Can Europe deliver growth? The Sapir Report and Beyond

This CEPS policy brief analyses the Sapir report
and discusses the traps and difficulties related to pursuing
European growth. It suggests that a number of EU co-ordination
processes are not goal-oriented but serve to protect the
actors’ unilateral decisions.

The SAPIR report is important for Europe.
The justification of and search for higher
economic growth in the EU ought to be on the
very top of the EU agenda everywhere. Offering
a very rich and useful survey of many issues
related to European growth, or indeed the lack
of it, the report’s analysis is insightful
and should be compulsory reading for
policy-makers and political leaders. Sapir et
al.’s policy recommendations are numerous
and rightly touch economic as well as
institutional aspects at EU level. 

Its status is therefore that of an
agenda-setter. Unfortunately, this has perhaps
been insufficiently appreciated. The timing of
publication (17 July 2003) and the lingering
fascination with the final package of the
Convention (Part III and some technical
revisions were handed over to the Italian
presidency on the 20th of July) lowered the
probability of appropriate and widespread
attention. Limited as the reporting was at the
outset, the media appetite for conflict has
caused a one-sided emphasis on the Pavlovian
reactions of (two) Commissioners objecting to a
few conclusions, related to only one (i.e. the
EU budget) of six sets of recommendations,
solely in order to protect their turf
(agriculture and cohesion). Little if any
serious exposition of the analysis and
strategic direction of the report has been
provided in the press. 

This neglect as well as the defensive
reactions to just a few conclusions out of 33
recommendations are completely mistaken.
Commission President Prodi was right in asking
for this report from a group of well-known
economists and a leading political scientist.
Now that the report has finally begun to
trickle down in EU policy circles, it may still
accomplish what, in our view, is indispensable:
to bring the growth debate back in Europe,
established on a serious footing and based on
solid analysis as well as policy options
changing the status quo where
necessary. 

The following discussion will not focus on
the economic analysis – where we largely
agree – or the analysis of
‘governance’ questions and design at EU
level. This is not to say that the lengthy
treatment of many issues in the report could
not be subjected to further scrutiny, but this
should best be done on other occasions. Our
appreciation of the analysis in the Sapir
report is that it can serve as well as any
other, if not better, as the basis for a policy
debate. Therefore, it is more fruitful, for
present purposes, to concentrate on the
assignment, the orientation and the policy
recommendations of the report in the light of a
preponderant question: 
How (much) does it help to revitalise
Europe in securing a higher long-run growth
path?

The present CEPS Policy Brief is therefore
critical where desirable for EU growth, and
supportive where growth is expected to be
promoted by the Sapir
recommendations. 

The thrust of our critical remarks can be
summarised at the outset. First, the report is
largely barking up the wrong tree. This is due
to the mandate and can neither be attributed to
the authors nor to the principal (the
Commission President). The focus of the
recommendations is entirely on the EU level of
policy and governance, and that is the lesser
problem. The bigger problem is to be found at
the member state level. 

Although the analysis recognises, sometimes
explicitly and sometimes between the lines or
by implication, the huge gap between what
member states say (often, in an EU context as
well) and what they do or fail to do, the
policy options are almost silent about national
strategies for growth. In particular, the
member states’ (in)capacities to reform and
their lipservice rather than genuine commitment
to deep and sustained investment in creating a
(leading) knowledge economy are critical
impediments to the Union achieving higher
long-run economic growth. 

Second, the report deals extensively with
market functioning, including labour markets,
but refrains from sketching the microeconomic
requirements for superior performance. One
obvious reason is that, as far as labour
markets are concerned, the member states and
not the EU level determine whether and how
(far) labour markets are to be
reformed. 

Third, a more fundamental set of issues
about market functioning in Europe remains
virtually untouched in the Sapir report. They
have to do with deeply engrained preferences
and behavioural characteristics of Europeans
today. Queries here include whether Europeans
are and would like to remain risk-averters
rather than risk-takers, whether Europeans are
(still) entrepreneurial (compared to the past
or to economic agents in other continents),
whether Europeans still want higher economic
growth given their current level of prosperity
and realising the pains or adjustments which
precede or accompany growth, and finally,
whether today’s inertia does not reflect an
intergenerational conflict between the present
and the future generations of Europeans (but
with the future one not – yet in
power).

To read the full 
CEPS

Policy Brief by Jacques Pelkmans and
Jean-Pierre Casey, 
click here

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