Ten Do-s and Don’t-s for Sustainable Growth in Europe

This EPC paper presents ten ‘do-s and
don’t-s’ designed to boost growth in Europe while
retaining the positive agenda for jobs, social cohesion and
sustainability, which are at the heart of the Lisbon
process.

Economic growth is not an end in itself.
Rather, economic growth is there to serve a
greater ambition: the creation and maintenance
of a vibrant, socially inclusive and
environmentally sustainable European
society.  Economic growth is a means to
these wider ends.

The challenge, then, of boosting the growth
rates of the European Union is part and parcel
of the challenge of creating the necessary
balance between economic prosperity, social
justice, the development of intellectual
capital and respect for our shared environment.
Without higher growth rates in the European
Union, none of these aspirations will be
realised. Much, therefore, is at stake.

In this, the interim report of the
EPC’s Task Force on the European Growth
Initiative, we underline that there is much
that the European Union should be proud of. We
reject the pessimism, which often governs much
public discussion in the European Union.

Yet the successes of the European economy
cannot disguise persistent shortcomings. The
total employment rate in the EU still lags
almost 10% behind the proportion of the US
labour market engaged in work. The EU would
have to employ almost 17 million more people to
close this gap. Productivity in the EU has
stagnated in recent years, now at almost 20%
lower  per employed person than in the US.
These are the main reasons why, today, US GDP
per capita is more than 30% higher  in the
US than in the EU. Add to this the low
fertility rates in the EU, and the impending
explosion in the retired population in Europe,
and the reasons why urgent action is required
to boost EU economic growth becomes self
evident.

The EU is not starting from scratch, given
the already successful launch of the internal
market, the introduction of the euro and the
enlargement eastwards Both the Lisbon agenda
and the Sustainable Development strategy are
precise and adequate tools, which set out the
route towards stronger, sustainable growth. But
far more political commitment is needed to turn
the potential for strong EU recovery into
reality.

Our Interim Report takes the novel form of a
list of 10 “Do-s and Don’t-s”
which we address to all decision makers in the
European Union. The intention is not to provide
yet another exhaustive analysis of the policy
remedies required. Rather, our list of 10
points is designed to highlight some of the
most crucial aspects of the process of economic
reform in the European Union.

In drafting this interim report, we based
our analysis on a number of underlying
assertions:

• That a careful balance must be maintained
  between the role of the European Union itself
  and the duties and responsibilities of the
  Member States. A failure by Member States to
  implement commitments made at EU level is a
  persistent shortcoming in the pursuit of
  greater economic growth and competitiveness.
  On the other hand, the freedom of Member
  States to compete and exploit national
  advantages must not be threatened by
  excessive harmonization at EU
  level. 
• That, in an enlarged EU with greater
  political and commercial diversity, new EU
  regulation must be ever more intelligently
  crafted in order to be effective. This is
  especially so in view of the EU’s recent
  enlargement to twenty-five members.
  Regulation which provides incentives for
  individuals and companies alike to operate on
  a level playing field is most likely to
  succeed.
• That raising productivity and increasing
  job creation should go hand in hand. At
  present, high productivity levels are often
  accompanied by low employment rates, and
  higher employment rates by low productivity.
  Such a choice is not inevitable, and there
  are good examples in the EU of economies that
  possess both high levels of employment and
  impressive productivity levels. A relentless
  emphasis on innovation, intellectual capital
  and the fostering of dynamic, new economic
  sectors is needed.
• That job security and labour market
  flexibility must also go hand in hand. The
  assumption that one opposes the other is
  false. Job security for those in work by
  excluding those out of work is unacceptable.
  Lowering barriers for those wishing to enter
  the labour market does not necessitate the
  lowering of generous social security support,
  as long as that support does not act as a
  disincentive to seeking
  employment. 

Each of the assertions in our list is
supported by short explanatory and statistical
annexes. Since a new European Parliament has
recently taken office, and a new College of
European Commissioners is due to be installed,
the principal purpose of this interim report is
to act as a wake up call to policy makers
everywhere. The members of the EPC Task Force
are drawn not only from the corporate world,
but also from labour and environmental
organisations. The claim, therefore, that this
group represents an important spread of opinion
from both the private sector and civil society
is fully borne out in the work of the
group.

Subject to the responses we receive from
this interim paper, we will explore specific
issues related to the challenge of boosting
European economic growth for our final report,
timed to coincide with the final report on the
implementation of the Lisbon strategy in the
spring of 2005.

In the meantime, we hope that this paper
provokes discussion, and helps foster an
environment in which active policy reform can
take place throughout the European Union.

Read the 
full paper

by 
Nick Clegg

– available on the website of the 
European Policy Centre (EPC)

.