18th May 2021

EU downbeat on its goal of trying to catch US

The European Commission today published a very downbeat assessment on its highly ambitious goal to become "the most competitive, knowledge-based economy in the World by 2010" - the so-called Lisbon strategy.

The report concedes, "the Union cannot catch up on the United States as our per capita GDP is 72 percent of our American partner's".

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Presenting the report, Commission President Romano Prodi confirmed that the EU would miss its targets for the half-way stage of the process (which runs from 2000 to 2010) and said, "This should be a strong enough message to serve as a wake-up call to governments".

And a downcast Economic and Monetary Affairs Commissioner Pedro Solbes admitted, "we may not attain the Lisbon objectives in 2010".

Much to do

The report outlines the main problems facing the EU in its effort to catch up with the US, saying "in certain domains there are significant problems which hold back the entire strategy and which hinder the return of strong growth".

The main areas where the EU lags behind the US are jobs, productivity and investment.

First, in terms of jobs, although the EU has created six million jobs since 1999, it will still fall far short of its employment targets for 2005. Describing the jobs situation as "on the whole disappointing", the report says, "Despite a 1.8 point advance in three years, it will not prove possible to achieve the intermediate target of 67 percent in 2005 for the Union as a whole".

"Nevertheless, the 70 percent target laid down for 2010 is still realistic if the economic upturn feeds through into rates as high as those at the end of the 90s".

The situation is hardly better in terms of productivity. In fact, the growth rate in productivity per employed person in the EU is actually declining and now fluctuates between 0.5 percent and 1 percent, far behind the two percent enjoyed by the US.

Again, the conclusion of the report is that "the European Union's efforts to catch up with the United States are at a standstill".

Finally, public investment is falling and is also far below the US levels.

Member States to blame

The Commission blames the Member States for these failures, concluding, "the Union has still not managed to achieve all its objectives, in particular due to Member State's inadequate implementation of the reforms".

Indeed, of the 40 directives drawn up under the Lisbon strategy, which should have been passed into national law, less than 60 percent have actually been written onto national statute books. The Commission derides this as a "very poor showing".

Some Member States escape harsh criticism. Denmark, Luxembourg, the Netherlands, Austria, Sweden and the UK have "relatively better overall acheivements to date" in terms of contributing to the Lisbon goals.

At the other end of the scale, Greece, Spain, Italy and Portugal "are performing relatively poorly" but "there are still problems in all Member States and ... all of them need to make a greater effort to achieve results".

Hope for the future

However, there are some bright spots in the report - mainly in the shape of the 10 new member states. These new states mostly enjoy fast growth and have great potential for improvement.

Of accession countries, the report says, "Through their experience of reform and their desire to pursue this process, these countries will make a valuable contribution to the Lisbon strategy and its political momentum".

The Commission identifies what it calls a three-pronged strategy for improving progress towards acheiving the Lisbon goals, concentrating on investment, competitiveness and reform.

Furthermore, the report calls on EU leaders to "give fresh impetus to the Lisbon strategy" on 25-26 March, when they meet to discuss economic reform, stressing that "the year 2004 offers the Union opportunities on this count which it must grasp if it is to make progress".

Europe is failing

Many MEPs reacted with dismay to the report, which was presented to the European Parliament.

The leader of the Liberals, Graham Watson, said, "It is clear from the report that Europe is failing in the targets it has set itself".

Mr Watson criticised the discrepancy between the rhetoric of EU leaders and the reality of the situation.

"In 1993, another Commission document spoke of 'growth, competitiveness and employment, the challenges and the ways forward into the 21st century'. Ten years on from Jacques Delors' White Paper, the bold words are the same but are still not matched by deeds".

Jonathon Evans, leader of the UK Conservatives in the European Parliament said, "Instead of making progress on the Lisbon targets, the EU is actively heading

in the opposite direction".

'Weak' Eurozone

Reaction outside the Parliament demonstrated similar disappointment.

Sir Brian Williamson, former Chairman of LIFFE - the London-based futures exchange - said, "This report is another reminder - if we needed it - that the reform process has stalled. The Commission's analysis should leave no one in any doubt about the weak state of the Eurozone".

And Alasdair Murray, economics expert at the Centre for European Reform, told the EUobserver, "The Commission report shows that although we are nearly at the half-way point in the Lisbon programme, many EU governments are still half-hearted about the need for reform".

Mr Murray warned, "EU leaders must use the spring summit in March to push through some meaningful reform measures. Otherwise the economic gulf betweeen the EU and the US risks becoming ever larger".

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