This working paper is intended to analyse the status of the so-called Lisbon Agenda, the programme of action adopted by the EU member states at the Lisbon Council meeting in October 2000. This programme set a target for the EU to become the most competitive region of the world by 2010, and listed a series of actions to be undertaken to achieve that goal. This paper first reviews the agenda itself, summarises and assesses its priorities, and then briefly reviews the way in which the agenda was adopted. Progress since the Lisbon summit is then analysed, and the changing environment for economic growth in the world economy is then considered. This in turn raises questions for the continued relevance of the Agenda and the degree to which it will have to be modified in order to fully respond to the pressures of globalisation and the internal dynamics of the EU itself.

The paper finds that:

  • Although measuring progress on the Lisbon Agenda is difficult, it appears to have been limited.
  • The assumptions concerning the European and world economy made at the time are no longer valid.
  • The Agenda itself neglected the international dimension of competitiveness.
  • Special emphasis will need to be given to the restructuring of industry and future perspectives, trade and investment issues, labour markets and regulatory reform. Specific focus is also needed on broadband availability and on the financial sector.
  • Refinement and updating of the Lisbon Agenda will be needed on a continuous basis, reflecting the need for clarity as to key priorities and the need for precision as to the instruments to be used. 

The Lisbon Council

Before discussing the Lisbon Agenda itself –its specific proposals for improving the knowledge-based competitiveness of the Union and the means by which that might be achieved– it is important to emphasise two new features that derived from the Council meeting and that have had important impacts on the nature of EU policy-making. The first is that the Lisbon Council adopted for the first time an integrated approach to questions of economic and social policy, by dealing explicitly with questions of social policy, quality of life and employment generation in the same context as those of innovation, growth, productivity, exports and investment. This convergence of issues was to be strengthened further at the next European Council (Stockholm, 2001) to include economic and social questions.

The open method of co-ordination
A second significant step taken by the Council was the adoption of the so-called “open method of co-ordination.” Described at the time as a means of helping member States to develop their own policies, the objective was to spread methods of best practice and achieve greater convergence towards the EU goals. The open method was defined at the time as a combination of guidelines, targets, time-paths, indicators and benchmarks for the Union to be translated to the national and regional levels through co-operation between the Union, member States, social partners and civil society. The Lisbon Declaration defined the open method as follows:

  • Fixing guidelines for the Union, combined with specific timetables for achieving the established goals in the short, medium and long terms.
  • Establishing, where appropriate, quantitative and qualitative indicators and benchmarks against the best practices in the world, tailored to the needs of different member States and sectors.
  • Translating these European guidelines into national and regional policies by setting specific targets, adopting measures taking into account national and regional differences, and engaging in periodic monitoring, evaluation and peer review organised as a mutual learning process.

The outline model for the open method adopted at Lisbon has in practice been developed in a number of different ways and in connection with a range of policy issues.[1] It has been recommended that the European Parliament should be systematically involved in the open method of coordination, and that the objectives, procedures and limits of the open method of coordination should be included in the new treaty to provide a Constitution for the EU. [2]

The Lisbon Agenda
The goals, objectives and strategies set out in the Ministerial Declaration have come to be known as the Lisbon Agenda. The Council meeting had, as its objective, an agreement on a new strategic goal for the European Union in order to strengthen employment, economic reform and social cohesion as part of a knowledge-based economy. This was defined in Lisbon as follows:

“Today the Union has set itself a new strategic goal for the next decade: to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.”

Three immediate objectives to attain this goal were then defined:

  • Preparing the transition to a knowledge-based economy and society by better policies for the information society and R&D, as well as by stepping up the process of structural reform for competitiveness and innovation and by completing the internal market.
  • Modernising the European social model, investing in people and combating social exclusion.
  • Sustaining the healthy economic outlook and favourable growth prospects by applying an appropriate macro-economic policy mix. This was meant to preserve stability, to stimulate growth and employment, and also to foster the transition towards a knowledge-based economy. The measures mentioned included alleviating tax pressure on labour, a grater share of investment (including in R&D) in public expenditure, and improving the long-term sustainability of public finances (a specific mention of the need to encourage entrepreneurship and innovation through fiscal measures was however, lacking).

This strategy was described as being designed to enable the Union to regain the conditions for full employment and to strengthen regional cohesion in the European Union. The European Council identified the need for a goal of full employment in Europe “… in an emerging new society which is more adapted to the personal choices of women and men.” The measures identified, in conjunction with a “sound macroeconomic background,” were designed to lead to an average economic growth rate of around 3 per cent for the years to come.

Implementing this strategy was to be achieved by improving existing processes, introducing the new open method of coordinationat all levels, coupled with a stronger guiding and coordinating role for the European Council to ensure more coherent strategic direction and effective progress monitoring. A meeting of the European Council to be held every spring was to define the relevant mandates and ensure sufficient follow-up.[3]

The measures set out in the Lisbon Agenda –by which the goals were to be achieved– vary in precision and focus. Some are targets with dates for completion, some are aspirations without time frames, while still others are either calls to complete the work already initiated or requests for further studies. To summarise them beyond the general strategic goal given above is difficult. Nevertheless, Annex I provides a list of fifty-nine steps that are sufficiently precise to be taken as specific actions. As can be seen, however, even these vary considerably in their scale and scope. A number of proposed actions either have no target date for implementation or a target date one or two years hence.

The Background: How Did It Come About?

Competitiveness and Benchmarking
The productivity deficit in Europe –the degree to which growth in productivity lags behind that in other regions– has long been a source of concern to European policymakers. This focus on productivity growth is a proxy for underlying concerns about the quality and use of factors of production. (Reflecting endogenous growth theory is a concern about the degree to which technological development is taking place.) A concern for productivity reflects a policy emphasis on the quality and innovative character of capital goods, and on the skills and use of labour inputs. The degree to which innovation is taking place can be assessed by comparing the outputs from different combinations of capital and labour inputs. This concern for productivity is also linked to other areas where again the EU is seen to be lagging behind the US: R&D and innovation, competition for markets, and labour legislation. A recent study integrates a number of these concerns by suggesting that R&D intensity has a positive impact on productivity growth. Anti-competitive product market regulations reduce incentives to adopt better technology and catch-up with the technological leader. Likewise, stringent employment protection legislation has a negative impact on productivity growth in countries where wages or internal training do not offset the adjustment costs associated with high firing costs.[4]

Explicit focus has often been directed to the so-called ‘triad’ of Europe, the US and Japan, with the (superior) performance in growth and in productivity –particularly in the US– as targets for Europe to meet or exceed. There is thus overt identification of Japan and the US as competitors. In fact, the Commission figures for the long-term evolution of productivity growth suggest that for several decades the gap had been closing. The average annual growth of productivity in the US for the period 1961-1999 was 1.5%, while for the EU-15 it was 3.0%. For the five years to 1995, EU productivity growth, at 1.9%, remained above that of the US, at 1.3%. Only in the period 1996-2000 did US productivity growth exceed that of the EU (2.0% per annum compared to 1.3%). The trends in productivity growth in the US are believed to be stronger than in the EU, so the Commission’s forecasts for 2002, 2003 and 2004 show the much stronger productivity growth in the US (2.9%, 1.9% and 2.2%, compared with projections for the EU of 0.6%, 1.5% and 1.7% respectively). The gap in labour productivity per worker has also increased, from 37.4% higher in the US in 2000 to 38.5% higher in 2001. [5]

The Commission’s ambitions for the euro as a world currency and, to a degree, as a replacement of the dollar for denominating commodity trade follow in a similar competitive vein. Again, many statistical publications of the Union include as a matter of course statistics for the US and for Japan. Another example of the reference point for policy comes from the review of Single Market Strategy:

 “By the middle of the decade about 500 million people will be part of the Union’s Internal Market –making it nearly twice as big as that of the United States–. [6]

Business organisations have been important advocates of an increased focus on competitiveness. The Union of Industrial and Employers’ Confederations of Europe (UNICE) emphasized the importance of competitiveness in a range of reports that called for more attention particularly to high-technology issues and identified the need for a reduction in bureaucracy and labour market reform.[7] The European Round Table, a group of large enterprises, had a key role in encouraging the Commission to undertake benchmarking, which was an initial form of target setting. As a result, benchmarking has become an accepted feature of policy analysis in the EU, reinforcing the concentration on competitiveness. Most recently, the structural indicators used in the analysis of Lisbon progress include the US and Japan as far as possible, while the open method of co-ordination has many benchmarking ramifications, as can be seen, for instance, in the BEST Procedures exercise (See Section 7.9, below).

Key Countries
Although Portugal held the Presidency of the Union at the time of the Lisbon meeting, and was very active in securing the adoption of the Lisbon Agenda, the United Kingdom has been one of the countries most closely associated with the programme[8]. The Thatcher years focused international attention on the UK experience in the privatisation of state-owned industries, the liberalisation of markets, and the introduction of competition in industries that for decades had been regarded as natural monopolies (including telecommunications, electricity and public transport). The Blair government, which followed the conservatives, made no attempt to dismantle the Thatcher achievements, preferring rather to adapt them to a context of social progress (an effort that came to be known as the “Third Way”). This Labour government programme received considerable attention in other EU countries not only because of the spectacular electoral success of New Labour but also because the “Third Way” appeared to offer a new development path for the social democracies of Western Europe, one that would allow for increased competitiveness and growth while maintaining the values of social inclusion and protection. The UK thus held the initiative in the lead up to the Lisbon summit and played a central role in the adoption of the strategy. A notable ally in this process was Spain.[9] Early bilateral contacts had confirmed a commonality of policy concerns between the UK and Spain with respect to the European economy.

