Maria Joao RODRIGUES

11.10.2006

Three Europes facing globalisation

The stage seems set in Europe for a classic confrontation between those who would protect jobs and those who advocate sacrificing them to increase competitiveness. Maria Joćo Rodrigues, who is Special Advisor for the Lisbon agenda, argues that there is a "Third Europe" that makes this dilemma obsolete and sterile.

In our increasingly globalised world what kind of Europe do we want to become? One that ties to shelter itself from the pressures of the global marketplace, one that merely goes with the flow, or one that strikes out in new directions? This should be the central question in the great debate over Europe's future, because it has implications for almost EU level and national policies.

The wider implications of the global challenges we face are already becoming uncomfortably clear. The US and Japan remain in the forefront of science and technology and China and India are emerging as new economic giants capable of producing and exporting sophisticated products and services. Europe has islands of excellence, but our dynamism is being hindered by ageing trends that are leading to the shrinkage of our working age population. And taking the world economy as a whole, new achievements in information and communication technologies and in biotechnologies are being overshadowed by our collective incapacity to reverse the global trend towards environmental degradation and the darning rise of relative poverty.

The stage now seems set in Europe for a classic confrontation between those who would have us sacrifice competitiveness to save jobs and the European social model, and those who prefer to abandon those so as to strengthen competitiveness and pave the way for new jobs. But even if social protection, healthcare and the social dialogue components of this social model are to be sacrificed, it will certainly prove impossible for Europe to compete with these emerging economies because their much lower wage costs. We Europeans need to focus on a third solution, in which Europe would compete on the basis of knowledge, innovation and the work of more skilled, mobile and active men and women who have access to good systems of social protection and family care. Looked at in this light, synergies will count more than contradictions; Europe needs to achieve greater competitiveness so as to strengthen its social model, and this in turn should also contribute to improving our competitiveness.

Constructing this third Europe will involve large reforms if we are to renew our competitiveness, energise Europe's social model and introduce a much stronger basis for economic growth. We are going to need many more innovation networks to connect companies with universities, many more workers in training for new jobs, better family care services, and a equitable balance between benefits and contributions to our social protection systems with more equity between generations.

As we know, it was this idea of a "third Europe" that was chosen when the EU's Lisbon Strategy was defined and agreed on back in 2000. Lisbon has since then chalked up some achievements, but it has also come up against many bottlenecks. The achievements include wider access to the Internet, stronger European research networks, less red tape when setting up new companies, more integration in the markets for telecommunications, energy and financial services, first reforms of pension systems and more child care and social inclusion programmes. But the bottlenecks have resulted in little or no progress on the single market for services, the Community patent, the development of innovation networks, the reform of labour markets and access to lifelong learning.

We have to clarify our priorities much more effectively at European and national levels if these bottlenecks are to be overcome. This in turn means going beyond the confrontation between the two traditional positions and giving new momentum to the third Europe. How to do this has been at the heart of the new political debate that takes place every day between EU policymakers, and it should now be extended so as to in value Europe's citizens. And as part of that effort, it is worth calling attention to the 2005 mid-term review of the Lisbon strategy, which included a number of useful clarifications:

• The Lisbon strategy translates into three priorities: knowledge and innovation for growth; making Europe more attractive to investment; more and better jobs, with social cohesion;
• The strategy's implementation must be stepped up. The EU's guidelines for economic and social policies were adopted for the first time and translated into national reform programmes for growth and jobs in all Member States.
• All available financial instruments should support the strategy's implementation. These include the reformed Stability and Growth Pact, the review of the state aids regulations, the development of new instruments by the European Investment Bank and the new guidelines for the next generation of structural funds;
• First steps to develop the "external dimension" of the Lisbon strategy, by promoting its values among the EU's international partners. This builds on global convergence towards better social and environmental standards and mutual recognition of the value of knowledge, as reflected in the new political orientations recently adopted by Brazil for its development agenda and by China for its new five-year Plan.

"Third Europe" also presents different choices for consideration on the European agenda, with a "trilemma" replacing Europe's traditional dilemma between the two classical positions:

• Should we, or should we not, undertake the restructuring and redeployment of the European economy to new sectors? We should, but supported by innovation and employment policies which combine new jobs with new skills and foster new activities that are more knowledge-intensive.
• Should we pursue the opening of the European economy in the frame of the WTO and prepare its redeployment to new, more knowledge-intensive sectors? We should certainly pursue this, making the necessary concessions on CAP reform, but also demanding respect for basic standards in both social and environmental areas as well as intellectual property rights;
• Should we extend the single market for services? It should certainly be opened, but with respect by the basic features of the European social model;
• Should we strengthen the Stability Pact? We certainly should strengthen it, but making macro-economic policies better able to foster the public and private investment required by an inclusive knowledge society; a more consistent external action of the eurozone is also particularly relevant;
• Should we reduce the Community budget for investments which look to the future (R&D, innovation, human capital) or for the expenses on regional cohesion? Neither one nor the other and this implies curtailing expenses on the Community agriculture policy and on the British rebate. In addition, greater preparation for the transition to knowledge-based societies should be provided by the policy for regional cohesion;
• Should enlargement be given priority or the deepening of European integration? Both have been clearly justified but under no circumstances should enlargement hinder the political deepening needed by Europe to improve its governance of globalisation.

These trilemmas can provide a framework to understand many key issues currently under debate in the European Union. There are not just two different political agendas. There are three.