Maria Joao RODRIGUES

13.10.2006

Europe in Reform?

The EU Member States have recently presented their national reform programmes for the next three years. This is the largest coordinated process of economic reform ever tried in Europe. The purpose is to adapt to each country a set of common priorities to foster growth and employment and to prepare Europe for globalization. This re-launch of the Lisbon strategy is now much more focused on the national level of implementation.

These national programmes show that many reforms are under way throughout Europe. Still, are they in the right direction and have they the necessary scope? This will be in debate in the next European Council.

The central question is quite simple. How can Europe grow faster, creating more and better jobs and keeping social inclusion, in the today's globalized economy? We should acknowledge there is a real problem here, because Europe is nowadays the economic bloc with the slowest growth. The answer also seems simple: it needs to explore new markets, increase competitiveness by investing in knowledge as well as expand and train the employed population. From this view point, which conclusions can be drawn from these national programmes for growth and employment?

Concerning new markets, we have the progress stemming from enlargement and from the globalization strategies adopted by some European countries and corporations. It is enough to mention the current race to invest in China or India, for example. Nevertheless, many other steps are to be taken: to reach an agreement in the Doha WTO Round; to develop long term-term strategic partnerships with new central partners; to reach an agreement in the services directive; to turn the next generation of structural funds into powerful tools for catching up in the less developed regions; to use the euro-zone for a stronger co-ordination of macroeconomic policies for investment and growth.

For competitiveness, what is at stake is to redeploy the European economies for activities of higher added value, whatever the sector: from biotech, information technologies, business services, to automotive, textile or tourism. More public and private investment in R&D is crucial to step up this transition to a knowledge intensive economy. This can be achieved with better infrastructures, more training and mobility of researchers, more fiscal incentives. But this is not enough to turn knowledge into value. What is also missing in many European countries is a more ambitious development of their innovation systems, connecting companies and universities in promising clusters and partnerships.

The European employment policy has now another focus: not only to reduce the unemployment, but also to increase the employed population, who can therefore contribute for sustaining the social protection systems. For this reason, many countries are activating their employment services to make jobs or training proposals as well they are expanding child care and testing the first measures for active ageing. Nevertheless, something deeper is at stake: this is to re-organize and co-ordinate the employment, training and social protection policies for supporting people over their life-cycle with choices which are increasingly different. This is will make it easier to introduce more flexibility in the labour market, according to the so-called flexi-curity models.

In the meantime, the original mark of the Lisbon strategy should remain clear. The best tool to adapt to change is lifelong learning. Once more, something is improving regarding the rate of workers with this possibility or the share of young people concluding secondary education. But, once more, what is at stake is something broader: is to build a lifelong learning system with access points in schools, companies and households, providing more tailor-made services of education and training. Universities have a particular responsibility here to respond to much more diversified demands.

A re-orientation of national and European policies seems to be underway. Still, this should be brought about much further and also pass another very important exam: re-directing the financial means themselves. The recent review of the Stability and Growth Pact will be under test. What is at stake is certainly to pursue the fiscal consolidation and to strengthen the sustainability of the social protection systems; but is also to re-direct the public expenditure, the tax systems and the structural funds for the future-oriented priorities of investing in research, innovation and human capital.

From the overview of the national reform programmes, another conclusion can also be drawn. The differences of implementation of this European strategy are now very clear when we compare policy fields or Member states. But the best general performance in growth, jobs, innovation, social inclusion and environment is emerging in the countries which are achieving a better implementation. Something to be debated in each country.

Maria Joao Rodrigues
ISCTE, University Institute, Lisbon