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EU: Report Says Economies Moving In Right Direction

  • Mark Baker

A year ago EU leaders said they would transform the European Union into the world's most dynamic regional economy in just 10 years. While many dismissed the remark as wishful thinking, a London-based think-tank took the EU at its word and has now issued a report assessing the union's progress toward that goal. In its report, the Center for Economic Reform acknowledges both achievements and shortcomings, but is cautiously optimistic about Europe's prospects. RFE/RL correspondent Mark Baker spoke recently with the author to see if the goal is realistic.

Prague, 18 April 2001 (RFE/RL) -- At the time it sounded like so much idle boasting.

A year ago European Union leaders meeting at a summit in Lisbon decreed that in just 10 years the EU would have the world's "most competitive and dynamic knowledge-based economy." Forget about the United States or Asia, the leaders implied. By 2010, the EU would be the engine of global growth.

At the time, many in Europe and outside dismissed the claim as empty rhetoric -- an attempt by EU leaders to gloss over the union's perceived shortcomings with respect to the United States, which was then in the midst of an economic boom.

But one group, the British-based think-tank Center for Economic Reform, decided to take the EU leaders at their word and judge how serious they were.

The center has recently issued a report entitled "The Lisbon Scorecard" in which it evaluates progress to date in 15 areas widely seen as important if the European Union hopes to make good on its pledge.

Edward Bannerman, the head of the center's business and economics unit and the author of the study, spoke to our correspondent about what the report tried to do:

"We looked at all the EU economies and essentially assessed the extent to which they had achieved the targets that they set out last year at [the] Lisbon [summit]. We looked at each of the pledges the EU made and then we looked at which countries made the most progress on those issues, and we made [those countries] the 'heroes.' And [then] we looked at which countries were lagging badly, and we called them the 'villains.'"

Bannerman says that in the long term the Lisbon summit will have a big economic impact on the EU -- bigger even than the upcoming move to the single currency, the euro. As he writes: "how Europe creates its wealth is more important than how Europe chooses to denominate it."

But he says the significance of the summit was lost on the general public because the agenda was too broad.

Bannerman's study reduced the Lisbon agenda to four general areas: encouraging innovation; liberalizing markets; creating an entrepreneurial environment; and promoting social inclusion -- in other words, how will it bring more people into the workforce while maintaining the fabric of society. He says Europe must improve in all of these areas.

Bannerman's study says the EU is making best progress in improving innovation and access to information. The study gives the EU a grade of 'B+' ('A' is 'very good' and 'E' is 'very poor') in creating what it calls an "information society," in other words, ensuring access to the Internet and making information technology training available in schools. The study points out that EU members Sweden and Finland are now often ranked higher than the U.S. in terms of Internet usage.

Bannerman tells our correspondent that while all of the EU economies have their various strengths and weaknesses, the Scandinavians in particular score highly in technology:

"Again, it varies to some extent across different issues. [Among] all the major EU economies, there are heroes on some issues and villains on others. I think what comes across in very broad terms is that the northern Europeans, particularly the Scandinavians, do very well in terms of the Lisbon targets. I'm thinking here, for example, improving Internet access, encouraging R&D (research and development) to a knowledge-based economy. They also score very well on issues like social inclusion, bringing people into the workforce."

The Lisbon scorecard is less charitable when grading Europe on its ability to foster a business-friendly environment. The report gives the EU a 'D,' or 'poor,' in terms of how well countries promote new businesses. It saves its harshest words for France: "The lack of French entrepreneurs seems deeply rooted in cultural factors."

In terms of its regulatory environment, Europe rates only a 'D+.' The report says the regulatory burden on small and medium-sized enterprises is especially heavy in countries like Italy, Belgium, and France.

The report is also downbeat about the EU's ability so far to liberalize its transportation and energy markets, pointing to a string of failures -- particularly in France and Germany -- to liberalize electricity and gas markets.

While Bannerman is reluctant to single out specific countries as villains, he notes that France comes in for its share of criticism, particularly for when it comes to energy policy:

"[One] of the countries that [does] less well, for example, in liberalizing [its] economy, particularly in the case of energy, is a country like France, which was made something of the villain in the recent EU summit in Stockholm for blocking progress in energy liberalization."

So, will the EU have the world's most competitive and dynamic knowledge-based economy nine years from now?

Bannerman's study says it's too early to tell, but given the EU's efforts to promote an information society, it appears to be off to a satisfactory start.

Overall the reports gives the union a 'C+' (better than satisfactory) for its first year after Lisbon.

The report concludes by saying that EU governments appear to be moving in the right direction. In the report's words: "the European supertanker has now turned itself around to face in the right direction. We are confident that by the time of the Barcelona summit in the spring of 2002, a similar report would conclude that it is steaming steadily ahead."

(The full study is available online at: http://www.cer.org.uk)

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