Competitiveness within the Union

Competitiveness as a concept has moved to the top of the policy agenda in most countries. This has happened in spite of the conceptual doubts as to whether competitiveness can really be applied to nations rather than enterprises.[10] It is therefore not surprising that the issue should also be a priority at the European Union level. However, there are difficulties for the Union, in that the member states themselves have already recognized the importance of competitiveness and compete as much amongst themselves as with the US. Thus, they review their policies and institutions against the benchmarks provided not only by the United States, Japan, the fast-growing Asian economies and others, but also against neighbouring countries with whom they are in partnership in the EU.  Particularly important is the question of foreign direct investment. Most countries in Europe are actively engaged in trying to attract FDI from outside the Union and have put in place measures to encourage such investment, including institutional support, targeted incentives, educational development, grants, loans, factories, and other measures. From a certain point of view, this competition within the Union does no harm: it encourages a constant scrutiny of the business environment and a continual effort to upgrade it. However, such intra-EU competition can be harmful when it impacts upon policy-making at EU level. All countries have, to one degree or another, dragged their feet on network industry liberalisation, State aids reduction, and harmonization, and this had often been due as much to questions of national competitiveness as to issues of social protection.

Progress since Lisbon

The Stockholm European Council took place a year after Lisbon. It was the first of the review meetings on economic and social issues that had been decided upon at the Lisbon meeting. The Stockholm priorities were given as full employment in a competitive Union. The Council’s main focuses were: the demographic challenge, the creation of more and better jobs, the acceleration of economic reform, the modernization of the European social model and the harnessing of new technologies.

The Council added to the Lisbon targets in several ways. It set intermediate targets for employment rates across the EU as a whole for January 2005. These included a 67% overall employment rate, a 57% target for women and an additional goal of increasing the average EU employment rate among older women and men (55-64) to 50% by 2010. Educational training and skills were also addressed, since “improving basic skills, particularly IT and digital skills, is a top priority to make the Union the most competitive and dynamic knowledge-based economy in the world.” To encourage the mobility of workers in new open European labour markets, it was agreed that the recommendation on mobility of students, persons undergoing training, young volunteers, teachers and trainers were to be adopted by June 2001, and member States were to implement the mobility action plan in parallel.

With regard to the internal market, the Council set a target for transposition of directives into national law of 98.5 per cent by the time of the Barcelona summit. Other key decisions included the provision by the Commission of a strategy for regulatory simplification and quality before the end of 2001, agreement on more effective securities market regulation, and full implementation of the Financial Services Action Plan by 2005. Encouraging effective competition was to be implemented through procurement rules and a reduction in State aids. Modernisation of the European Social Model was another Stockholm pillar, with a focus on improving quality of work (to be incorporated into the 2002 employment guidelines) and promoting social inclusion. With respect to harnessing new technologies, there were detailed proposals for action with deadlines in the fields of e-Europe, while in the other fields (research and innovation and frontier technologies, particularly biotechnology) the conclusions were less action-oriented. The Council also agreed that the spring meeting in 2002 would review progress on integrating the sustainable development aims into the Lisbon strategy and on the contribution of the environmental technology sector to the promotion of growth and employment.

The Commission Assessment
In preparation for the Barcelona Summit, the European Commission prepared a communication summarising the progress achieved.[11] The message that emerges from this communication is a rather positive one. It describes progress to date as “encouraging.” However, the reasons advanced for this point of view are not entirely convincing. The Commission notes that the initial phase of defining the objectives and driving policy reforms is coming to a close, and that there have already been notable policy successes in the areas of telecommunication markets, co-operation in areas such as education, pension reforms and research and new programmes to tackle inequality and social exclusion. The introduction of the euro is also pointed to as a proof of the EU’s capacity to deliver. Nevertheless, the Commission also noted that some key proposals had been stalled, mentioning in particular the lack of progress on the community patent, financial services, energy and the Galileo satellite system. Furthermore, the Commission noted that deadlines for agreements have been missed and progress has not always been fast enough. The Commission singled out three priority areas: (1) further development of employment policies (with a particular focus on active labour market reforms); (2) further reforms and completing missing links in key network industries and accelerating financial market integration; and (3) increasing investment in knowledge to ensure increased competitiveness and job creation.

The communication included a Lisbon Reform Calendar, in which the Commission singled out a number of areas where the danger existed that target dates for individual measures could be missed due to insufficient progress within the Council and European Parliament. They are as follows:

  • The strategy for simplifying the regulatory environment (some delay).
  • The new framework for public procurement (the 2001 deadline for agreement already missed).
  • The single market for risk capital (2003).
  • Further opening of electricity markets for business customers (2003).
  • The Community patent (2001).
  • Further opening of gas markets for business customers (2004).
  • The energy tax framework (2004).
  • The single market for all financial services (2005).
  • The Galileo satellite navigation system entering into operation (2008, but 2001 deadline for agreement on structure already missed).

In fact, of the 24 measures singled out by the Commission in the Lisbon reform calendar, six had been achieved by the Barcelona summit, eight were delayed or at risk of delay and the remainder appeared to be on schedule. But such a summary can be misleading. For instance, while further opening of the electricity market for business customers appears to be at risk of not being achieved by 2003, the opening of gas electricity market for residential customers is, nevertheless, still seen as on track for completion in 2005. Once again, too much weight appears to have been given to some projects that are scarcely central to the Lisbon objectives. A case in point is the Galileo satellite navigation system, which is actually not even mentioned in the Lisbon programme.

A second method for assessing progress would be to focus on outcomes, examining indicators of performance to date. The Commission notes that the gap in GDP per capita between the EU and US has remained unchanged, and that the differences in labour productivity per hour account for approximately one-third of this gap. Progress towards the goal of full employment is described as distorted by the current conditions. With respect to research and innovation, the Commission notes that positive trends continued, particularly in science and research with respect to the number of patents in relation to the population or the quality of research. The annual growth rates of patent applications (both at EPO and USPTO) were, between 1995 and 1999, at least as high as in the US, and considerably above those in Japan. A further positive development is that the European Union researchers have had a higher share of the total number of scientific publications since the second half of the nineties than their United States counterparts, and the number of publications has been growing faster in the European Union. Meanwhile, however, the levels of investment in education are still too low, the take-up of lifelong learning remains very limited, and too many young people continue to leave school with at most only basic qualifications.

With respect to economic reform, the commission notes significant progress in some areas of the internal market, particularly in connection with the regulatory framework for electronic commerce and communication sectors. Unfortunately, however, little progress has been made on the Commission’s plans for integrating the services sector. Some of the most important structural reforms covering electricity, gas, the Galileo satellite navigation system, financial services markets and procurement markets have not yet been delivered.

With respect to social cohesion, the Commission finds it difficult to make a full assessment of progress, although a number of measures have been taken, including the adoption of the first two-year National Action Plans in the member States against exclusion and poverty. With regard to the environment, the launch of the EU sustainable development strategy at the Gothenburg Economic Council is seen as an important step. Nevertheless, achieving the agreed-on targets for the reduction of greenhouse gas emissions, together with the objective of decoupling GDP and transport growth, remains “a very demanding challenge.”

The Barcelona Summit
The European Council met in Barcelona on March 15 and 16, 2002. For the first time, the thirteen candidate countries were involved in a discussion of the Lisbon Strategy and its implementation. However, it was noted that “…there have been important successes, but also that there are areas where progress has been too slow.” A second characteristic of the meeting was the increasing integration of economic, social and environmental policy as expressed in the concept of sustainable development. This represents a further broadening of the Lisbon and Stockholm conclusions, although the intention is to consolidate all of the issues:

“Growth today must in no event jeopardise the growth possibilities of future generations. The Sustainable Development Strategy means that the various policies should be consistent with the Union’s long-term objectives. Economic, social and environmental considerations must receive equal (emphasis added) attention in policymaking and decision taking processes. [12]

The Council stressed the importance of adopting the Sixth Environmental Action Programme, and called for an agreement on the adoption of the Energy Tax Directive by December 2002, and for substantial progress in enhancing energy efficiency by 2010. It also noted the Commission’s work in preparing a framework Directive on charging for transport infrastructure, a sustainability dimension in regulatory impact assessment and an action plan for take-up of environmental technologies.

With regard to a more favourable environment for entrepreneurship and competitiveness, the Council noted that the interim transposition target of 98.5 percent set in Stockholm had only been achieved by seven member States. A new transposition target was set, of 100 per cent, to be achieved by the Spring European Council in 2003 in the case of Directives whose implementation is more than two years overdue. The end of 2002 was set as a target for the adoption of a new legal framework for competition rules. For the Seville meeting, the Commission was asked to submit an action plan on regulation, taking into account the recommendations of the Mandelkern Group.

With regard to reinforcing social cohesion, three broad areas were identified: more and better jobs, a reinforced Employment Strategy (with fewer guidelines, better integration with the Lisbon Agenda, and reinforced social partnership responsibility) and the promotion of skills and mobility. With respect to the latter, the implementation of the Action Plan to remove barriers by 2005 was endorsed, including urgent action on the coordination of social security systems.

Single market issues emphasised included financial markets, where there was further commitment to implementing the Financial Services Action Plan (FSAP) and achieving fully integrated securities and risk capital markets by 2003 and financial services markets by 2005. Detailed steps for the integration of this sector were also specified: the proposed Directives on Collateral, Market Abuse, Insurance Intermediaries, Distance Marketing of Financial Services, Financial Conglomerates, Prospectuses and Occupational Pension Funds and the International Accounting Standards Regulation were all to be adopted by the end of 2002.

The Council also adopted significant conclusions in the field of Integrating European Energy, Transport and Communications Networks. Electricity liberalization –which had been stalled–received a significant boost through an agreement on the opening of the business market for electricity.

