensive discussion on the Lisbon Strategy, its goals and objectives, successes and failures. The fervent debate, which took place in Warsaw at the end of 2004, investigated the future of the Strategy in Europe and Poland. The publication, which we are proud to present, is a result of this discussion. 

The Polish context for achieving the Lisbon goals was explored at a conference on December 9, 2004 entitled “The Lisbon Strategy in Poland: Directions of Necessary Reforms”. Earlier, however, answering the question whether the Lisbon objectives successfully support competitiveness in Europe was of chief concern to a group of scholars and specialists attending the conference entitled “Lisbon Strategy as an Effective Tool of Increasing Competitiveness in Europe?” (The meeting took place in Warsaw on November 8, 2004). The conference dialogue resulted in a systematic and inquisitive debate on the causes of successes and failures of the Lisbon Strategy against the background of the current economy in the united Europe. The perspectives for the future implementation of the Strategy and its desired effects also proved to be of great concern. The arguments presented by the authors of the present publication continue the discussion, which has now been enriched by the contributions by conference participants. 

The Lisbon Strategy launched by the European Union in 2000 was designed to increase the growth and modernize Europe, while caring for sustainable development and social cohesion. The Strategy represented an innovative approach to development because economic objectives were not juxtaposed with social ones. Instead, the Strategy endeavoured to demonstrate that economic and social objectives are intertwined and the implementation the economic objectives might feed-back support and strength to the social objectives, and vice versa. 

Directing European economies to new paths of development was the backbone of the Strategy’s success. The success could be achieved through increasingly intensive participation of knowledge-based economy in the overall development (research, education, access to information technology) with the concurrent improvement in functioning of a single European market, support for entrepreneurship and strengthening of sound macroeconomic frameworks. The necessary action to accomplish such goals was an intensive enhancement of societies’ general knowledge and capability and a constant closing of the social exclusion gap. The Strategy decided that in the age of information society a sustainable growth could be achieved only through a high employment level in all social groups together with a continuing increase in labour productivity. Greater care for natural environment could also contribute to a higher quality of life. 

Such goals were of primary importance to all countries of the European Union, although their implementation depended on the policy of individual countries. Special tools were designed to monitor the progress of the Strategy and to provide multilateral support in its implementation. Today, when the Strategy has reached a midterm point, we already know that some of its ambitious assumptions cannot be put into practice, at least not in the planned implementation period of 10 years. The most spectacular goal of the Strategy remains out of reach: closing the economic gap between Europe and the Unites States and advancing ahead of the USA. 

The reasons for missing the goal should be attributed to the fact that when the Strategy was designed Europe enjoyed very positive development trends, which perhaps led to excessive and unfounded optimism about the future plans and expectations. The beginning of the new millennium brought a deterioration of the European economic outlook. The origins of such decline were difficult to predict at the early stages of the Lisbon Strategy planning; a general slowdown occurred in economic dynamics and a recession which followed lasted several years. As a result, some objectives of the Strategy could not have been implemented on the planned level, while the distance to reach some of the goals has even increased. 

Does it mean that the important objectives, commonly agreed upon between the countries of Europe in the framework of the Strategy should be abandoned? What would this mean for the new Member States, which so painstakingly embarked on their most difficult systemic reforms? Are they to arrest restructuring which would lead to modernization and greater competitiveness of their economies? 

Romano Prodi, the President of the European Commission, has said upon leaving office at the end of last year that the Strategy had proven a huge failure and had not fulfilled the expectations. It seems, however, that frustration resulting from a large discrepancy between hopes and reality hid behind his bitter words. The official communications of the current Commission strike a significantly different tone as the Commission strives for strengthening and revitalizing of the Lisbon Strategy. The report prepared in November 2004 under the leadership of Wim Kok carries a similar message: he sharply critiques these Strategy’s shortcomings, which could have been prevented (for example, too slow introduction of a single market). At the same time, however, Kok emphasizes the importance of the Strategy today in comparison with five years ago: especially now the Strategy should be implemented. The Kok report describes the direction of necessary changes and points to the means to achieve success. 

Our discussion had a similar pragmatic tone; the debate took place parallel to the publication of the Kok report and resulted in this book. 

We have asked the following questions: 

• Is the rationale for the Lisbon Strategy correct? Is it based on a correct identification of the most important barriers to the growth of European economies?
• What are the reasons behind the failure of several Lisbon goals, of which some are of key importance? 
• Is there a need for revision of the Strategy goals? Should they be “downgraded” (i.e. made less ambitious)? 
• Is the scope of the Lisbon Strategy too broad? Is there a need for a more focused approach? 
• Does the Lisbon Strategy need new instruments? 
• Is the open method of coordination an efficient tool for motivating European governments to reform? 
• How does the recent EU enlargement impact on the implementation of the Lisbon Strategy? Is the Strategy more difficult to implement in a larger Europe composed of countries lagging behind? Or is it a chance to reinvigorate the Lisbon process, given that the new Member States are in some respects less ‘eurosclerotic’ than the EU-15? 
• What are the main challenges for the new Commission? What are the planned or recommended institutional solutions within the new Commission? 

Each of the articles presented in the publication attempts to answer these questions, each from a different standpoint. Patrick Lenain, an OECD expert, discusses the European economic situation and the causes of increasing distance between Europe and countries which develop the fastest in the world. In his view, all undertakings which couple the productivity growth with increasing employment are very important for future growth. However, difficult structural and regulatory reforms would be needed. Ulrik Mogensen concentrates on elements supporting European entrepreneurship. Being a European Commission employee, he also gives the Commission’s view on the possibilities to implement the Strategy in its present institutional form, especially as regards to the so-called open method of coordination requiring high volumes of voluntary cooperation of all countries participating in it. Vicente Royuela – Mora, a professor at the University of Barcelona and a co-author of the report “Euro and the Lisbon Strategy” prepared by the European Forecasting Network, focuses on the methodology of monitoring the Lisbon goals. He suggests that a proper implementation of the Strategy requires improvement of its tools. Together with the members of his research team, Royuela – Mora seeks appropriate measures for the development of a knowledge-based economy. All three authors agree that the Lisbon Strategy brought limited although very visible results, while its main directions have been rightly chosen and they continue to be valid. 

In the last five years, some countries have made a much better progress in the Strategy’s implementation than others. Also, states which entered the path of competitiveness at a later time have successfully managed to catch-up. Having this in mind, one could see the future possibilities to implement the Lisbon Strategy more optimistically, under the condition that its goals are treated by all countries with due attention and respect. The Strategy renaissance and its reinvigoration might be helped by the discussion of the European Council in its midterm report; the report by the Kok group is one of the most important elements of the discussion. 

The implementation of the structural reforms proposed by the Strategy is very important also for the new Member States. Going along the Strategy’s path they might faster cover the distance separating them from the most developed European countries. 

Thanking the authors and discussion participants for their invaluable input, the editors of this publication hope that it would become a source of better understanding of Lisbon Strategy and would propagate the knowledge about its importance to the growth of the united Europe. 

We would like to thank CASE – Center for Social and Economic Research for support during project implementation and the National Bank of Poland and its Programme for Economic Education for financial assistance with the conferences and the publication.

To read the full text of the report, visit the CASE website.