EU’s slow boat to Barcelona

Date: 07/03/02

IS THE EU on target to become 'the most competitive and dynamic knowledge-based economy in the world by 2010' - the objective set by the Lisbon summit two years ago?

Not really, according to the report the European Commission has prepared for next week's economic summit in Barcelona. Hardly at all, according to a more hard-headed assessment being prepared by Edward Bannerman for the Centre for European Reform (CER).

The Commission's report lists a whole series of missed deadlines by the member states (and, in some cases, the European Parliament) for adopting proposals set out in the Lisbon timetable. These include:

• simplification of the regulatory environment;
• creating a new framework for public procurement;
• creating single markets for risk capital and financial services;
• a single Community patent;
• liberalising the gas and electricity markets;
• the Galileo satellite system.

There have been some important successes, such as the recently agreed telecoms package, and the fast growth in internet penetration of EU households, though the target of connecting all schools to the net by the end of last year was missed.

A new legal framework has been established for e-commerce; the European research network, embracing 31 countries and now the fastest in the world, is in operation; and the European Small Firms Charter is helping to raise the rate of business start-ups and create a more entrepreneurial European economy.

The table above, which has been adapted from one in the Commission report, shows how far the EU still has to go before it gets anywhere near its objective of overtaking the US economy.

In some respects - notably in employee productivity - the position has actually deteriorated since Lisbon.

Bannerman's study for the CER, The Barcelona Scorecard: Economic Reform In The EU-25, which will be published only after the summit is concluded, is a follow-up to his report after last year's spring summit in Stockholm, which considered the first year of the ten-year programme.

He assessed the progress made on a five-point scale, ranging from 'very good' to 'very poor'.

His overall conclusion was that the first year's progress had been no more than 'satisfactory' and awarded it a C+.

During the second year, in his view, there has been some slowing down, and he has reduced the grade to C-.

Bannerman's study takes account of the relative performance not only of the member states, but also of the 12 countries currently negotiating membership, and he names 'heroes' and 'villains' under each category of the Lisbon programme.

For the process as a whole, he lists Sweden, Spain, the UK and Hungary as being in the forefront of progress, and France, Germany and Poland as the back markers.

The task awaiting the summiteers at Barcelona is to inject a new dynamism into the Lisbon process.

Unlike the 1992 programme to create a single European market, or the project leading to the creation of the euro, it has not depended on a complex legislative framework involving the adoption of a large number of directives and regulations.

Instead, it has relied on a largely voluntarist approach - the so-called 'open method of coordination' - with the member states being jollied along by a combination of peer pressure, bench-marking and the adoption of best practice.

This has produced uneven results, the least satisfactory concerning the liberalisation of energy markets.

Much the worst offender has been France which, while refusing to liberalise its domestic market, has encouraged the state-owned EdF to buy up utility companies in other member states and profit from the liberalising measures that have been introduced.

The reaction of other member states has been to shrug and say that nothing can be done until after the French elections in May and June.

But even then it is far from certain that the French will hasten to fulfil their obligations. The European Commission may well have to act, under Article 86 of the Rome Treaty, to force them to do so.

The heads of government at Barcelona should seriously consider whether a more rule-based approach should now be adopted to loosen the other main logjams which have appeared - for example, on labour market reforms, financial services, and research and development.

What is at stake is not just Europe's pride and the desire not to be outdone by the Americans and the Japanese.

As British Trade Secretary Patricia Hewitt told a meeting on Monday of the Foreign Policy Centre, the attainment of the Lisbon objectives by 2010 would leave every man, woman and child in the EU €8,175 a year better off.

Major analysis of separate reports from the European Commission and the Centre for European Reform (CER) on the progress achieved following the Lisbon European Council in March 2000. Author concludes that progress has been limited.