How to cope with changing labour markets in a globalised world

Two MEPs discuss how Europe can revitalise its economy

Europe needs to rid tself of the rigid labour markets that stand in the way of new jobs, says Christofer Fjellner

A successful Lisbon Agenda is all about how we meet structural changes. I was reminded of this last week when I spent some days in the town where I grew up, Enk�ping, in Sweden. I visited the pride of the town, the Bahco tools factory. 120 years ago J.P. Johansson invented the adjustable spanner in a small workshop in Enk�ping. Since then the best spanners in the world have been made at Bahco. But not for much longer. Bahco's production will move and along with it, a big part of Enk�ping's heritage and Swedish industrial history.

I am sure that much could have been done to make Sweden and the Bahco production in Enk�ping competitive in a globalised world. But I am amazed that we have been able to keep the production in Enk�ping for so long. Especially considering the tax level and the labour costs in Sweden.

Times are inevitably changing and this is only one example of the structural change European industries and cities such as Enk�ping are going through. Even if it is a painful process we should not only get used to it and accept it. We should embrace it.

Welfare in Enk�ping will not be secured through Bahco keeping the production of spanners in Enk�ping. The future will depend on whether Bacho will be able to successfully develop, market and manage the company from Enk�ping. Or, maybe more importantly, if new companies are able to start up and prosper in Bahco 's place. How well Enk�ping will do only time will tell.

Unfortunately, Europe has not been up to speed with the necessary changes, as statistics from all different areas can confirm. The result is a European economy that is growing slower than the economies of our global competitors. Since 1980, Europe's economy has grown 60%. During the same time the Chinese economy has grown 650% and India's economy has grown 250%. The US had a larger economy than Europe to start with but it still grew by 100%. Europe is lagging behind.

Our economic shortcomings are now pushing us down a negative spiral and our politicians are focusing more on securing the jobs that we have and thinking less of the jobs we can get. They seem preoccupied with saving a European social model that looks less and less social but accepting more and more people outside the labour market. Economic nationalism is growing and protectionism as a method of tackling global competition is on the rise. European politicians are trying to do what seems impossible: to stop change. The worst thing that can happen is that they succeed and preserve the economic structures of yesterday.

But it doesn't have to be like this. History shows us that we have great possibilities if we embrace structural changes. 150 years ago, 80% of the Swedish population worked in agriculture. Today, they represent fewer than 3% but actually produce more. The other 77% have got better jobs and now the average Swede is ten times wealthier. All around us history is silently repeating itself. The Danish shoe manufacturer Ecco has never had as many employees in Denmark as today, even though the company has stopped manufacturing shoes in Denmark altogether. In the US, Delta Air moved 1,000 ticket reservation jobs to India in 2003 and saved $25 million in the process, which was sufficient to hire 1,200 new employees in more qualified positions.

Some European countries have managed globalisation better than others. In Ireland, employment in manufacturing industries has fallen by 10% since 2000. Employment, on the other hand, has risen by 10%. For every old job, two new ones have been created. Through change, Ireland has gone from being one of the poorest European countries to becoming one of the richest.

In order to benefit from globalisation, we have to embrace it. Stop sheltering old industries and sectors under subsidies or behind trade barriers. Open up the growing service sector to European and global competition. Leave the rigid labour markets that stand in the way for new jobs. In essence, we need more of globalisation and structural change but less structural and globalisation funds.

• Swedish centre-right MEP Christofer Fjellner is a member of the Parliament's committee on international trade.

The diversity of our economic players gives the EU strength and flexibility, says Edit Herczog

Europe has for a long time been pleading for the worldwide spread of democracy. Today, it is happening, along with an unprecedented, turbulent development in the field of information and communication technologies. This has irreversibly led the world's economic order into a radical change: globalisation. Europe cannot urge and welcome the causes on the one hand and reject or fight against the consequences on the other. Globalisation is a new state of affairs with new opportunities we have to detect and seize, for the successful will be those who can ride the change.

Both EU and national authorities have to recognise the need to react, decide on how to react, and then deliver. The Lisbon Agenda is the right tool, but its handling still needs perfecting. It is high time we stopped evaluating our objectives and focused on action and results.

The European Parliament's first job and prime responsibility in that respect was to raise and maintain awareness. That was the purpose of our resolution on the mid-term review of the Lisbon Agenda and the launch of the Lisbon co-operation platform with the national parliaments. Thus prompted into action, the European Commission also urged member states to put forward their national reform plans. Hopefully, member states have now realised that national ownership of the Lisbon Agenda is not a question of pleasing Brussels, but a crucial step for everyone towards living up to the challenges of globalisation. It is now time to move on from plans to measures.

When it comes to action, hints as to what could be done to promote European competitiveness on the global level could be found, among others, in the resolution adopted by the Parliament on 14 February, about the effects of globalisation on the internal market. The two keywords to be highlighted are diversification and flexibility. Indeed, there never was and never will be a single approach, or any monolithic solution. The internal market is heterogeneous and should remain so, for the diversity of our economic players is our greatest strength in terms of adaptability and flexibility. Achieving the internal market does not mean creating uniform players, but building a common level playing-field where no internal barriers prevent the players from making the best out of their diversity.

Flexibility and diversification should also apply to the better regulation programme. In both EU and national legislation, we must get rid of out-dated and inflexible rules that in too many cases discard new ideas or technologies which, if not exploited in Europe, will soon be turned into assets elsewhere.

Cutting red tape is equally crucial, not only because lengthy procedures hinder our competitive development in the accelerated global context, but also because in our endeavour to protect the communities' financial interests, we create growing administrative costs which undermine the cost-effectiveness of our policies and the efficiency of our investments. Transparency is important, but it only makes sense to the extent that its cost-benefit balance remains positive. And community financing also has to be flexible enough to adapt to the diversity of the cases involved. The same rules simply cannot apply to major infrastructure investments and low- volume high-risk venture capital. Both deserve and need EU support, and it is up to decision-makers to create the relevant, transparent and accessible frameworks for both.

Last but not least, a great effort remains to be made, from Brussels through national governments down to the regional and local levels. EU citizens must understand that the continuous change which globalisation imposes on us is not a permanent threat, but a historical chance. The history of evolution shows that it is always the most flexible ones who survive great changes. In Europe, we don't need one big dinosaur but as many swift horses as possible. With our millions of small- and medium-sized enterprises, with our innovative resources, with our world leader policies for sustainability, we have the horses and the tools. Let's harness them and ride on.

• Hungarian Socialist MEP Edit Herczog is a member of the Parliament's committee on internal market and consumer protection.

Two MEPs discuss how Europe can revitalise its economy.
Article is part of a European Voice Special Report, 'Business and the Lisbon Agenda'.