Lisbon Strategy for Growth and Jobs: guide

11 December 2007
by eub2 -- last modified 11 December 2007

The European Union's Lisbon Strategy to modernise Europe was first agreed in 2000 and relaunched in 2005, with a clearer focus on growth and jobs.

What is the Lisbon Strategy for Growth and Jobs?

The Strategy is based on a consensus among Member States and organised around 3 year cycles. It is now making a strong contribution to Europe's current economic upturn.

If the EU makes the right economic reforms now, it can secure a prosperous, fair and environmentally sustainable future for Europe. It can ensure that our economies are well positioned to take advantage of the opportunities offered by globalisation. It can put Europe in a strong position to cope with demographic changes that will mean more older people and fewer young people of working age in our societies.

How does the Lisbon Growth and Jobs Strategy work?

It is based on a close partnership, with a clear division of responsibilities and a strong emphasis on maximising the synergies between the Community and the national levels and between different economic policy areas. Member States undertake reforms at national level based on National Reform Programmes presented in 2006 and based on the policy guidelines ("Integrated Guidelines") agreed collectively by all Member States in 2005 and due for review in 2008. These National Reform Programmes cover a three-year period.

Each year, Member States produce reports on the implementation of their National Reform Programmes. The latest implementation reports were presented in October 2007.

All Member States have appointed Lisbon Co-ordinators ("Mr or Mrs Lisbon") charged with driving the strategy forward in their own Member State and involving stakeholders in its implementation. The Commission assists, monitors and assesses this national level reform process.

In conjunction with this, a programme for European level reform – the Community Lisbon Programme - is implemented.

Furthermore, the 2006 Spring European Council agreed four priority areas as the pillars of the renewed Strategy (knowledge and innovation, unlocking business potential, investing in people and modernising labour markets, energy/climate change).

It also agreed on a number of actions, such as making it possible anywhere in the EU to start-up a business within one week or less. Progress on these actions has been good.

In March 2007, the Spring European Council took a further important step by endorsing country specific recommendations – proposed by the Commission in its December 2006 Progress Report - for the first time. These are Treaty based. By endorsing them, Member States have agreed collectively on what each needs to do.

The Commission's assessment of progress at national level focuses - this year and in future – particularly on the implementation of these recommendations and of the other "points to watch" included in the country chapters.

What is the structure of this year's Report? What are the components of the package?

The first part of the report to the 2008 Spring European Council sets out the Commission's proposals for taking the Lisbon Strategy forward during the next three years.

The second part consists of an assessment of progress made by each Member State (and the euro area) in the implementation of its National Reform Programme (NRP) and country-specific recommendations, as adopted by Council.

The Commission’s Strategic Report is based on its assessment of the Member States autumn 2007 Implementation Reports, on its general monitoring of progress and bilateral contacts with Member States, and on the Commission’s own review of progress with the Community Lisbon Programme.

A detailed assessment of progress by policy area can be found in a companion document. The Lisbon package furthermore contains:

• a proposal to update the country-specific recommendations and 'points to watch' adopted by the Council in May 2007;
• a proposal for a Council recommendation to re-affirm the Integrated Guidelines for growth and jobs for the next three-year cycle;
• a renewed Community Lisbon Programme for European level action for growth and jobs, more clearly focused on the four priority areas agreed in 2006: investing in people and modernising labour markets, improving the business environment, especially for SMEs; knowledge (education, R&D and innovation); energy and climate change.
• an analysis on the reorientation of the structural funds in support of growth and jobs.

Why is this year's report called a Strategic Report, and not an Annual Progress Report as in previous years? What are the differences from last year?

This report marks the transition to a new cycle in the implementation of the Lisbon Growth and Jobs Strategy, from 2008-2010. It therefore takes stock of progress over three years, draws lessons and proposes policy lines for the next few years – in other words, it has an enhanced strategic component. It also includes proposals for the reaffirmation of the Integrated Guidelines – which have worked well as broad drivers of policy - and for changes to the text accompanying those guidelines, to reflect the need to update the Strategy in the light of experience so far and to respond to changing circumstances.

The other differences from last year are that the Report for the first time includes country assessments for Bulgaria and Romania, and that it is accompanied by a renewed Community Lisbon Programme.

What are the main achievements so far under the Community Lisbon Programme?