The Barcelona Council also further developed the Lisbon agenda by setting an explicit target for education and training systems: to make them a world quality reference by 2010, based on improved quality, facilitation of universal access and an opening-up to the wider world. However, the detailed steps specified in the area of education and training were relatively small: transparency of diplomas and qualifications, foreign languages, digital literacy, twinning of secondary schools and the promotion and integration of the European dimension in education (by 2004).

The weaknesses of the Stockholm conclusions on R&D were not really redressed by the Barcelona conclusions. A target of 3 per cent of GDP was set for R&D and innovation spending. A further call for progress on the European Patent was made, and for measures and a timetable for exploiting the potential of biotechnology.

The Barcelona summit’s main achievements, therefore, were the full integration of sustainability considerations into economic and social policy to the extent that there can now be said to be three interdependent pillars to the development of European integration. The detailed and quite comprehensive measures agreed upon in the field of energy and telecommunications cannot be said to be matched by agreements in the areas of R&D and innovation, or education and skills where, as noted above, the steps forward appear to be only minor. It may be concluded that there are enough targets and programmes in many areas. However, given the comprehensive and far-reaching nature of the Lisbon Agenda, what is urgently needed and not yet forthcoming is an interpretation of its aspirations in practical terms, especially in the central area of the strategy, knowledge and its application.

The Enterprise Policy Scoreboard
In recent years the European Commission has developed a tool for assessing the impact of policy in a broad sense, which is called the Enterprise Policy Scoreboard, now in its third edition.[13] The concentration is on data related to the environment for enterprise, in support of the wider goals of the Lisbon strategy. The data presented, however, allow little possibility of assessing progress in implementing the Lisbon Agenda or evaluating the effects of policy change. This is so first because data is not recent enough. For instance, the data presented on access to finance runs only from 1998 to 2000, the year in which the Lisbon Agenda was adopted. Again, for most indicators, comparative data for non-EU countries are not included. The latest scoreboard has begun to include data from candidate countries, but for many crucial policy areas no data appear to be available for the United States or Japan. Thus, conclusions can only be very limited, while the scoreboard is more useful for indicating to individual EU members how far they are lagging behind other members in certain areas.

Venture capital data is presented for 1999, 2000 and 2001. This data shows that in the EU venture capital fell with the general slump to below levels in 2000. However, this fall was not as steep as that witnessed in the United States. In this relative sense, therefore, some progress can be said to have taken place. With regard to the regulatory and administrative environment, the measures do not allow for comparisons with the US and Japan. Trade openness has declined in the EU and the US between 2000 and 2001, and has risen only slightly in Japan. Some data are presented on propensity towards entrepreneurship, allowing for the conclusion of a fall in both the EU and US between 2000 and 2001, with a bigger fall, however, in the United States. The same is true for another area where comparative data are presented, ICT expenditure as a percentage of GDP. With regard to access to the Internet, the costs of dial-up access to the Internet were lower in the US in 2001 than in any EU country, although Japan’s costs were nearly as high as those in the worst EU country. (Given the importance of broadband communications, dial-up access is not a very good indicator of progress.) In general, therefore, there are some very tentative indications that the potential for knowledge-based industry in the EU is slightly more resilient than in the US, but it is of course starting from a much lower base.

Single market
Progress in the enhancement of the Single Market should also be looked at for its contribution to the achievement of the Lisbon Agenda. Single Market enhancement includes centralised co-ordination of legal frameworks of the individual member States in order to ensure free movement of goods, services, capital and labour, and also to ensure that a level playing field is provided for enterprises across the Union. The rationale for the creation of the Single Market was that only such a market could bring the expected benefits to consumers while also producing larger firms that could compete internationally. The concept of “minimum economic scale” was used extensively in analysis to demonstrate that the removal of frontiers within the Union could bring about the emergence of firms ready to compete in high-technology areas. From this point of view, therefore, the Single Market is part of the competitiveness Agenda.

The Single European Market came into being on 1 January 1993 (although it was often called the 1992 Programme). It involved inter alia a commitment to implementation of Commission measures to improve the functioning of that market. Since then, the Commission has been developing a scoreboard to evaluate the extent to which EU internal market laws have been implemented in individual member countries. The latest Internal Market Scoreboard shows that the so-called “implementation deficit” has begun grow again, rising from 1.8 per cent in May 2002 to 2.1 per cent in November 2002.[14] This deficit is defined as the percentage of EU Internal Market laws currently in force that member States have not yet passed into national law even though the deadline agreed by the European Parliament and Council of Ministers has passed. Nevertheless, the values for the index represent a considerable improvement over the 21.4 per cent value of 1992.

The Commission has also reviewed progress in specific actions needed to improve the market.[15] The Commission identified the following achieved targets: liberalisation of Postal Services, establishment of the European Food Authority, agreement on procedures for faster and better securities legislation, Commission proposals to liberalise selling of cars in Europe, adoption of new telecommunications package, adoption of UCITs Directive and agreement on the Regulation on InternationalAccounting Standards, together with the presentation of proposals with regard to recognition of professional qualifications. The Commission noted that missed targets included that for agreement on the Public Procurement Package, on the Community Patent, on the Take-Over Bids Directive, on the Pension Funds Directive and on the Directive on Protection of Biotechnological Inventions. The Commission proposals for Services Strategy were behind schedule, eight member States had failed to meet the transposition target set at Stockholm, and the Commission’s Better Regulation Action Plan was postponed for six months.

The Strategy for Services provides an important tool for the implementation of the strategy agreed on at the Lisbon summit.[16] It covers a full range of activities at the national and Commission level in order to encourage the growth of cross-border services trade as a means of completing the single market. It means therefore considerably increased impetus for regulatory reform in a range of areas affecting services sector development. Given that this represents the majority of GDP, this will be of great significance for the growth of these activities. The Strategy envisaged a series of actions for 2002:

  • Drawing up a list of obstacles that can be removed by applying Treaty principles.
  • Implementing non-legislative measures as appropriate.
  • Introducing harmonisation where necessary, focusing on horizontal barriers to the free movement of services.

The strategy is particularly interesting because it is based on a business model, unlike most approaches to policy whether at the national or EU level: it analyses the set of rules that may affect a service provider at each stage of the business process –establishment, use of inputs, promotional activities, distributional activities, sales activities and after-sales support activities–.

Most recently, the Commission has issued a comprehensive review of progress in the Single Market.[17] It is intended to emphasize the benefits realized, and it “…deliberately focuses on the positive side of the balance sheet, without failing to point out areas where the Internal Market has done less well”. It points to improvement with regard to the transposition deficit (the percentage of EU law not implemented at national level, which has declined sharply from over 20% per member State in 1992 to just over 2% today). However the number of open infringement cases (taken by the Commission against member States) has increased from just under 700 in 1992 to just over 1500. The report notes that “…this indicates that large numbers of Directives are not being fully applied at national level. The damage this does to the effective functioning of the Internal Market is enormous. Problems remaining in the mutual recognition of more complex products are also noted. In services, the Internal Market is still not functioning well, and the need for a single EU financial market is urgent. Public procurement is not taking full advantage of the wider market, and State Aids continue to distort competition.

Other Assessments
Another assessment of progress has been made by the UK Treasury using the structural indicators data.[18] This data set has been compiled by Eurostat in response to the call at Lisbon for development of a set of commonly agreed-upon structural indicators to measure progress. A revised and updated set of 42 indicators was agreed on at Laeken. The data were used in the preparation of the Commission report to the Barcelona European Council, discussed above in section 5.2. The UK report has the advantage that the data are succinctly presented and analysed, but it has the disadvantage that no other information is used, and in particular no information on implementation.

The UK overall assessment distinguishes between areas where the indicators suggest progress has been made in the EU and areas where less progress is suggested. The first category comprises the following ten areas: GDP growth, the total employment rate, and the average tax rate on low wage earners, ICT expenditure as a share of GDP, communications expenditure, Internet access at home, Internet access in enterprises, State aids, jobless households and emissions of greenhouse gases.

There are altogether thirteen cases where the indicators show less progress for the EU: they comprise labour productivity per worker as compared with the US, the total employment rate of older workers, business R&D expenditure as a share of GDP (which has risen but then fallen), total R&D spending as a share of GDP, venture capital as a share of GDP, intra-EU trade, external EU trade, industrial electricity prices, household electricity prices, gas prices for industrial users and for households, the persistence of monopolies in network industries and long-term unemployment.

A recent report from the World Economic Forum[19] reviews the Lisbon process and assesses European competitiveness. The assessment is carried out from the point of view largely of the analytical reports that it publishes, known as the Global Competitiveness Reports. The assessment is based on a distinctive component of these reports, which is the incorporation of opinion from market practitioners, including mainly enterprises operating in the markets concerned.

In this analysis, the European Union is seen to lag behind the United States in almost all the eight main areas of action identified in the Lisbon Agenda. The only exception, unsurprisingly perhaps, is that of social inclusion. Even in the area of sustainable development (both for environment and climate change), the US is found to be ahead of the EU. Individual county performance is quite uniform across policy areas, with Finland clearly a leading country in all areas. It is in first position in six of the eight policy areas, second in another, and third in the remaining area.

Table 1: Ranking of EU Countries

InformationSocietyInnovationResearch, andDevelopmentLiberalisation of Network IndustriesFinancialServicesEnterpriseEnvironmentSocialInclusionSustainableDevelopmentAverage Rank

Source: World Economic Forum.

There may be questions about the precision of these results, given that they depend on sample surveys of opinion rather than purely statistical indicators. But the World Economic Forum rightly points to the fact that statistical indicators tend inevitably to lag the events that they summarise by a couple of years –too late, perhaps, for policy intervention to correct the trends by a couple of years identified–. What appears most striking from these figures is not so much that Finland is in the lead, but that the larger EU economies are showing a mediocre to poor performance. Given their weight in economic and in population terms, together with their influence on policies at the EU level, the prospects for success in implementing the agenda remain cloudy.

