Europe is at a crossroads. Should we opt for our own European way, or should we embrace the American alternative? Should we further develop Europe's social and economic model, or should we not? But the choice we appear to face, with one side of Europe arguing for the former, the other for the latter, is a non-choice. Europe will only prosper if we stick to and modernise the European way. A successful outcome to the Lisbon strategy is indispensable.
Five years after being launched, Europe’s bid to make itself by 2010 the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion, is at its mid-term. And at this halfway stage, the Lisbon strategy picture is mixed. Certainly, new jobs have been created and up to two-thirds of them have gone to women. Important steps have been taken towards deepening Europe's internal market, the market share of renewable energy is growing, the number of people taking part in lifelong learning is rising and some EU countries have started to improve their childcare systems. But there are still huge improvements to be made. Europe's economic growth is largely stagnant, and the pace of reform is much too slow. The share of people at work among the working age population is still way below target, and there are too many people looking for new jobs.
The “no” votes in France and The Netherlands were first and foremost reactions to this development. A Europe with more than 20m unemployed is not a Europe that lives up to our peoples’ expectations. And with good reason. If the European project fails in creating the new jobs and the security our citizens crave for, they will reject it. This underscores the importance of the Lisbon strategy’s objectives.
And if we fail to meet them, globalization, our ageing populations and environmental degradation will become even more difficult to deal with. So achieving these ambitious targets is vital to Europe's long-term prosperity. The strategy holds the key to our citizens’ quality of life and the EU's future role in the world.
There is widespread consensus on the diagnosis of the Europe’s economic ills. The EU is falling behind the US and south east Asia on competitiveness, growth and employment. But when it comes to prescriptions, there are clear dividing lines.
Europe’s right-of-centre parties have argued that the Lisbon strategy should be focused on what they see as its core, the economic pillar. They think we should put all our efforts into enhancing productivity and raising employment. And that we should leave out – until, one gathers, better times – the social and environmental dimensions of our cooperation.
This school of thought also believes that economic growth and new jobs should be created through traditional structural reforms, a more entrepreneur-friendly environment and greater investment in Europe's infrastructure. Some of these proposals are perfectly reasonable, but alone they are not enough to get Europe moving fast enough and in the right direction.
They ignore, and so fail to take advantage of, Europe’s resources – our social and economic model. They regard social policies as a cost and a burden rather than as leverage for growth and prosperity. They suggest that we should base our competitiveness on our lowest common denominator and not on our highest common factor.
By doing so they disregard the rationale of the Lisbon strategy and the conviction it was born out of; that economic reform, social policy and environmental considerations can be mutually reinforcing and synergetic, and will promote job creation and sustainable growth.
It was therefore encouraging to see Europe’s heads of state and government set a more balanced agenda at the spring European Council than liberals and conservatives had been asking for, and than the Commission had proposed. The Council, in line with the social democratic family, emphasised that Europe cannot afford to neglect its social model and its devotion to sustainable development in the chase for growth and jobs.
The re-launched Lisbon strategy is more focused on growth and employment – but without neglecting the strategy’s social and environmental pillars. Europe’s current employment situation makes focus a necessity. But it is also paramount that the accomplishments already achieved are not jeopardised, and that the new jobs we create are indeed better than the ones we lose.
The mid-term review will go some way to getting Europe back on track towards completion of the strategy – but not all the way. Three factors will be decisive for achieving the results we so desperately need.
First, it is imperative that member states take national responsibility for the strategy. Though the European level is central to the strategy, it is primarily the national governments that must implement it. They must adopt the community directives it contains and prioritise its targets. So far they have not shown sufficient will and courage to do so. If this carelessness continues the ambitions of Lisbon will be hard to meet.
Second, the resources to implement the strategy, both through the EU budget and through national budgets, must be secured. At EU level the next financial perspectives must reflect the priorities of the strategy. The original proposal presented by the Commission more than a year ago did so to a certain extent. But when negotiations on the budget broke down at the EU’s summit in June one would have had to look long and hard to find the priorities of the strategy in the last version of the budget proposals placed before the European Council. Now, the collapse of those budget negotiations should be used to get the Lisbon goals back into the financial perspectives for 2007-2013. If not, we will have even less chance of creating the Europe we want.
At national level, governments must ensure that public expenditure is channelled into the Lisbon strategy – for instance, by improving national education and lifelong learning policies, increasing investment in research and by applying gender budgeting.
At the spring summit two of the three corners of Europe's “golden triangle” were secured. The Lisbon strategy was re-launched and the euro’s Stability and Growth Pact was revised in a way that should make it work able. But the third corner is still missing; faster growth still eludes us. Reforms to labour markets and employment policies – the supply side of our economies – will not by themselves deliver sufficient new and better jobs. Higher demand is also needed to achieve this.
My third point is therefore that initiatives to promote stronger demand must be taken. Ambitious, focused and proactive macroeconomic policies must be pursued as a fundamental addition to private business innovation and entrepreneurship. The member states should agree on a set of closely coordinated and precisely targeted public investments in the environment, in education and lifelong learning, in infrastructure and in active labour market policies. Such an initiative will take advantage of our mutual interdependence in a proactive fashion and, if it is done in the right way, create the durable growth we need.
By launching simultaneous public investment efforts in the Lisbon strategy's key areas – education, research, development and childcare – we could increase our overall EU growth rate by 1 percentage point a year. Investing simultaneously in all member states would be a way of taking positive advantage of our European interdependence. Increased growth would result from this “European dimension”. The leap from current levels of around 2% growth a year to 3% would make a tremendous difference to our continent by helping to create up to five million new jobs.
When thinking ahead for Europe’s economy we must remember that it was progressive social policies that created some of the most prosperous, competitive and harmonious countries in Europe. In these countries, progressive policies have created labour markets that combine flexibility with security. Providing they are modernised, such innovative active labour market policies can work as “springboards” that will get people who have been excluded from the labour market back into work. They can ensure that companies can hire and fire according to their needs, but also that no one is forced to stand outside society because they loose their job. Competitiveness and social welfare are not contradictions but preconditions. This is evident when looking at countries like Finland, Sweden, Denmark and the Netherlands, which rank among the eight most competitive countries in the world.
Europe faces immense challenges. Yet I do not believe we should be pessimistic about our future. What we need is more cooperation, more commitment and closer scrutiny of our national policies. Our task is to boost momentum and cut down on short-term trade-offs. We have the abilities, the resources and the instruments to act. These are inherent in the European model. All we need is the political courage and will to do so.