The first Community Lisbon Programme for 2005-2008 generated significant results. For example, significant progress has been made towards improving the legal framework of the single market, through the adoption of the Services Directive and the implementation of the Financial Services Action Plan. The Commission has also successfully driven forward its better regulation agenda to cut unnecessary costs and remove obstacles to innovation.

Substantially greater amounts of Community funding have also been made available for growth and jobs. The new regulatory framework for the Cohesion policy programmes will make some €210 billion available for investment in growth and jobs over 2007-13, an increase of over 25% compared to 2000-06. Overall 87 actions of the 102 announced in the original 2005 CLP had been delivered by mid-2007.

How is it possible to assess the performance of "new" and "old" Member States, or large and small ones, according to the same criteria?

It is not possible and we have not tried. We recognise that each Member State has a different starting point and different traditions. We are not assessing their current economic performance as such but progress in implementing and reinforcing their National Reform Programmes – in other words in getting in shape for the future, to take advantage of the opportunities of globalisation and to meet the challenges of ageing populations. Thus, the assessment for each Member State is based on the implementation of their own National Reform Programme.

Is there a correlation between the number of recommendations and how well the Commission thinks a Member State is doing?

Clearly the Commission only proposes a recommendation where it thinks that an important challenge exists and that the Member State concerned needs to step up its efforts to meet that challenge. So if there are several recommendations, this means there are several important challenges. But there is not necessarily a direct correlation between the number of recommendations and the overall level of progress.

Even for Member States with no recommendations, the Commission points out areas where there a particular effort is needed and which therefore could give rise to recommendations in the future. A Member State with one recommendation in a key area may need to address that area particularly urgently, to avoid progress in other areas being held back. And while a Member State with several recommendations clearly faces a range of tough challenges, it may also be doing well in some areas. The country chapters identify significant strengths in every national programme.

Many people are not aware of the Lisbon Strategy. What can be done about this?

The Commission will continue to reinforce its efforts to get the message across – directly or in cooperation with stakeholders - to a wide public that the growth and jobs strategy is a positive vision of wider opportunity, not a message of doom, gloom and austerity.

But for this to succeed, it is essential that Member States also make stronger efforts to inform stakeholders and citizens of the importance of the Growth and Jobs Strategy, and in particular to demonstrate that as a result of the interdependence of Europe's economies, successful reform in one Member State contributes to prosperity everywhere. All Member States, even those already in the vanguard of reform, have a strong interest in the success of the Strategy.

Within the context of the implementation of the "Communicating Europe in Partnership" Agenda, and in particular in taking forward voluntary management partnerships with those Member States who wish to do so, the Commission will encourage Member States to give a very high priority to the Growth and Jobs Strategy. It will do the same in working with other EU institutions, notably the European Parliament, the Economic and Social Committee and the Committee of the Regions.

It will also continue to lay a strong emphasis on consultation, ownership, and communication in evaluating progress at national level. This aspect is covered in every country chapter.

Why is the Strategy now more clearly focused on Growth and Jobs?

Growth is not an end in itself, but it is a prerequisite for being able to maintain and increase Europe's prosperity and thus for preserving and enhancing our social models.

Growth must be sustainable – while there is sometimes a short-term cost to protecting the environment, in the long term the costs of not tackling environmental issues such as climate change would be far greater.

We need more jobs for two reasons – first because far too many people's lives are still blighted by unemployment and second because only by getting more people into work can we ensure that our societies cope with demographic change. Older populations mean higher pensions and health care costs and those need to be financed by the working population.

In a nutshell, what are the most important steps for achieving more jobs and growth in Europe?

There are many pieces in the jigsaw puzzle. It is the whole policy mix that counts. We need to make Europe a prosperous, low-carbon society.

That means budgetary sustainability, better regulation and the right tax and benefit systems. We need to improve education and training to allow more people to reach their full potential, for their own sake and that of society as a whole. We need to invest in research to maintain our comparative advantage relative to competing regions.

We need more competition to make sure that research feeds through into real innovation, as companies strive to stay ahead in highly competitive markets. We need to make our economy more adaptable to change and more resistant to external shocks. This need has been further highlighted by the recent trend for high commodity prices and by financial market instability at global level.

We need more people of all ages in employment to finance social spending as our populations age. We need to use energy more efficiently and sustainably and to negotiate better with countries which supply us with energy. We need to tackle climate change at home and act globally to ensure that responsibilities in this are taken worldwide.

All of these things require European and national level reforms.

What are the main targets under the Growth and Jobs Strategy?