Another well-known competitiveness analysis is that of IMD, which prepares annual World Competitiveness Reports. The latest[20] provides a similar picture of the relative position of EU countries, also using some survey data combined with other statistics, to produce a perspective on national competitiveness. The rankings are derived from a composite index and show some improvement over figures for 2001. Eight EU countries have risen in the rankings (Finland, Luxembourg, Netherlands, Denmark, Austria, United Kingdom, France, Portugal, Greece) five have fallen (Ireland, Sweden, Belgium, Germany, Greece) and two have remained the same (Spain, Italy).

Using the basic data provided by the Competitiveness Report, it is possible to measure progress in the EU as a whole by taking a weighted average of the scores from the individual member States. The weights used here are those of population, and the results are seen in Table 2.

Table 2: Changes in Competitiveness Rankings, 2001-2002

Rank  2002Rank  2001Score   2002Score   2001Population  (millions) 2000WeightWeighted score 2002Weighted score 2001
United Kingdom161968.9364.7859.70.1610.8910.23

 Source: IMD, European Commission.

From this analysis, it is seen that the increase in overall EU competitiveness has been very slight and is not likely to be significant, especially in view of the incorporation of sample survey results in the calculation of the scores. In general, the EU competitiveness position is not good, as far as the IMD data is concerned. If the IMD report had treated the EU as a single entity, its score of 64.97 would have put it in the11th position internationally, behind Chile but ahead of Estonia. 

Before the Barcelona summit, the European Round Table (which, as noted, played an important role in the establishment of benchmarking) made an intervention. It identified decision-making in connection with the Lisbon process as a stark example of the weaknesses in European governance. It was particularly critical of the Council and described the European Parliament as still not fully on board, citing the loss of the Takeover Directive as demonstration of how easily the Parliament falls prey to national interests and special pleading. In contrast, the Commission was praised for being effective in pushing forward the Lisbon agenda.[21]

The broad-based business organisation, UNICE, issued a statement before the Seville Council. They confirmed that the Lisbon process remained their top priority and they urged the Head of States and Governments to step up efforts to enhance the competitiveness and dynamism of Europe.[22]

The Role of Spain in the Process
Spain has played a significant role both in the preparations for the Lisbon Agenda and in measures to encourage its implementation. Four main areas of action can be distinguished.

Spain has contributed to wider trends in the reform of economic management and enterprise policy, which have been reflected in the Lisbon agenda, particularly in the area of regulatory reform. Spain has undertaken an important transition from a conservative corporate state to economic liberalism while at the same time maintaining the social model characteristic of European economies. Liberalisation of key sectors has been an important feature of Spanish policy development, most notably in the areas of electricity and telecommunications and, more recently, in the field of financial services, where recent changes in the banking sector have incorporated the EU Financial Services Market Directive into legislation. Although some liberalisation efforts in Spain appear to have approached the limits of what may be politically acceptable for the moment, it is nevertheless the case that Spain has not been a negative actor within the general context of European economic reform.[23]

The second way in which Spain has contributed to the Lisbon process has been in the political support given to it by the Spanish government. As noted, an alliance between the Spanish Prime Minister and the British Prime Minister in preparation for the Lisbon summit has been generally credited with providing the initial impetus to the European Union’s focus on the need for restructuring Europe’s economy. Since Lisbon, Spain has also been supportive of implementation. In advance of the Stockholm summit, the Spanish and UK prime ministers issued a joint statement calling for some of the Lisbon deadlines to be brought forward and suggesting other areas of work. During its Presidency, in particular, Spain played a significant role in this regard. The priorities adopted by Spain for the Presidency were as follows:

  • Strengthening transport infrastructure.
  • Further liberalising energy markets.
  • Reinforcing the financial system.
  • Introducing greater labour market flexibility.
  • Strengthening education and training.

The Spanish were seen as giving clear encouragement to the Lisbon process: “It is clear from Spain’s priorities that the business spirit of Lisbon is about to be jump started again (an approach IBEC and its partners in UNICE support wholeheartedly).[24]

In general, “Whilst the Spanish presidency of the EU has approached the Barcelona summit with energy and flair, it has been thwarted by inertia and short-term domestic agendas in some key member States. Rodrigo Rato, Spanish Economy Minister, compared the citizens’ embrace of “the euro” throughout the Eurozone with their readiness to embrace a reform to deliver growth, employment and income gains envisioned under the Lisbon Agenda.[25] At the Seville Council, which reviewed progress in some of the key areas in connection with Lisbon that had already been discussed at Barcelona, Spain was firmly behind the tax package, which will play an important role in creating a genuinely integrated financial market in Europe, quite apart from its security considerations.

A third significant element has been the major changes in the decision-making processes introduced into the debate during the Spanish EU Presidency. At Seville, Spain supported the concept of separate General Affairs and External Relations Councils to be key institutions for decision-making in the Union. While this was not agreed upon, the General Affairs and External Relations Council will nevertheless have separate meetings and separate agendas on the two main groups of topics (external relations and other issues).

Given the comprehensive nature of the Lisbon Agenda it is clear that national foreign ministries are not well equipped to further it. The separation out of external relations will therefore be helpful in coordinating activity and progress on the extremely complex and detailed list of steps required to achieve the Lisbon targets. Nevertheless there is a risk that important questions such as foreign trade and development co-operation, which should be more closely integrated into the Lisbon process will continue to be isolated as a result of their separate treatment under the external relations agenda.

The preparatory mechanisms for the European Council are also to be significantly streamlined as a result of Seville. In addition, the establishment of the new High-Level Technical Group for Interinstitutional Cooperation was welcomed by the Seville Council. This Group has representation from the Council, the Commission and Parliament. It is presided over by the Permanent Representative of the country holding the Presidency, and it is to co-ordinate the work of the three institutions. It has already begun work on how to improve the quality of EU legislation, and the Seville conclusions invite the three institutions concerned (Parliament, Council and Commission) to adopt an inter-institutional agreement before the end of 2002, on the basis of proceedings in the High Level Technical Group, in order to improve the quality of Community legislation and the conditions, including time frames, for its transposition into national law. If co-ordination in the work of the Council, the Commission and the Parliament results in more efficient rule making in the Union, this can accelerate progress in implementing the Lisbon Agenda, a significant component of which requires agreement on improved legislation.

A fourth area in which Spain was significant in furthering the conditions necessary for the achievement of the Lisbon agenda was that of external relations. Under the Spanish Presidency, the Euro-Mediterranean dialogue was pushed further, with the objective of improved trade and investment relations between the European Union and the full range of countries in the Eastern and Southern Mediterranean. In this connection it should also be noted that Spain supported Turkey’s candidature for membership in the European Union, a further necessary step in the broadening and deepening of the European market for greater growth prospects in the future. Finally Spain’s traditional ties with Latin America were developed during the Spanish Presidency by a continuation and expansion of the dialogue with Latin American States for enhanced co-operation, including in trade and investment. This general emphasis during the Spanish Presidency on openness to international linkages is particularly important for maintaining a long-term growth path for Europe in the future, and allowing the Lisbon Agenda to have meaningful application in expanded markets.

Spain’s own progress in competitiveness is no easier to measure than that of the EU as a whole, since aggregate annual indicators are available for only a couple of years since Lisbon. However, as can be seen from Table 2, the IMD ratings of Spain show that although its worldwide ranking did not improve between 2001 and 2002, remaining in 23rd position, the competitiveness score showed an improvement from 60.14 to 61.52. By contrast, some other EU countries (Sweden, Ireland and Greece) saw a decrease in their scores.

The Enterprise Scoreboard shows Spain’s performance to be mixed. There are positive indications in the key area of entrepreneurship: the propensity towards entrepreneurship is higher in Spain than in all other EU countries except Greece and Portugal. Similarly venture capital declined between 1999-2001 in all countries except Spain, Sweden and Denmark. But fiscal and regulatory conditions do not reinforce these tendencies: typical time requirements for business registration are higher in Spain than all other EU countries except Italy, and the typical costs of registration are the highest in the EU. In other key areas, including education and training, R&D as a share of GDP, patents in relation to population, and high-tech exports as a share of total, Spain lags behind. It is lowest in the take-up of e-commerce. Yet an index of innovation capacity presents a more positive view of Spain’s resources and infrastructure in this regard, and the challenge for Spain, as for many other EU countries, is to improve the functioning of the national innovation system so that the potential is fully realized. [26]

6. A Changed Environment

Review of the Assumptions
In examining progress in implementing the Lisbon Agenda, it is important also to assess the degree to which the assumptions made at the time of its adoption are still valid. The Lisbon conclusions listed a number of strengths and weaknesses in the Union as the starting point for the definition of strategy. Table 3 compares these with the economic situation at the time of writing.

