Lisbon process: why the time has come for a rethink

Date: 13/03/03

By Dick Leonard

IS THE Lisbon process - to make the European Union the most competitive and dynamic knowledge-based economy in the world by 2010 - running out of steam? If so, what urgent steps need to be taken to put it back on track?

These are the questions which need to be addressed by the 2003 spring summit in Brussels on 21-22 March.

Unfortunately, the summiteers seem all too likely to be distracted by their divisions over Iraq and by equally pressing problems concerning the Stability and Growth Pact.

It is now three years since the Lisbon process was launched, and throughout this time the London-based think-tank, the Centre for European Reform (CER), has kept a constant check on the progress made in each of the 15 sectors of the programme.

Moreover, it has cast a beady eye over the performance of each member state, naming the front-runners in each category as 'heroes', and the backsliders as 'villains'.

The think-tank's assessments have tended to be sharper than those made by the European Commission - which has been officially charged with keeping the score.

On Monday (10 March), the CER published its latest findings, Lisbon Scorecard III: the status of economic reform in an enlarging Europe, by Alasdair Murray.

Its overall message is not too alarming, progress having speeded up under several categories since a year ago, and this is reflected in a marginal improvement in its overall rating from C to C+ (see table opposite).

Yet Murray does not mince his words about the backsliders.

"Some member states," he writes, "including the eurozone's three largest economies, France, Germany and Italy, have made little attempt to fulfil their Lisbon promises.

"The new French government has not yet used its healthy parliamentary majority to push forward with pension reform or ease the regulatory burden on business.

"Equally, the Italian government talks incessantly about the need to overhaul the country's sclerotic labour market but has only succeeded in introducing some very modest reforms Gerhard Schröder's enfeebled government appears unable, or unwilling, to push forward with labour and product market reforms."

The Commission is equally scathing in its annual report on the Lisbon agenda, criticising member states for the "sluggish pace of reform".

It concludes: "The overall picture that emerges from this review is rather disappointing.

"The reaction to the slowdown in economic growth is characterised by policy inertia and backtracking."

The CER rates Denmark and Finland as the most impressive performers, but says that Nordic countries in general are already world-class contenders in the competitiveness stakes, citing the World Economic Forum findings, which put Finland second and Sweden fifth in its global competitiveness report.

Six other EU member states are commended for making "creditable progress" towards meeting their Lisbon targets - the UK, Ireland, the Netherlands, Luxembourg, Spain and Portugal.

The remaining six countries are clearly falling short, with Germany and Italy named as the 'villains' of the piece.

The position in the candidate and incoming states is also examined, and again a mixed picture emerges, though it is encouraging that several of them, notably Estonia and Slovenia, already show up among the 'heroes' of reform in several categories.

Among the different sectors, good progress in the past year has been made in information society, transport, the business start-up environment, bringing people into the workforce and upgrading skills.

Conversely, the position has deteriorated regarding research and development, state aid and competition policy, social protection and the environment.

One long-delayed advance was achieved last week, when EU ministers agreed a deal on setting up a single European patent.

However, the compromise reached was not entirely satisfactory, as the translation costs involved will still be a burden for smaller companies, and Germany succeeded in winning a seven-year transition period before its own courts lose jurisdiction over patent cases.

So, what now needs to be done to speed up the whole process?

In online magazine, Challenge Europe - www.TheEPC.be - Hans Martens, chief executive of the European Policy Centre, and two of his colleagues, draw an instructive comparison with the 1992 internal market programme.

That was largely based on legislation, with a detailed timetable for adopting nearly 300 different laws, and with a very strong guiding hand from the Commission and its powerful then-president, Frenchman Jacques Delors.

By contrast, the Lisbon process entails a minimum of legislation, and is based on the so-called 'open method of coordination', with bench-marking and peer pressure being relied upon to encourage member states to take the necessary steps.

It is now clear that this does not provide sufficient momentum to ensure the compliance of the more reluctant governments.

Given the arrival next year of ten new member states, firmer direction from the centre is now essential.

To secure this, three important decisions need to be taken in principle at next week's summit.

First, there should be greater legislative back-up for some sectors, at least, of the Lisbon process.

Secondly, the Commission should be given a far stronger role in policing the process: it is not enough for it merely to keep the score.

Finally, there should be a determined attempt to mobilise public opinion, and the various stakeholders in each member state, behind the drive to catch up, and overtake, the United States and Japan in the remaining seven years before the target date set at Lisbon.

Is the Lisbon process - to make the European Union the most competitive and dynamic knowledge-based economy in the world by 2010 - running out of steam? If so, what urgent steps need to be taken to put it back on track?