22nd Jul 2019

Brussels to unveil economic plan for next decade

  • R&D spending in Europe in below 2% compared to 2.6% in the US and 3.4% in Japan (Photo: gilderic)

After a decade of the EU's failed efforts to become the world's most dynamic knowledge-based economy, Brussels is laying down a fresh economic vision based on innovation, education and digital technologies. However, it stops short of introducing sanctions to ensure national capitals this time stick to the plan.

On Wednesday (3 March), the European Commission is set to adopt a 10-year economic strategy, dubbed Europe 2020, that warns of a "lost decade" should the 27-nation bloc continue "at a slow and largely uncoordinated pace of reforms."

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The draft document, seen by EUobserver, argues in favour of "smart, green and inclusive growth" - an objective mirrored in five "measurable" targets that should be later translated into national obligations.

The EU should increase its employment rate from the current 69 percent to at least 75 percent by the end of the next decade; should boost its investment in R&D and innovation to some 4 percent of GDP; and stick to its green goals of lower CO2 emissions, more renewables and higher energy efficiency.

In addition, at least 40 percent of Europeans aged 30-34 should obtain a university degree - currently, only 31 percent do so, while some 28 million people (or a quarter of Europeans) should be lifted out of poverty by 2020.

The old continent lags behind the US and Japan when it comes to research spending, education achievements or the development of information and communication technologies. The EU's executive body is, therefore, set to keep an eye on how national governments stick to new tasks.

"The monitoring of progress towards these targets should become an integral part of our economic governance," the paper says.

No sticks, no carrots

The idea of sanctions or incentives - floated by the Spanish EU presidency and opposed by Germany - has not made it into the commission's package, however.

Instead, Brussels is opting for "country reporting" based on "reform programmes" that EU capitals will need to submit for evaluation together with their stability or convergence programmes, which examine country's macroeconomic and fiscal stance.

If a member state fails to "adequately respond to a policy recommendation ... or develops policies going against the advice, the commission could issue a policy warning," says the document. EU institutions now enjoy a stronger say in the area of economy.

What about the money?

But the EU executive is likely to ruffle feathers in some capitals when it comes to discussing financial resources for Europe 2020, particularly the idea that future priorities should be mirrored in the bloc's post-2013 financial multi-annual budget.

"We have insisted that the debate about the 2020 economic strategy cannot be the debate about the European Union's budget," Slovak Prime Minister Robert Fico said at a February EU summit partially devoted to the topic.

According to diplomats, the view is shared by Hungary, Poland, the Czech Republic as well as the Baltic states.

The less developed countries do not see themselves as sufficiently able to absorb EU funds for R&D, innovation and low-carbon technology when compared to their western counterparts. Instead, they argue, the region still needs to put money into basic infustructure in order to boost attractiveness for investment.

"Member states must have the right to choose how they achieve the economic growth," Mr Fico argued, defending current financial tools such as the Cohesion Fund. "Such policies must be part of the 2020 strategy. If not, some countries would be significantly disadvantaged."

No 'one size fits all'

Poland's EU affairs minister, Mikolaj Dowgielewicz, echoed Mr Fico's concerns.

"The proposal does not sufficiently reflect the different development levels of regions and member states and therefore does not respect the underlying factor of economic cohesion in the enlarged EU. The 'one size fits all' approach should be eliminated," he told EUobserver in an interview.

The minister voiced special concern over plans to "green the economy" due to the vast differences in emissions levels between the old and new EU states.

"We should stick to the Cohesion Fund and structural funds, which have well-established and operational delivery mechanisms," he added. "Poland is against creating separate thematic funds to address new challenges."

Brussels, for its part, wants to discuss the different funds' real impact before it tables budgetary proposals next year. In addition, it hopes to design new financial instruments with the participation of the European Investment Bank and the private sector.

The final decision on the new EU strategy is to be taken by the 27 EU leaders on 25 March. Under the bloc's new, post-Lisbon Treaty set-up, member states will have no chance to formally debate the proposals ahead of the summit in sectoral councils of energy or finance ministers, giving the commission extra power to force its ideas through.

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