Table 3: EU Strengths and Weaknesses, 2000 and 2002

 The Union’s strengths (2000)Current Position (December 2002)
The best macro-economic outlook for a generation. As a result of stability-oriented monetary policy supported by sound fiscal policies in a context of wage moderation, inflation and interest rates are
low, public sector deficits have been reduced remarkably and the EU’s balance of payments is healthy.
Growth is now very low. Inflation still low and interest rates likely to fall further. Public sector deficits growing and likely to breach the Stability
and Growth Pact Guidelines.
The euro has been successfully introduced and is delivering the expected benefits for the European economy. The internal market is largely complete
and is yielding tangible benefits for consumers and businesses alike.
The euro is well established although its external value has fallen below the launch value. Because of the economic slowdown there has not been much growth in trade among eurozone countries.
The forthcoming enlargement will create new opportunities for growth and employment.Enlargement is on course: however the general economic slowdown means that these opportunities may take longer to be realised.
The Union possesses a generally well-educated workforce.Persistent high levels of unemployment will erode
the skills base.
Social protection systems able to provide, beyond their intrinsic value, the stable framework required
for managing the structural changes involved in moving towards a knowledge-based society.
Pressures on government budgets are already eroding the social protection systems in some countries.
Growth and job creation have resumed.Most recent growth is well below the average for
the 1990s, and job creation has not outweighed job losses.
 The Union’s Weaknesses (2000)Current Position (November 2002)
More than 15 million Europeans are still out of
The Commission report “Employment in Europe 2002” gives 15.0 million unemployed for 1999, falling to 13.6 million in 2000 and 12.9 million in 2001. There has thus been a significant improvement.
The employment rate is too low and is characterised by insufficient participation in the labour market by women and older workers.The employment rate in 2000 was 63.2 per cent and it increased to 64.0 per cent in 2001.  Similarly women’s employment rate in 2000 was 54.0 per cent, increasing to 54.9 per cent in 2001. Older workers’ employment rate at 38.6 per cent is far below the Stockholm target of 50 per cent. [27]
Long-term structural unemployment and marked regional unemployment imbalances remain endemic
in parts of the Union.
The position is essentially unchanged.
The services sector is underdeveloped, particularly
in the areas of telecommunications and the Internet.
Telecommunications sector has been affected by excessive competition for 3G licences, which have drastically reduced investment resources for telecommunications companies to make further investments. Some indicators of Internet use are encouraging: the number of connections has now exceeded that of the United States for the first time, although in per capita terms Europe still lags behind.
There is a widening skills gap, especially in information technology where increasing numbers
of jobs remain unfilled.
The downturn in the IT sector has reduced the skills gap, but Europe’s resources in this sector are diminished by the downturn.

The above table can be summarised as follows: the weaknesses remain more or less as they were at the time of the adoption of the Lisbon Agenda while the strengths of Europe have deteriorated. The major exception is the numbers of unemployed, which have seen a decline since the position at the time of the Lisbon summit. The employment rate rose to 61.2% in 2001 making further progress towards reaching the intermediate Lisbon target of 67% in 2005.

Gaps in the Lisbon Agenda
In assessing the relevance of the Lisbon Agenda it is important also to note areas of significance that were missing from the programme altogether. They included the following:

There was no mention of world trade liberalisation as part of the strategy, nor indeed was there a mention of exports or imports at all. Thus, the main driving force for investment and growth in the post-war economy –and a significant vehicle for technological diffusion– was essentially outside the strategy. Despite the openness of the EU-15 to the rest of the world and its dependence on external markets and supplies, the implication was almost one of a wholly autonomous development path. Even the international trade dimension could have been done in fairly general terms: including a broad commitment to the further liberalisation of world trade and the benefits it might bring would have signalled to member states the global dimension that is needed in policy making for competitiveness.

A further significant absence was that of foreign direct investment. FDI (including both inward and outward investment) plays an important role in the European economy. Inward investment has played a key role in many countries, including a number of European countries, in improving export earnings, increasing productivity, diversifying industrial structures, encouraging technological diffusion, and, by creating spin-offs and supplier networks that generate new clusters of activity, including those in new technology areas. As noted, competition is strong among EU member States to attract foreign direct investment and will probably continue in practice to be a major component of enterprise strategy. Competitiveness policy at the EU level should therefore take account of this factor and exploit it, rather than ignore it. Again, outward investment is an important component of many European economies, and accounts for a growing share of GDP in countries such as Ireland and Spain: its significance ought to be explicitly taken into account in the long-term vision represented by the Lisbon Agenda.

The role of agriculture is also not discussed in the Lisbon Agenda. While there may be a number of political reasons for this, the sector is significant from three points of view. Firstly, it is a sensitive area in the WTO negotiations. Secondly, it is intimately linked to the food-processing sector and, as such, is an important input into manufacturing. The food sector in general is one in which Europe is successful and innovative, and the emphasis on biotechnology in the Lisbon Agenda will have direct implications for both food and agriculture. Thirdly, agricultural support in the EU is significant in budgetary terms, and will thus continue to be relevant to discussions of new spending areas in support of the Lisbon Agenda. 

The Euro
Although not yet adopted by all EU members, the euro has fundamentally changed the nature of the EU economy and the policies of national governments. First, it has transformed the nature of business (particularly for SMEs) by removing a psychological barrier to trade that was previously represented by exchange rates. Secondly, by removing powerful policy instruments from national governments (such as interest rates, exchange rates, and money supply management), it has provided new impetus to other competitiveness factors, such as regulatory reform, in particular. It has also focused attention, through the growing transparency of prices, on differences in competitiveness at the national level. While it has not yet provided a major growth impetus, the combination of monetary and fiscal stability that the euro implies for all eurozone countries will have positive effects for investment climates in future.

In advance of the Barcelona summit, the Spanish Presidency invited the candidate countries to participate in the Lisbon process, through a special meeting with EU Heads of Government.[28] However, it remains the case that most of the candidate countries lag behind the existing membership in terms of competitiveness, and enlargement will certainly result in a lowering of the overall competitiveness of the Union, at least taking into account the measures presented in Table 2 above.

While enlargement will create adjustment difficulties, it may also provide a growth impetus to the Union as a whole, especially in terms of increased investment in the new member States and expansion of markets in general. It should also be noted that many of the new members have in their traditions good educational systems and some technological skills and resources that will add to the Union’s strengths in a number of fields. The impact of enlargement on the possibilities for the Lisbon Agenda must therefore be positive in the medium-term: the doubt remains, however, that practical difficulties in the enlargement process itself will distract attention from implementation of the detailed steps needed in support of the Lisbon Agenda.

Enlargement, together with the reform of the institutions, changes in the structure of the EU and the division of powers between member States, the European Parliament and the Commission as a result of the next European treaty will together have additional and significant effects on the regulatory process in member States. In general, the large number of States in the new Union will encourage trends towards centralised decision-making which may be helpful in speeding up Lisbon-related decision making.

The Slowdown in ICTs
Given the importance of information and communications technologies (ICTs) in the Lisbon Agenda, the slowdown in this sector worldwide will have mainly negative effects on progress. Skill shortages in this sector will be less acute for the moment, but the venture capital industry will be discouraged from investing in the sector to the same degree as in the past. Moreover, a longer-term slowdown in the sector will have the effect of discouraging students from pursuing careers in this field. With regard to telecommunications in particular, there are special difficulties, added to those resulting from the more general slowdown, resulting from the high prices paid by telecommunications companies for 3G mobile telephony licences in several European countries. This will in turn discourage further investment and the introduction of new services

Uncertainties in the World Economy
The target of 3% growth envisaged in the Lisbon Agenda has not been met in the two years since the Lisbon European Council, and thus the required growth rate for the remainder of the target decade will have to exceed 3 per cent on average. The prospects for such growth do not look particularly good at present. The Commission’s latest forecasts[29] point out that the recovery has been much slower than anticipated, and that the average growth rate in the euro area is estimated to be 0.8% in 2002 and is forecast at only 1.8% in 2003. Growth is expected to gain momentum from the second half of 2003, if confidence returns, oil prices ease and stock markets remain stable. The Commission’s assumption of an easing of oil prices is a strong one: clearly, if difficulties in oil supplies were to arise in the first half of 2003, the envisaged growth would be less likely. The Commission describes the rise in the unemployment rate as limited and temporary. It is expected to rise from 8.2% in 2002 to 8.3% in 2003 and then fall to 8.0% in 2004. Due to the deterioration in the economic situation and an easing of budgetary policy, the general government deficit is expected to widen to 2.3% of GDP in 2002 in the euro area (to 1.9% of GDP in the EU), with a small improvement to 2.1% expected in the following year. The envisaged Lisbon activities in R&D, innovation and human resource development will all be constrained by tighter government budgets. The Commission forecasts also indicate that productivity gains are expected to remain low for another year in 2003 with a resulting increase in unit labour costs.

Some Priorities for the Future

Restructuring of Industry
A basic need for any economy is to adjust to technological change and modifications in consumer requirements. This adjustment process is facilitated by international trade and growth, the latter making it easier for the sometimes painful effects of change to be minimised. Regulation of the change process itself is to be avoided (for instance through protectionist measures or through regional policy that in effect serves as a subsidy to a declining industry), but good regulation and social protection structures can smooth the process of change and improve its efficiency. The Lisbon Agenda incorporates such principles, but it goes further in singling out industries that are explicitly to be encouraged, in particular information and communications technologies. It could be argued that this means a degree of picking winners in a way similar to the unsuccessful attempts by some national governments in the 1970s and 1980s. The difference, however, is that these policies are no longer those of direct subsidy or protection, let alone the creation and nurturing of individual firms, as was done with the national champions in the UK, France and other countries in earlier decades. Moreover, the targeting of ICTs is geared more toward encouraging the take-up of the technologies across sectors rather than the specific encouragement of the sector for its own sake, although inevitably encouragement will thereby be provided particularly to service providers in this sector.

Structural change may be described as an alteration in the horizontal structure of activity. This can be seen in the sectorial composition of economic activity, whether measured in employment or value-added terms. The causes are related to a combination of:

  • Long-term trends in sectorial GDP, where industry overtakes agriculture and then cedes ground to services (the so-called Tinbergen-Fourastié thesis[30]) or to a rise in demand for services as income rises.[31]
  • Specific technological trends that encourage higher productivity in certain sectors, but at different levels, thus leading to relative changes in employment or value-added shares of the total.
  • Changes in the international division of labour: with lower wage rates as an important determinant of competitiveness, international shifts in production take place as a result of competition in world markets, and this competition has been encouraged by the gradual reduction of trade barriers internationally.
  • Globalisation specifically plans production re-location whether as a result of cost considerations, efforts to obtain market access, or a combination of these dynamics.

