Lisbon Agenda has spurred resilient EU economy

Recent improvements in Europe's labour markets offer hope of sustained progress, writes Lorraine Mallinder.

European Union leaders meet in Brussels next month (13-14 March) for their spring European Council, which is traditionally devoted to economic matters.

The summit will find the EU entering the last phase of its Lisbon Agenda, launched in March 2000, with the global economic outlook looking decidedly gloomy. The Lisbon Agenda's ambitious goals still seem distant but that is not to say it has failed to produce results. It has equipped the EU economy with the structural resilience needed to cope with the economic downturn that many observers believe is on the way.

The Centre for Economic Reform (CER), a think-tank based in London, makes an assessment each year of the EU's progress towards its Lisbon targets. The CER concludes that member states have succeeded in laying solid foundations for long-term stability but that more work is needed to consolidate gains.

The CER report, to be launched on 3 March, asks whether Europe is ready for the approaching "economic storm". Looking at the bloc's job markets, Philip Whyte, a CER senior research fellow, is fairly positive. Of the bloc's 27 countries, 24 have improved employment rates. Doomladen predictions about the impact of emerging economies on job markets have not come true.

"The point is that the growing integration of these countries in the world economy is not destroying jobs in rich countries," says Whyte.

But how sustainable are the improvements? Back in the heady days of the internet boom in the late 1990s, European job markets were flourishing. The feel-good factor was such that governments cut taxes and upped spending - only to land with a bump when the bubble burst. The improvements in job markets back then, says Whyte, were cyclical. More recent improvements are, he says, structural and likely to be more sustained in nature, resulting from steady reform of labour markets.

"Essentially, countries have loosened and restructured labour market conditions," he says, marking out France for special attention. France's contrat nouvelles embauches, introduced in 2005, gives smaller companies of up to 20 employees more freedom to hire and fire. The open-ended contracts, which allow employers to dismiss workers without explanation in the first two years, were brought in despite considerable union opposition. A French government study released last year showed that 8% of employers maintained that they would not have taken on workers without the contract.

Further reform is envisaged under flexicurity plans approved by EU leaders last year. The common principles would allow employers more flexible conditions to recruit, while improving workers' security and guaranteeing retraining opportunities during transition periods.

Sceptics doubt whether such a balance can be achieved and warn of a public backlash if measures fail to deliver promised security. But Whyte points out that successful precedents do exist: Nordic countries and the Netherlands have succeeded in combining free labour markets with a high level of social equity.

Recent improvements in Europe's labour markets offer hope of sustained progress, writes Lorraine Mallinder.