Mad dash to the finish line

Ultimate success will depend on the sustainability of implementations over the next 18 months.

By Jerry Ash

With only 18 months left in a 10-year initiative, the Lisbon Strategy, which originally aimed at making Europe competitive in the Global Knowledge Economy, is now in its third regeneration and making a mad dash to the finish line with a significant caveat: the work will not be finished in 2010. And growth and jobs, not the knowledge economy, are the current bywords.
Although there has been a broad consensus on what needs to be done, the pace of delivery has been uneven.
In December 2007, a European Commission (EC) report declared:
“Not all Member States have undertaken reforms with equal determination. Reforms in some areas, such as opening up energy and services markets and tackling labour market segmentation, have lagged behind. Some signs of ‘reform fatigue’ have become apparent over the last 12 months.”
In March 2008, the EC met in Brussels. This was preceded by an exposé by the president of the European Parliament, Hans-Gert Pöttering, followed by an exchange of views.
The fundamentals of the European Union (EU) economy remain sound: public deficits have been more than halved since 2005 and public debt has also declined to just under 60 per cent. Economic growth reached 2.9 per cent in 2007, but is likely to be lower this year. According to the report, 6.5 million jobs were created in the past two years.
Although cyclical factors have played a role, these developments have been aided by the structural reforms undertaken over the past few years within the framework of the Lisbon Strategy and the beneficial effects of the Euro and the single market.

Global economic downturn
However, the global economic outlook has deteriorated recently as a result of a slowdown of economic activity in the US, higher oil and commodity prices, and ongoing turbulence on the financial markets. Excessive volatility and disorderly movements in exchange rates are undesirable for economic growth. The Presidency wrote:
“In the present circumstances we are concerned about excessive exchange rate moves. This is why it is all the more essential for the Union to avoid complacency and sustain reform efforts through the full implementation of the National Reform Programmes and the Integrated Guidelines for Growth and Jobs. Efforts to complete and deepen the internal market must continue. Closely coordinated economic and financial policies must be geared towards ensuring macro-economic stability, taking up the opportunities of globalisation and addressing the challenges ahead including ageing populations, climate change and energy.”
In order to ensure greater stability of financial markets, action is also required to strengthen their transparency and functioning and to further improve the supervisory and regulatory environment at national, EU and global level.

Another new launch
The Lisbon Strategy has been launched and re-launched three times over its current eight years and the latest EC meeting added a fourth.
In light of the positive factors in the Commission’s strategic report, the new launch retains the current Integrated Guidelines and Employment Guidelines and urges the Member States to adopt them.
The focus of the new cycle is on implementation and concentrates on those goals which are achievable by the end of the decade.
The new Strategy stresses the need to integrate economic, employment and social policies and predicts further EC commitment to structural reforms and sustainable development. And social cohesion will be necessary after 2010, in order to lock in the progress achieved by the latest renewal:
“The European Council therefore invites the Commission, the Council and the National Lisbon coordinators to start reflecting on the future of the Lisbon Strategy.”

Research, knowledge and innovation
Though no longer the headliners they were in the original Lisbon Strategy, the renewed strategy still sees research, knowledge and innovation as key factors for growth.
The full development of the potential for innovation and creativity of European citizens built on European culture and excellence in science continues to be considered essential in the new strategy. Since the 2005 relaunch, the EC says joint efforts have led to significant achievements in the areas of research, knowledge and innovation.
“The implementation of the broad-based innovation strategy is key to realising EU ambitions in the area,” according to the report. “All the priorities of the strategy need to be taken forward rapidly. At the same time further efforts must be made, including in the private sector, with a view to investing more, and more effectively, in research, creativity, innovation and higher education and achieving the three per cent R&D investment target.”
Member States are invited, within their National Reform Programmes, to show how progress towards national research and development (R&D) investment targets will be achieved and how their R&D strategies will contribute to the better governance of the European research area.
Presidency conclusions highlight the following actions on which the Member States and the Community are urged to make swift progress:

Key projects including the GALILEO, EIT (a European satellite navigation system), the European Research Council, the Risk-Sharing Finance Facility and the Joint Technology Initiatives must be swiftly implemented or further promoted;
Scientific e-infrastructure and high-speed internet usage must be significantly increased. Member States should aim to make high-speed internet available to all schools by 2010 and to set ambitious national targets for household access as part of their National Reform Programmes;
An EU-wide market for venture capital for the most innovative companies must be promoted. In that respect, the European Investment Fund must play a key role in the financing of innovative SMEs;
Efforts towards improving the framework conditions for innovation should be better coordinated, including through improved science-industry linkages and world-class innovation clusters and development of regional clusters and networks;
Particular attention should be given to further initiatives for joint programming of research, mutually complementary international S&T cooperation strategies and the strengthening of research infrastructure of pan-European interest;
Universities should be allowed to develop partnerships with the business community so as to benefit from complementary private sector funding.