Continued policy emphasis on the present and future trends in all sectors of the EU economy should start by taking a global view. The Commission already has a good overview at a sectorial level of what is happening in European industry (which effectively encompasses services as well), but needs to supplement this with a wider perspective in order to inform the policy debate at both the EU and national levels as to priorities, particularly in the areas of R&D and education investment. 

Broadband Access
A combination of regulatory and research initiatives are needed to accelerate the availability and take-up of broadband telecommunications in the European Union. Broadband is needed to encourage efficient use of the Internet, since the information available is increasing at a rate that exceeds the capacity of narrow band Internet access. Small firms as well as individuals need to be able to access the information and communications potential of the Internet, but broadband access is at present widely available in only a few EU countries. The cost also needs to be reduced to levels that are affordable for small business and consumers. In the absence of such a development, the progress of e-business will be severely constrained. The Barcelona European Council called for full implementation of the new communications regulatory package by May 2003, and for rapid adoption of the Directive on data protection. Broadband, next-generation Internet, and the eEurope 2005 Action Plan were other Barcelona priorities, as were open platforms for digital television, 3G and 3G mobile.

Integrated Financial Markets
This is a broad field, covering both the availability of finance for business and the further development of securities markets, which is crucial for the development of enterprise in the EU. The adoption of the Lamfalussy proposals will eventually lead to an integrated securities market in Europe, particularly important for SMEs and for larger firms in smaller countries seeking equity finance but currently constrained by the relative weakness of their respective national securities markets. The harmonisation of financial regulatory regimes, and perhaps their eventual integration, could encourage more efficiency and competition in the financial sector. Finally, more emphasis on financial institutions and on consumer rights to deal with financial institutions across borders would help again to achieve a wider range of services and lower costs, thus improving competitiveness of the enterprise sector overall.

Labour Markets
Labour market rigidities in the European Union have often been identified as a cause of weakness in European competitiveness, but critics do not always identify clearly what the rigidities consist of, perhaps because they are reluctant to be explicit. The difficulties in dismissing workers who are no longer needed are certainly sometimes mentioned, and comparisons are drawn with the United States, where it is easier to get rid of staff. Calls for this to be changed are unlikely to meet with much success in the short term, however, given the strength of the trade union movement in Europe and the deeply rooted attachments to the European social model. Nevertheless a more vibrant enterprise sector where new firms are emerging more frequently will itself give a stimulus to labour mobility. Attention may also focus on the need for flexibility in other areas, although even here there is considerable ambiguity. Flexibility can mean flexibility in the work force itself with openness to new work practices appropriate to new and flexible automation systems. It can also mean a willingness to upgrade skills in the light of decreasing product life cycles and structural change, implying life-long learning.

Finally, the desired flexibility can be in the market for labour itself, with increased cross-border migration encouraging a wider range of skills to be drawn upon and also perhaps moves towards equalisation of employment rates and wage rates, as workers move from countries with high unemployment rates to those with lower unemployment, making adjustment to structural change less difficult. The latest European Competitiveness Report[32]draws attention to the relatively good match between the distribution of educational attainment in the adult population and the skill content of labour demand in the EU, compared with that in the United States. However, for supply and demand to clear, increased cross-border labour mobility will be required. A greater emphasis on removing the administrative barriers to such labour movement should be a priority, focusing on the full range of issues in connection with the movement of labour, including pension and social security entitlements, wider recognition of qualifications and experience, and a range of family-related issues in health care, child care and education. The need for a strategic approach, especially in the light of the forthcoming enlargement of the EU, is particularly necessary. It was noted at Stockholm that the Commission intends to present to the 2002 Spring European Council an Action Plan for developing and opening up new European labour markets, as well as specific proposals for a more uniform, transparent and flexible regime of recognition of qualifications and periods of study, as well as on the portability of supplementary pensions, without prejudice to the coherence of member States’ tax systems.[33]

Forward Perspectives
Competitiveness is a moving target, and no matter how much progress is made in policy implementation by the EU and the member States it may not be enough if other countries have made more. One of the negative consequences of the inward-looking view of competitiveness adopted by the EU in the Lisbon Agenda and thereafter is that the progress in other parts of the world may be under-emphasised. Considerable efforts need to be made therefore in monitoring progress in other parts of the world, assessing what policies are being implemented and what results are being attained. This would contribute not only to revision of targets within the EU itself in the light of changing competitiveness requirements, but also to the identification of successful policies, measures and institutions in other countries that could be emulated in the EU.

This suggests the need to avoid excessive reliance on the scoreboard. While this is valuable information for competitiveness purposes, it should be regarded only as the starting point for analysis, pointing to the need for closer examination of the way in which policies and institutions in the EU and elsewhere have led to the kind of rankings provided by the indicators.

Similarly the competitiveness reports themselves suffer from being too backward-looking in character, concentrating more on diagnoses than solutions. There are undoubtedly both practical and legal limits to the degree to which the Commission may prescribe policies at the level of member states, but it is nevertheless desirable that analysis should lead to action, and more indications of the policy directions to be pursued by member States would be helpful. These need not be prescriptive: a model could be found in the BEST[34] initiative, and the approach there adopted of identification of best practice in policy implementation for enterprise, science and technology could be broadened to include a coverage of non-member countries. This could be done in the framework of the extensive structure of dialogue and co-operation with other parts of the world that already exists. The Forward Studies unit in the Commission has an important role to play in this regard. The need for a future-oriented enterprises policy may be partly addressed by close integration of its work with that of a number of Directorates-General, including of course DG Enterprise but also Single Market, Competition, ICTs, Regions and others. The replacement of three Ministerial Councils (Industry, Trade and Research) by a new one (Competitiveness) is encouraging in this connection.

Another important consideration is the integration of competitiveness concerns and especially the Lisbon Agenda issues concerning the development of a knowledge-based economy into broader economic analysis. The Lisbon Agenda called for the Broad Economic Policy Guidelines to focus increasingly on the medium- and long-term implications of structural policies and on reforms aimed at promoting economic growth potential, employment and social cohesion, as well as on the transition towards a knowledge-based economy.[35]

International Investment
A recognition of the importance of international investment, both inward and outward, for the success of the Lisbon Agenda is a necessary step. Practical measures to bring this about could include the following:

A new focus on WTO negotiations to prioritise the so-called “Singapore issues,” especially including the development of an international investment code. This should be developed in close consultation with other countries including particularly the developing countries in order to create a better understanding of the important benefits to all sides from enhanced investment. The Asia Europe Meeting (ASEM), a process of continuing dialogue between the two regions on economic, social and political issues, has brought some progress in the area of trade facilitation in particular, but the importance of agriculture liberalization to the ultimate success of the Doha round is of course crucial.

Priority given to investment issues in negotiations with future enlargement countries and with others with whom the EU has co-operation programmes.

Accelerated development and encouragement of a single European capital market (equities and bonds) to allow the mobilisation of long-term capital for outward investment from the EU and as well as for inward investment

Trade liberalisation
The EU as a whole is not a very open economy in world trade terms, at least not when compared to some individual countries. The trade-to-GDP ratio is only around 10% for the United States, Japan and the European Union when intra-EU trade flows are excluded.[36] The EU nevertheless has an interest in an open world trading system, which would be helpful for the future growth of the EU and thus for the success or otherwise of the Lisbon Agenda. A second reason for a consideration of the trade question in the discussion of the Lisbon Agenda would be the impact of globalisation, both now and in the future. At present trade within international corporations accounts for much of world trade: globalisation therefore finds expression in exports and imports of goods and services. If the EU is to become a higher technology, higher growth region such as is foreseen in the Lisbon Agenda, then it can be expected that inward investment into the EU will further increase. Similarly, economic integration within the EU and the completion of the Single Market should lead also to larger EU-based corporations, strong enough to expand beyond EU borders. In both cases, an increase in international trade is implied. For these reasons the evolution of the international trading system is directly related to European competitiveness. However, a new way of integrating policy choices in the EU will have to be achieved: trade negotiations cannot be as neatly separated out from competitiveness issues as they are at the moment.

The role of the EU in international trade negotiations and in the reduction of tariff barriers globally is, by and large, a positive one. The EU is committed in principle to the reduction of tariffs and other barriers to international trade and to special consideration for developing countries. However, some aspects of EU trade policy are less open, particularly agriculture. At present, the EU is a key advocate of progress on the so-called “Singapore issues” first introduced into the WTO Agenda in 1996. They include the questions of investment, transfer of technology, competition policy and environmental sustainability. Progress in these fields is uncertain, and to the extent that the international trade regime does not expand to include agreements on these issues, the competitiveness of the EU will lack a significant impetus that would otherwise have been experienced.

