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EU: Spring Summit Focuses On Reviving Bloc's Economy

  • Ahto Lobjakas

The two-day EU summit opening today in Brussels will be dedicated almost exclusively to the issue of revitalizing the bloc's economy. The 25 EU heads of state and government are expected to approve a plan to relax budget-deficit rules set out by the stability pact that underpins the euro. They will also revamp the flagging Lisbon strategy of economic reform, which has failed to take off since its inception five years ago. The group is also expected to discuss the recent U.S. nomination of Paul Wolfowitz to head the World Bank.

Brussels, 22 March 2005 (RFE/RL) -- The EU's spring summit, traditionally dominated by economic concerns, will this time focus on two major objectives.

The first is for EU leaders to formally approve a deal to allow countries to run bigger deficits without triggering economic sanctions -- a move that was agreed by member states' finance ministers on 20 March.

The other main objective is to agree a formula for re-launching the Lisbon strategy of economic renewal. The initial aim of the 10-year strategy, agreed in 2000, was to turn the EU into the most competitive "knowledge-based" economy in the world -- that is, to overtake the United States. That goal has now been abandoned as unrealistic.

Jose Manuel Barroso is president of the European Commission, the EU's executive arm. Yesterday he praised the deal to loosen deficit rules in the Stability and Growth Pact, which guides the economies of the countries that have adopted the euro.

"I consider [it] a very positive agreement. I believe we have found a difficult balance between stability and flexibility. The result is a rejuvenated pact, with newfound credibility, firmly based in economic logic," Barroso said.

The re-examination of the pact was forced by countries, led by Germany and France, who said the terms of the pact stifle economic growth.

Barroso said the basic constraints remain in place -- no "eurozone" government may run a budget deficit greater than 3 percent of GDP or a debt level higher than 60 percent.

However, the new deal allows countries to cross the 3-percent threshold by an unspecified margin and for an unspecified period of time without fear of reprisals -- if they have "relevant factors" to justify it. This is seen as an important victory for Germany, which could have faced large fines under the old rules for its budget shortfall. Now, Berlin can use the money it spends on the former East Germany to offset the deficit.

Five years after it was unveiled, the EU's grand ambition to catch the United States -- called the Lisbon strategy -- is now officially defunct. It has failed to deliver on any of its key objectives. Economic growth in the EU continues to trail badly behind the United States, while job creation remains a perennial problem for many EU member states.

Hence, Barroso said yesterday, better ways must now be found to boost both growth and employment.

"We expect a very clear signal from the summit that the creation of growth and jobs are becoming European Union's number one priority. I expect a clear signal that member states are ready for what the [European] Commission has proposed: a clear focus, [and] concrete and targeted measures which boost growth," Barroso said.

Barroso's measures include greater investment in research and development, use of government subsidies to support innovation, increased funds for research into ecologically sound technologies, and creation of a "European research council."

Research and development is seen as a key sphere in which the United States significantly outspends most EU member states.

One issue likely to liven up the summit is growing tensions surrounding the upcoming referendum in France on the new EU constitution. Polls show the referendum could fail, as moves to open the EU's service sector to competition have overshadowed constitutional issues. There are widespread fears in France this will result in "social dumping" -- an influx of foreign service providers undercutting local wages.

Barroso has been highly critical of the French leadership recently for having allowed the two issues to become interlinked. Yesterday, he said he was open to compromise. But he firmly rejected suggestions that the legislation on services should be postponed. He called France an important country but warned that it must not force the hand of common EU institutions.

"At the same time, there are other countries in Europe, there are 25 of us -- and I do not believe in taking decisions giving consideration to only one single country, even if it is a country I hold in high esteem which is essential in the construction of Europe. We should explain to our citizens in Europe that we must find compromises -- and this is the way Europe works. Europe is a compromise among different views," Barroso said.

EU leaders will tonight hold a brief discussion on the U.S. nomination of Paul Wolfowitz to take over as president of the World Bank. Wolfowitz is seen as one of the main architects of the war in Iraq, and his nomination has sparked debate in EU capitals.

There have been suggestions the EU could block Wolfowitz's nomination, but officials say this is unlikely. Yesterday, Barroso said Wolfowitz must not be "prejudged" and that his candidacy must be assessed solely in terms of his aims and ability.
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