High Level group presents an ‘Agenda for a Growing Europe’, August 2003

A group of high level experts from the economics and political science fields have called on the European Union to make growth its first priority or risk further European integration in a report on the EU's efforts to fulfill the goals of the Lisbon agenda, presented to European Commissioners on 18 July 2003.

Commissioned in July 2002 by Romano Prodi, the President of the European Commission, the high-level group was led by André Sapir, a Professor of Economics at the Université Libre de Bruxelles. The group's mandate was to review the entire system of EU economic policies and analyse the consequences of the two strategic goals for the decade ending 2010, namely:

• to become the most competitive and dynamic knowledge-based economy with sustainable economic growth and greater social cohesion (the so-called Lisbon agenda)
• to make a success of the pending enlargement by rapidly raising living standards in the new Member States

Based on its findings, the group was asked to propose a strategy for delivering faster growth together with stability and cohesion in the enlarged Union. The report concludes that the institutional achievements of the EU have not been matched by its economic performance and that the EU has failed to deliver a satisfactory growth rate. According to the experts, the EU's growth rate has been generally low since the mid-1970s and whilst its macroeconomic stability improved in the 1990s, its per-capita GDP has stagnated at about 70% of the US level since the early 1980s.

In order to address these problems the group have called on EU leaders and officials to make growth the EU's number one economic priority not only in the declarations of its leaders but first and foremost in their actions, with significant emphasis on innovation. Around this principle focus, the group have identified a six-point agenda, which would focus on micro and macro-level policies, governance and budget:

• make the Single Market more dynamic
• boost investment in knowledge
• improve the macroeconomic policy framework for EMU
• redesign policies for convergence and restructuring
• achieve effectiveness in decision-taking and regulation
• refocus the EU budget

One of the most radical of the experts' proposals is the suggestion that the stability and growth pact should be made more flexible, a demand often voiced by leading officials from eurozone countries but thus far staunchly opposed by the European Commission. According to the report, the 3% ceiling on budget deficits should be maintained but there should be a more flexible interpretation of the rules, particularly in the area of fiscal policy during slow economic periods.

Amongst the more controversial of the group's other proposals are suggestions that the Common Agricultural Policy (CAP) and regional funding should be renationalised. These two suggestions provoked severe criticism from the respective Commissioners for this area, namely Franz Fischler (agriculture) and Michel Barnier (regional policy). As part of the mid term review of the CAP, Mr. Fischler has fought hard to keep responsibility for CAP at the heart of the EU and to prevent Member States from being given the possibility of increasing subsidies. Recommendations that funds from the EU budget should be redistributed away from farm spending and in favour of growth-promoting investment in research and development, education and training, and improved infrastructure could fundamentally undermine his efforts.

Similarly, suggestions that regional funding should be renationalised threaten to stir up a debate which has been ongoing since February 2001 when EU officials first began to discuss regional reform. Under current rules, priority funds are provided for areas that have a GDP per capita below 75% of the EU 15.

After enlargement, the figures will change but the EU 25 GDP per capita will drop by 13% meaning that a number of regions in Spain, Portugal and Greece will still be eligible for regional aid. However, under the group's proposals the criteria for qualifying for regional funding would be set at 90% of the EU-25 GDP per capita level, leaving the whole of Spain ineligible for regional funding. Commenting on the suggestions to the media, Michel Barnier called them 'nonsense' and 'unrealistic', saying that he believed the regional funds should be increased in the future from 0.32% of EU's GDP to 0.45% in the enlarged EU.

But while European Commissioners might have attacked the Sapir report, its proposals have largely been welcomed by the wider audience. An editorial in the Financial Times praised the high level group for its 'perfectly sensible suggestions', which all 'deserve serious consideration'. The report seems set to provoke an intense debate, just as its initiator, Romano Prodi, who has refused to comment on the group's findings, intended.

Links:
European Commission:
	An Agenda for A Growing Europe: Making the EU Economic System Deliver - Report of an Independent High-Level Study Group [July 2003]
	19.07.02:	Press Release: Economic governance in an enlarged European Union - President Prodi appoints High-Level Study Group [IP/02/1101]
European Sources Online: Financial Times:
	29.07.03:	Europe must spend its money more wisely
	18.07.03:	Boosting growth: Fresh thinking is welcome to solve Europe's dilemma
	18.07.03:	Protests greet calls for radical reforms at EU
	17.07.03:	Commissioners in scathing attack on Prodi group report
European Sources Online: Topic Guides
	The Common Agricultural Policy of the European Union
	Economic and Monetary Union
	The Structural Policy of the European Union

Helen Bower

Compiled: Friday, 1 August 2003

A high level group presented a review of the EU's economic policy and its success in achieving the goals of the Lisbom agenda to European Commissioners on 18 July 2003.