Regulatory Reform
This broad policy area represents a significant agenda in itself. It encompasses the following topics:

  • Competition policy: both the control of anti-competitive behaviour among firms and specific enforcement of antitrust. The European Competitiveness Report recognises the important link between competition policy and a number of aspects of the Lisbon Agenda, such as the encouragement of the adoption of technology and productivity gains, the provision of an enabling environment, particularly for new businesses.
  • Network industries: industries depending on the sharing of infrastructure or some other restricted factor, such as electricity, telecommunications, gas, water, and railway services, have special regulatory requirements that transcend general competition policy. Even after the liberalisation of such industries, which in the past were typically government-owned monopolies, there will usually be some requirement for a regulator independent not only from the industry but also as far as possible from government. Clearly, the competitiveness agenda requires the provision of telecommunications services with low prices and a good range of services, particularly broadband services, but electricity and water are important inputs into a number of sectors and competition to provide services can yield important benefits in this sector also, both with regard to the provision of services and their cost.
  • Management of regulation: this covers the processes by which regulations are made, consultations that take place prior to the application of the regulation and the analyses, if any, made in support of them. The Stockholm Council noted that: “Businesses and citizens need a regulatory environment that is clear, simple, effective and workable in a rapidly changing global marketplace. This means consultation on proposed regulation, assessment of the impact of regulations as well as the introduction of schemes for codification and recasting of European legislation and legislation review systems.”(para.23)
  • Reducing bureaucracy, cutting red-tape: this amounts to a simplification of administrative regulation. It can be as simple a matter as reducing the number of forms or the number of administrative steps that an enterprise has to go through to obtain a permit. Reducing bureaucracy is especially important in the creation of an enabling environment for enterprise because many studies show that the burden of administrative regulation falls most heavily on small and medium enterprises (SMEs). The Stockholm Council noted that: “The public sector should increase efficiency and reduce red tape in order to enhance the productive and innovative capacity of our economies.(para.23)

The regulatory reform agenda is thus a large one and it has been recognised by many EU countries as a crucial component of competitiveness policy. Competition policy is one of the areas where most progress has been made at EU level. Major parts of EU legislation governing competition law are being reviewed. In addition, the role of national competition authorities vis-à-vis the EU has been clarified. On 11th December 2002, the European Commission approved a package of proposals for the radical overhaul of merger control, together with draft guidelines on so-called “horizontal” mergers, improvements in procedures and an upgrading of the Commission’s staff in this area. The changes are claimed to combine a predictable review timetable with an improved decision-making process, based on solid economic analysis and enhanced opportunities for merging firms’ views to be taken into account.

With regard to network industries, co-ordination will be an important component of EU regulation of the network industries in the future:

“Where NRAs (national regulatory authorities) take decisions using the Guidelines, they will necessarily affect the development of the internal market. These decisions cannot be allowed to jeopardise the functioning of the internal market. Therefore, NRAs must ensure there is consistency of approach as between themselves in the application of the rules to which these Guidelines apply. Such consistency can only be achieved by close co-ordination and co-operation with other NRAs, with national competition authorities (NCAs) and with the Commission, as provided in Directive [framework] and suggested in Section 5.3 of the Guidelines.[37]

Electricity is likely to be another focus of attention, with market access a particular concern. In particular, France –where the state-owned enterprise is making significant investments in the more liberalised markets of other EU States– will have to make concessions in this field. The Stockholm Council noted the competition issues involved.[38] The Barcelona European Council called for targets including freedom of choice of supplier for all European non-household consumers as of 2004 for electricity and for gas, the separation of transmission and distribution from production and supply, interconnections targets, adoption of guidelines and accompanying financial rules on Trans-European Energy Networks (TEN), and analysis of the global performance of the European internal energy market, particularly the degree of transposition of the regulatory framework.

Aviation is another field where the regulatory powers of the Commission have increased. Following a decision by the European Court of Justice, the Commission has now assumed full negotiating powers over the use of EU airspace, with a possible overturning of the so-called “open skies” agreements between individual member States and the US. The Commission will also address the allocation of “slot rights” in the individual member States’ airports. In the field of transport, the Barcelona European Council has called for the setting up of the Single European Sky by 2004, and rules on slot allocation by 2002.

Under regulatory management, the main initiatives to be noted are the SLIM (Simplified Legislation for the Internal Market) and BEST initiatives. SLIM was launched by the Commission in 1996 and the fifth phase has just concluded.[39] This focused on three sectorial issues: maximum levels of pesticide residues, the shipment of radioactive waste and the Directive on Cosmetics. There was no progress reported in the third area and the exercise is clearly limited in scale and scope. The way forward may lie rather in the development of new regulations and legislation that supersedes existing combinations of national and EU law.

The Business Environment Simplification Task Force (BEST) was set up in September 1997, to prepare an independent report on ways for improving legislation and removing unnecessary hindrances to the development of European businesses, particularly small and medium-sized enterprises (SMEs). BEST also looked at other areas of difficulty for SMEs, such as access to finance, innovation and research, technology transfer and their dealings with public administrations. It therefore went beyond purely regulatory issues to consider most of the issues that confront entrepreneurs in practical terms. It was directed especially towards identifying best practice in legislation and institutional support to SMEs. It has undergone modifications in the light of Lisbon. The second BEST Procedure report has been issued,[40] which is essentially an analysis of measures and best practice under way in member States, related to selected business policy issues, such as business impact assessment, business support services, the administration of start-ups, the management of incubators, national and regional policies in support of e-business for SMEs, and business angels. Other projects are also under way. It is a practical example of the open method of co-ordination, responding to the Lisbon Agenda.

In spite of a number of initiatives, there are nevertheless crucial weaknesses in the EU’s regulatory processes, which is why regulatory reform with respect to the EU institutions has become a priority for many member States. The “Mandelkern Group” was established in the light of the conclusions of the Lisbon summit in order to gather views of the member States and prepare proposals on how the regulatory processes in the EU could be improved. The Group issued its final report in November 2001. The group recognised that: “…better regulation is about ensuring that regulation is only [sic] used when appropriate, and about ensuring that the regulation that is used is high quality.”

The Group adopted seven core principles for regulation: necessity, proportionality, subsidiarity, transparency, accountability, accessibility and simplicity. The main recommendations were as follows:

  • The Commission should prepare an annual report on developments in better regulation; joint training programmes should be established for officials; and a set of indicators should be prepared.
  • Impact assessment systems should be established at national and EU levels, and proposals for regulation without such assessments should not be considered.
  • Standard consultation procedures for proposed new regulations should be set up, with open access.
  • Simplification of existing European regulation should be institutionalised, with policies for simplification also to be set up in member States.
  • Appropriate institutional structures should be developed, use of alternatives to regulation examined, codification of European regulation undertaken with specific targets for reduction in numbers of acts and pages, and public access provided to text of regulations in member States.
  • Transposition of EU regulations to national legislation: data on progress should be standardised, and all parties “should pay more attention to the precision, clarity and coherence of European legislation during the negotiating process.”

The report of the “Mandelkern Group” was considered at Laeken. The recommendations were not adopted as such. However, the Commission was to come forward with a plan for better regulation within a six-month period. The Laeken Council also considered a Commission Communication[41]that listed the most pressing concerns:

  • Simplification and improvement of the acquis communautaire (now over 80,000 pages).
  • The need for well-prepared and more appropriate legislation, including more consultation and impact analysis, and a new culture within the institutions.
  • Better transposition and application of community law at the national level.

Harmonisation as a concept will inevitably decline in importance, and subsidiarity may come into increasing conflict with the demands of the Single Market and international agreements. The consequence of these tendencies is that centralised regulation may increase. This is likely even with no conscious ideological drive towards centralisation: the need to achieve market uniformity will inevitably produce arguments in favour of a regulation rather than a directive. This will particularly be the case for network industries that are subject to rapid technological change, such as telecommunications and financial services. But it will also be driven by the strategy for services together with the increased focus on services industries in WTO, and the enhancement of the Commission’s responsibilities in this area.

The future of the Lisbon Agenda

The Lisbon Agenda has clearly brought high-level attention to problems of EU competitiveness, and it is likely that attention will be continued into the future, with policy focus on the degree to which the objectives set out in Lisbon are being attained and the degree to which plans are being implemented. But it is also clear that competitiveness is a complex subject and there is no universal understanding of what it could mean at the level of the European Union. In spite of the broad consensus on policies, and on indicators either of implementation or of resulting increased competitiveness, there is a need for more analysis of the degree to which achievement of the different targets adopted within the Lisbon Agenda are necessary, sufficient, consistent and feasible. In this way the priorities for action could be more clearly identified. There should also be more consideration of the implementation structures needed: are the institutions adequate for dealing with the detail of implementation. The open method of co-ordination is dependent on national as much as EU structures for basic instruments to achieve the agreed objectives. In the light of the complexity of the tasks, and the increasing need for competitiveness in the light of a rapidly changing world economy, the programme may lack the necessary structures to achieve it. While some re-allocation of responsibilities between member states and the Commission may be implied by this diagnosis, the priority should first be a more precise statement of the system under consideration, the main drivers of competitiveness, their interrelatedness and the direction of causality. But competitiveness is in any case a relative concept. A more precise statement of the problem should be complemented with practical examples of solutions in detailed policy areas. Examples of attractive and successful policy initiatives taken inside or outside the Union should continue to be identified and brought to the attention of policy-makers within Europe. Policy benchmarking, rather than performance benchmarking, should therefore receive higher priority. In this way also key areas could be identified within the broad concepts of skills, knowledge, innovation, finance, and entrepreneurship. Thus the Lisbon Agenda would be refined and updated on a continuous basis.

Dr. Eoin Gahan
Director of Jacobs and Associates Europe, Limited. From 1995-2002 he was Chief Economist of Forfás, the industrial policy board for Ireland, where he directed the research of the National Competitiveness Council. Previously, he was for many years a staff member of the United Nations Industrial Development Organisation, where he was Coordinator of the United Nations Industrial Development Decade for Africa in 1994-1995.



The following list attempts to select the principal measures and targets from the text of the Lisbon Ministerial Declaration.

E-business and telecommunications

  1. Comprehensive eEurope Action Plan to be presented to the European Council in June 2000
  2. Adopt as rapidly as possible during 2000 pending legislation on the legal framework for electronic commerce
  3. Conclude as early as possible in 2001 work on the legislative proposals announced by the Commission following its 1999 review of the telecoms regulatory framework;
  4. Fully integrated and liberalised telecommunications markets should be completed by the end of 2001;
  5. Greater competition in local access networks before the end of 2000 and unbundling the local loop in order to help bring about a substantial reduction in the costs of using the Internet;
  6. All schools in the Union to have access to the Internet and multimedia resources by the end of 2001,
  7. All the teachers needed to be skilled in the use of the Internet and multimedia resources by the end of 2002;
  8. Ensure generalised electronic access to main basic public services by 2003;
  9. All European countries to have low cost, high-speed interconnected networks for Internet access and foster the development of state-of-the-art information technology and other telecom networks as well as the content for those networks.

