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EU: European Commission Criticizes Progress On Competitiveness

  • Mark Baker

The European Union's goal of overtaking the United States in competitiveness is in danger of failing. So says the European Commission in a report this week (14 January) on steps the EU has taken to make the bloc a better place for companies to operate. While the report cites some progress in energy liberalization and banking reform, it says many other areas are falling behind. RFE/RL correspondent Mark Baker looks at the report and talks to an independent analyst who monitors European competitiveness.

Prague, 16 January 2003 (RFE/RL) -- The European Commission has warned in a report this week that a lack of progress in implementing reform is endangering future economic growth in the EU.

The findings call into question the European Union's goal -- made in Lisbon in 2000 -- of overtaking the United States as the world's most competitive economic area within a decade.

The report notes progress in just six of 16 initiatives that were to have been under way by the end of last year. It points out relatively little progress has been made in areas such as pensions, taxes, and patent procedures.

The commission could not immediately be reached for comment, but Frits Bolkestein, the European commissioner for the internal market, said in a statement that "nearly all the most serious delays" could be blamed on differences between the European Parliament, which agrees on the changes, and national governments, which must adopt and implement them.

The report, however, was not entirely negative, and said "reasonable progress" had been made in areas such as energy and banking.

This finding was seconded by the British-based Center for Economic Reform, a think tank that monitors progress toward the Lisbon commitments. Alastair Murray, an analyst at the center, is the author of an annual scorecard of European competitiveness. He tells RFE/RL: "In terms of Lisbon over the past year, the performance has not been so bad. There are a number of important legislative issues that have been [partially passed] that will go a long way ultimately toward raising competitiveness."

He says the most important breakthrough came in liberalizing energy markets -- in other words, allowing companies and households to choose their suppliers of gas and electricity. He says not only will companies some day be allowed to choose their energy suppliers, but individual households will as well by 2007. Murray says this will lead to lower prices.

"That means that by 2007, the vast majority of the European energy market will be liberalized and that could have very profound implications for competitiveness by simply leading to falling prices," Murray said.

Murray supports Bolkestein's contention that national governments deserve part -- if not most -- of the blame for the slow progress: "The problem is of course, as far as overall competitiveness is concerned, much of this has to be done at member-state level. While some of this [can be done] at Lisbon, it doesn't spell out to member states -- because it can't -- what they should be doing."

The report is to be presented to EU leaders at their 21 March summit in Greece and is expected to add to overall concern that economic gaps within the EU are widening, not shrinking. Southern countries like Spain, Italy, Portugal, and even France are seen at risk of falling behind northern countries like Denmark, Sweden, and Finland.

The Scandinavian countries -- which until relatively recently were criticized for burgeoning budget deficits and falling productivity --- increasingly are being hailed as model EU countries. They traditionally score at the top for technological innovation and Internet usage, and are now seen as EU leaders on competitiveness.

Murray says these countries have made great strides in pension reform and public spending. Denmark has liberalized its labor market, making it easier for employers to hire and fire workers: "What [the Scandinavian countries have] managed to do is to achieve a rebalance of their fabled welfare model, which 10 years ago, even five years ago, people felt was totally unsustainable and would have to be ripped apart. What they have an advantage in is they have social solidarity."

The commission report warns that unless more progress is achieved, the EU runs the risk of failing in its long-term goal of overtaking the U.S. as the world's most competitive economy.

Murray, for one, feels that this was never a serious goal in the first place. But he adds that rivalry with the U.S. does provide psychological benefits.

"No, I don't think [the goal of surpassing the U.S.] was ever really achievable. It's an aspiration. It's a nice little political phrase to hang out. What one shouldn't do -- as has been suggested by a couple of politicians -- is junk it now, because it's a disciplining goal. I don't think you should junk it even if I don't think they'll ever make it," he said.

Murray says the point wasn't ever to surpass the U.S., but merely to try to close a gap that had been growing for more than a decade.