Open knowledge sharing
The report notes that in order to become a truly modern and competitive economy, and building on the work carried out on the future of science and technology and on the modernisation of universities, Member States and the EU must remove barriers to the free movement of knowledge by creating a “fifth freedom” based on:

Enhancing the cross-border mobility of researchers, as well as students, scientists, and university teaching staff;
Making the labour market for European researchers more open and competitive, providing better career structures, transparency and family-friendliness;
Further implementing higher education reforms;
Facilitating and promoting the optimal use of intellectual property created in public research organisations so as to increase knowledge transfer to industry, in particular through an ‘IP Charter’ to be adopted before the end of the year;
Encouraging open access to knowledge and open innovation;
Fostering scientific excellence;
Launching a new generation of world-class research facilities;
Promoting the mutual recognition of qualifications. Unlocking the business potential, especially of SMEs.

The EC claims decisions taken since the renewal have started to improve conditions for market players. It has become easier to set up a business as all Member States have established one-stop shops or similar arrangements to facilitate registration and reduce paperwork.
The European Council applauds the progress made during 2007 on better regulation and considers that further efforts are needed in order to deliver crucial improvements to the competitiveness of EU business, in particular SMEs.
“Better regulation should be considered a high priority by each Council formation in its regulatory work” the report states.

SMEs
The report notes that small and medium-sized enterprises (SMEs) form the backbone of the European economy and have the potential to contribute significantly to creating more growth and jobs in the European Union. In order to reinforce the Union’s SMEs policy and to allow them to operate more effectively in the single market, the following actions are considred of immediate importance:

Swift examination by the Council of the upcoming Small Business Act initiative setting out an integrated approach across the SMEs’ life cycle in line with Better Regulation and Think Small First principles and intended to further strengthen SMEs’ growth and competitiveness;
The introduction, where justified and following screening of the acquis communautaire, of exemptions for SMEs from the administrative requirements of EU legislation;
Strengthened support of research-performing and innovative SMEs with high growth potential, for example through a new European private company statute;
Further facilitation of access to finance, including through existing EU financial instruments;
Facilitation of increased participation of innovative SMEs in clusters and in public procurement.

Investing in people
The report says the education element of the knowledge triangle ñ research-innovation-education ñ should be strengthened.
Providing high-quality education and investing more and more effectively in human capital and creativity throughout people’s lives are crucial conditions for Europe’s success in a globalised world. This can bridge and facilitate the movement towards a knowledge-based economyí, create more and better jobs and contribute to sound fiscal positions.
They are also effective ways of fighting inequality and poverty and can contribute to reducing youth unemployment.
The European Council looks forward to the Commission’s proposal for a renewed social agenda which should play a key role in strengthening the social dimension of the Lisbon Strategy by taking account of Europe’s new social and labour realities and also covering issues such as youth, education, migration and demography as well as intercultural dialogue.
In this context, combating poverty and social exclusion, promoting active inclusion and increasing employment opportunities for those furthest from the labour market are all of major importance. To this end all the appropriate instruments and tools available at Community level should be used. In view of increasing skills shortages in a number of sectors, it invites the Commission to present a comprehensive assessment of the future skills requirements in Europe up to 2020, taking account of the impact of technological change and ageing populations and to propose steps to anticipate future needs.
Economic migration can play a role in meeting the needs of the labour market and can contribute to help reduce skills shortages. The European Council, therefore, considers that the employment and social impact of migration of third-country nationals needs to be addressed in the context of the Commission proposals for a common policy on migration.
The European Council urges Member States to take concrete action to:

Substantially reduce the number of young people who cannot read properly and the number of early school leavers, and improve the achievement levels of learners with a migrant background or from disadvantaged groups;
Attract more adults, particularly low-skilled and older workers, into education and training and further facilitate geographic and occupational mobility;
Promote higher overall labour force participation and tackle segmentation in order to ensure active social inclusion;
Improve policy consistency and coordination of economic, employment and social policies in order to enhance social cohesion.

Ambitious package
The ambitious package of proposals leading up to the final run to 2010 are even more extensive. It looks to support Member States in the reduction of greenhouse gases and recognises the need for analysis in a global context of competitive markets. The risk of carbon leakage is a concern in sectors such as energy intensive industries particularly exposed to international competition.
The EC feels it is necessary to achieve greater synergies between climate change and biodiversity policies as a way of securing co-benefits, in particular by strengthening mutually supportive activities and measures with regard to climate-change mitigation and adaptation and to the production, consumption of and trade in biofuels. The European Council encourages Member States and the Commission to strengthen efforts aimed at halting biodiversity loss by 2010 and beyond.
Finally, the EC takes on the problem of the instability of financial markets.
With only 18 months left, the EC logically seeks to implement those policies which are achievable by then. The ultimate success will depend on their sustainability and that means the Lisbon Strategy will continue to drive change in Europe for many years to come.