R&D and innovation

  1. Appropriate mechanisms for networking national and joint research programmes,
  2. Improved environment for private research investment, R&D partnerships and high technology start-ups, by using tax policies, venture capital and EIB support;
  3. Encourage the development of an open method of coordination for benchmarking national research and development policies,
  4. Facilitate the creation by the end of 2001 of a very high-speed trans-European network for electronic scientific communications,
  5. Take steps to remove obstacles to the mobility of researchers in Europe by 2002,
  6. Ensure that a Community patent is available by the end of 2001

SMEs and entrepreneurship

  1. Benchmarking exercises on issues such as the length of time and the costs involved in setting up a company,
  2. Commission communication on an entrepreneurial, innovative and open Europe
  3. European Charter for small companies to be endorsed in June 2000
  4. Review of EIB and EIF financial instruments

Single Market

  1. A strategy for the removal of barriers to services by the end of 2000
  2. Speed up liberalisation in areas such as gas, electricity, postal services and transport, including air;
  3. New rules on public procurement by 2002;
  4. On-line Community and government procurement by 2003;
  5. Strategy for further regulatory simplification by 2001;
  6. Shift State aids towards horizontal issues;
  7. Implement Financial Services Action Plan by 2005,
  8. Implement Risk Capital Action Plan by 2003;
  9. Rapid progress on takeover bids and credit institutions restructuring
  10. Conclude tax package

Macro-economic policy

  1. Macro-economic policies should foster the transition towards a knowledge-based economy

Human resources

  1. Substantial annual increase in per capita investment in human resources;
  2. Number of 18 to 24 year olds with only lower-secondary level education who are not in further education and training should be halved by 2010
  3. Multi-purpose local learning centres and learning partnerships;
  4. European framework for basic skills;
  5. Definition of means for student and teacher mobility by end 2000;
  6. Steps to remove obstacles to teachers’ mobility by 2002;
  7. Common format for Cvs;
  8. Reflection on concrete future objectives of education systems for the European Council in the spring of 2001.
  9. Europe-wide data base on jobs and learning opportunities;
  10. Special programmes for unemployed to fill skill gaps;
  11. Higher priority to lifelong learning;
  12. Increasing employment in services;

Social cohesion

  1.  Furthering equal opportunities;
  2. New benchmark for childcare provision
  3. Raise the employment rate from 61 per cent today to as close as possible to 70 per cent by 2010
  4. Increase the number of women in employment from an average of 51 per cent today to more than 60 per cent by 2010.
  5. Member States should consider setting national targets for an increased employment rate.
  6. Social cohesion: exchanging experiences and best practice;
  7. Study on the future evolution of social protection and pensions with progress report by December 2000.
  8. Commission initiative for cooperation in promoting social inclusion to be presented by June 2000.
  9. Exchanges of information and best practice
  10. Mainstream the promotion of inclusion in member States’ employment, education and training, health and housing policies,  
  11. Develop priority actions addressed to specific target groups
  12. Reaching agreement on a European Social Agenda at the Nice European Council in December

EU Organisation

  1. Broad Economic Policy Guidelines to focus increasingly on the medium- and long-term implications of structural and transition towards a knowledge-based economy.
  2. European Council to hold meeting every spring devoted to economic and social questions
  3. Commission to prepare annual synthesis report on economic and social questions
  4. EIB to make another billion euro available for venture capital operations for SMEs
  5. Dedicated lending programme of 12 to 15 billion euros over the next 3 years for the priority areas.

[1]Dermot Hodson and Imelda Maher, “The Open Method as a New Mode of Governance: The Case of Soft Economic Policy Co-ordination,” Journal of Common Market Studies, Volume 39: Issue 4.

[2]Report of the Working Group on Economic Governance submitted to the plenary session of the European Convention on 7 and 8 November 2002

[3]Presidency Conclusions, Lisbon European Council, 23 – 24 March 2000.

[4]Stefano Scarpetta and Thierry Tressel “Productivity and Convergence in a Panel of OECD Industries: Do Regulations and Institutions Matter?” OECD Economics Department Working Papers, no.342, September 25, 2002.

[5]Economic Forecasts, Autumn 2002 (to be published as EUROPEAN ECONOMY, No. 5 2002. Office for Official Publications of the EC. Luxembourg).

<[6] EU Commission, “2002 Review of the Internal Market Strategy: Delivering the Promise,” COM (2002) 171 final, Brussels, 11 April 2002.

<[7]UNICE, 1998 “Competitiveness,” 1999 “Entrepreneurship,” 2000  “Innovation,” and 2001 “The reNewed Economy.”

[8]Indeed, this is sometimes claimed as an entirely UK programme. See for instance the then UK Minister for Europe, Peter Hain, who referred to  “…the British agenda adopted in Lisbon a couple of years ago…” in the BBC Newsnight programme, 11 October 2002. 

<[9]“Indeed, it was our two Prime Ministers, Tony Blair and José María Aznar, who first proposed a special summit at Lisbon -an idea that the then Portuguese Prime Minister Guterres immediately endorsed and built on-.” Speech by UK Secretary of State for Trade and Industry, Patricia Hewitt, 6 February 2002

[10] Krugman, P. “Competitiveness: A Dangerous Obsession”, Foreign Affairs, March/April 1994

[11]Commission of the European Communities, “The Lisbon Strategy: Making Change Happen,” Communication from the Commission to the Spring European Council in Barcelona. Brussels, 15.1.2002, COM (2002) 14 final.

[12] Presidency Conclusions, Barcelona European Council, 15-16 March 2002.

[13]Commission of the European Communities “Benchmarking Enterprise Policy: Results from the 2002 Scoreboard” SEC (2002) 1213, Brussels, 7 November 2002.

[14]IP/02/1644 Brussels, 11th November 2002.

[15]EU Commission, “2002 Review of the Internal Market Strategy: Delivering the Promise” COM (2002) 171 final, Brussels, 11 April 2002.

[16]EU Commission, “An Internal Market Strategy for Services,” COM (2000) 888 of 29.12.2000.

[17] Commission of the European Communities “The Internal Market –Ten Years without Frontiers”, January 2003

[18]HM Treasury, “Structural Indicators of European Economic Reform: Measuring Europe’s Progress,” February 2002.

[19]World Economic Forum (2002).

[20]IMD, “World Competitiveness Report 2002,” Lausanne, 2002.

[21]ERT Working Group on Competitiveness, “Will European Governments in Barcelona Keep Their Lisbon Promises?” Message from the European Round Table of Industrialists to the Barcelona European Council, March 2002.

[22]UNICE, “Lisbon Agenda: Failure to Deliver,” UNICE press release, 14 June 2002.

[23]Keith Salmon, “Spain: From Protectionism to Advocacy of Liberalisation,” Working Paper, Real Instituto Elcano, 8-11-02, /wps/documentos/19.asp

[24]Irish Business Bureau. European Monthly Newsletter, January 2002, number 152.

[25] Europartnership “EU could benefit from a ‘Performance Management’ approach”, http://www.europartnership.com/news/02mar13.htm

[26]Commission of the European Communities “Benchmarking Enterprise Policy: Results from the 2002 Scoreboard” SEC (2002) 1213, Brussels, 7 November 2002.

[27] European Commission, “Employment in Europe 2002: Recent Trends and Prospects.” Manuscript completed in July 2002.

[28]“In accordance with the Conclusions of the Stockholm and Gothenburg European Councils, the Spanish Presidency would like the Candidate Countries to begin to involve themselves in the Lisbon Strategy and familiarize themselves with its procedures and objectives. Given their experience and willingness to change and adapt, they have a great deal to contribute to the process of reform in which we are currently engaged.”  Letter from the President of the European Council, Jose María Aznar, to the Candidate Countries, Madrid, 9 March 2002.

[29]Economic Forecasts, Autumn 2002 (to be published as EUROPEAN ECONOMY. No. 5. 2002. Office for Official Publications of the EC. Luxembourg).

[30]Tinbergen, J. “ The target of twenty five per cent for the third world.” Industry and Development, No. 3, 1979.

[31]EU Competitiveness Report 2002.

[32] European Commission, “European Competitiveness Report 2002.”

[33]Presidency Conclusions, Stockholm European Council, 23 and 24 March 2001.

[34]European Commission, BEST.

[35]Presidency Conclusions, para. 35.

[36] OECD. STI Scorecard 2001. The indicator uses the average of exports and imports, expressed as a percentage of GDP.

[37]Draft Framework Directive on Telecommunications.

[38] “The Commission will ensure that the provisions of the Treaty, and in particular Articles 85 and 86, will be fully observed and that the implementation of those decisions could create no distortions of competition. On that basis, the Commission will also ensure that those enterprises that still benefit from a monopoly situation on their national market will not unduly benefit from that situation.” Presidency Conclusions, Stockholm European Council, 23 and 24 March 2001, para.17.

[39]EU Commission “Simpler Legislation for the Internal Market: Report on the Outcome of the 5th Phase of SLIM,” SEC (2001) Brussels, 2001.

[40] Highlights of the Results of the Best Procedure Projects 2001-2002, Commission Staff Working Paper SEC (2002) 1212, 7 November 2002.

[41]European Commission, “Simplifying and Improving the Regulatory Environment” COM (2001) 726, 5 December 2001.