Before the 2005 relaunch, there were too many disparate targets. Although Member States are encouraged to set their own targets in several areas, we now have a streamlined and simplified process with only two EU level headline targets,: investment of 3 % of Europe’s GDP in research and development by 2010 and an employment rate (the proportion of Europe’s working age population in employment) of 70% by the same date.

Of course, these are not the only issues that matter – but achieving both is absolutely central to getting our economies into shape for globalisation.

And there is progress towards both of them. All Member States have set ambitious R&D targets and most have undertaken important reforms to help them get there. If all of these targets are met, the EU will reach an R&D level of 2.6% of GDP in 2010 (up from 1.9% in 2005). This would be a significant improvement even if the key EU target of 3% (with the private sector contributing 2%) is only reached later.

Employment rates are expected to rise to around 66% in 2008 compared to 63% in 2004. This leaves us with more work to do to reach the ambitious 70 % target for 2010 but remains important progress.

Has the management of the Strategy always worked in this way?

No. The Strategy was relaunched in 2005. Before that there was more complicated system with a plethora of different targets and reporting mechanisms and fewer synergies between the different strands. Some progress was made but overall the results were not fully satisfactory. So the Commission proposed a relaunch, based broadly on the recommendations of a mid-term review led by former Dutch Prime Minister Wim Kok. EU leaders agreed to this proposal at the 2005 Spring European Council.

Why do we need a European strategy when many of the necessary measures have to be taken at national level?

Our economies are interdependent. Prosperity in one Member State creates prosperity in others. Sluggishness in one Member State holds others back. So Europeans need to work together to achieve economic reform, sharing policies that work.

In addition, national policies alone are not enough to allow the Growth and Jobs Strategy to succeed. European Union policies are also central to the Strategy. For example, an efficient internal market, the right policies on external trade, the updating and enforcement of EU competition law, well-targeted European research programmes, the effective use of EU Structural and Cohesion funding and the application of EU environmental policies are all crucial to delivering the prosperous and modern society which is the ultimate aim of the Lisbon Strategy. The Community Lisbon Programme sets out the EU-level priorities for the next three years.

What is the Commission’s role in the governance of the Strategy?

First, it proposes the Integrated Guidelines for reform, which are then approved by the Council and form the broad basis for Member States’ National Reform programmes.

Second, in its Annual Progress Report the Commission assesses the content and implementation so far of National Reform Programmes, allowing stakeholders and citizens to see how far each Member State has got.

Third, it works continuously with Member States to help them exchange experience, learn from each other and implement, update, and improve their National Reform Programmes, taking into account the strengths and weaknesses identified in the Annual Progress Report. This role as a catalyst for mutual learning, building consensus that feeds into national as well as European policies is sometimes low profile, but has been central to the Commission's work since the European Community began.

Last but not least, the Commission ensures through its role in driving forward the Community Lisbon Programme that policy making and funding activities at European level best serve the goals of growth and jobs.

What is the link between the Growth and Jobs Strategy and regional policy and the Structural Funds?

The link between the Growth and Jobs Strategy and the Structural Funds is very close and this is clearly demonstrated by the inclusion in this year's Strategic Report package of the communication entitled "Regions Delivering Lisbon through Innovation and Cohesion Policy 2007-2013". This assesses the extent to which new Cohesion Policy programmes aim to move forward the implementation of the renewed Lisbon Strategy, notably by respecting a commitment to earmark funds for growth and jobs.

In a single market, structural and cohesion funding will be spent on procuring works, goods and services from all over the EU. That will benefit all Member States and not just those directly receiving the most substantial amounts of structural funding.

The Commission continues to encourage Member States to ensure that regional aspects are fully taken into account in National Reform Programmes and that regions are consulted on the development of the programmes. This is the case in most Member States.

Is the EU maintaining its target of becoming the most competitive knowledge-based economy in the world by 2010?

The key aim is getting into a rhythm of high sustainable annual growth and low unemployment by 2010. If, for example, the US does even better that will not mean the EU strategy has failed. Rather, it will be good news for us all. Nevertheless, it is crucial that Europe closes the competitiveness gap with the US – that goes hand in hand with getting the EU in shape to benefit from globalisation.

What matters in the end is that we in Europe can maintain and enhance our quality of life – and that of our children and grandchildren – in the context of globalisation, demographic change and environmental challenges. That is what the Lisbon Strategy is ultimately about. And it is working.

Source: European Commission