1. E UROPEAN V IEW Volume 1 - Spring 2005
EUROPE’S ECONOMY AND THE CHALLENGE OF GROWTH
Wilfried Martens Editorial • Antonio López-Istúriz Preface •
José Manuel Durão Barroso Working Together for Europe’s
Future: A New Start for the Lisbon Strategy • Angela Merkel
Tapping Germany’s Potential for a Prosperous Europe •
José María Aznar Europe’s Challenge for Growth: The Path to
Follow • Jacques Barrot Mobility - a Key Element for Growth
and Competitiveness • Joe Borg Relaunching the Lisbon
Strategy - a Contribution from Fisheries and Maritime Affairs? •
Stavros Dimas Creating Growth and Jobs - a Role for Environment
and Sustainable Development? • Ján Figel' Education and Training
– Are We on Target for 2010? • Viviane Reding Towards the
Knowledge-based Economy: Information Society • Andris Piebalgs
The Lisbon Strategy and Energy: Making the Connection
• Ivan Mikloš Commentary: Europe and the Need for Reforms •
Alexander Radwan Lisbon - the Scapegoat: How France and
Germany Bailed Out from the Stability Pact • John Bruton The
Challenge of Lisbon for the European People’s Party • Carl Bildt
Accelerating Globalisation - Is Europe Destined for Decline? •
Alexander Stubb Efficient Execution of the Lisbon Strategy:
The Balance Between the Community and the Open Method of
Coordination • Mário David Building Global Growth - Relations
Between the European Union and Mercosul • Erhard Busek
The Future of Economic Reconstruction, Development and
Cooperation in South Eastern Europe • Peter Jungen Entrepreneurs
in Europe: A Vision of Prosperity • Bartho Pronk The Lisbon Process
- Impossible Dream?
A Journal of the Forum of European Studies

2. EUROPEAN VIEW
European View is a Journal of the Forum of European Studies, published by the European People’s
Party. European View is a biannual publication that tackles the entire spectrum of Europe’s political,
economic, social and cultural developments. European View is an open forum for academics,
experts and decision-makers across Europe to debate and exchange views and ideas.
EDITORIAL BOARD
Chairman:
Wilfried Martens, President of the European People’s Party, former Prime Minister, Belgium
Carl Bildt, former Prime Minister, Sweden
Elmar Brok, Member of the European Parliament, Germany
John Bruton, Vice-President of the European People’s Party, Ireland
Mário David, Member of Parliament, Portugal
Vicente Martínez-Pujalte López, Member of Parliament, Spain
Loyola de Palacio, former Vice-President of the European Commission, Spain
Chris Patten, former Member of the European Commission, United Kingdom
Jan Petersen, Foreign Minister, Norway
Hans-Gert Poettering, Chairman of the EPP-ED Group in the European Parliament, Germany
Alexander Stubb, Member of the European Parliament, Finland
József Szájer, Vice-Chairman of the EPP-ED Group in the European Parliament, Hungary
Andrej Umek, former Minister for Science and Technology, Slovenia
Per Unckel, former Minister of Education and Science, Sweden
Yannis Valinakis, Deputy Foreign Minister, Greece
ADVISORY BOARD
Antonio López-Istúriz, Christian Kremer, Luc Vandeputte, Kostas Sasmatzoglou, Guy Volckaert,
Alexandros Sinka
EDITOR-IN-CHIEF
Tomi Huhtanen
Assistant Editors:
Ben Priestel, Mélanie Dursin
For editorial inquiries please contact:
European View
Editor-in-Chief
Rue d’Arlon 67
1040 Brussels
email:thuhtanen@epp-eu.org
Tel. +32 2 285 41 49
Fax. +32 2 285 41 41
Url: www.epp-eu.org/europeanview
The Forum of European Studies is a think-tank dedicated to Christian Democrat and like-minded
political values, which is engaged in open, comprehensive and analytical debate.
European View and its publishers assume no responsibility for facts or opinions expressed in this
publication. Articles are subject to editing and final approval by the Editorial Board.
This publication is partly funded by the European Parliament.
2
European View

3. CONTENTS
• Preface .............................................................................................................................................................................................................5
Antonio López-Istúriz
• Editorial ..........................................................................................................................................................................................................7
Wilfried Martens
• Working Together for Europe’s Future: A New Start for the Lisbon Strategy ...................................................9
José Manuel Durão Barroso
• Tapping Germany’s Potential for a Prosperous Europe .............................................................................................15
Angela Merkel
• Europe’s Challenge for Growth: The Path to Follow .....................................................................................................21
José María Aznar
• Mobility - a Key Element for Growth and Competitiveness ......................................................................................29
Jacques Barrot
• Relaunching the Lisbon Strategy - a Contribution from Fisheries and Maritime Affairs? .................35
Joe Borg
• Creating Growth and Jobs - a Role for Environment and Sustainable Development? .........................41
Stavros Dimas
• Education and Training – Are We on Target for 2010?............................................................................................45
Ján Figel'
• Towards the Knowledge-based Economy: Information Society ............................................................................53
Viviane Reding
• The Lisbon Strategy and Energy: Making the Connection .......................................................................................61
Andris Piebalgs
• Commentary: Europe and the Need for Reforms ............................................................................................................65
Ivan Mikloš
• Lisbon - the Scapegoat: How France and Germany Bailed Out from the Stability Pact.....................67
Alexander Radwan
• The Challenge of Lisbon for the European People’s Party .........................................................................................71
John Bruton
• Accelerating Globalisation - Is Europe Destined for Decline? ................................................................................79
Carl Bildt
• Efficient Execution of the Lisbon Strategy: The Balance Between the Community and
the Open Method of Coordination ...........................................................................................................................................83
Alexander Stubb
• Building Global Growth - Relations Between the European Union and Mercosul .................................91
Mário David
• The Future of Economic Reconstruction, Development and Cooperation
in South Eastern Europe ..................................................................................................................................................................95
Erhard Busek
• Entrepreneurs in Europe: A Vision of Prosperity .........................................................................................................103
Peter Jungen
• The Lisbon Process - Impossible Dream? ............................................................................................................................109
Bartho Pronk
3
Volume 1 - Spring 2005

5. Preface
By Antonio López-Istúriz
Dear Readers,
It is with great pleasure that I present to you In economics - the theme of the first edition of
the ‘European View’, the Journal of the Forum the European View - Europeans are increasingly
of European Studies, which will be published facing more of the same problems and the same
biannually from now on. challenges. Hence, in order to find the right
solutions, we need to find a common approach
The European View is a forum for dialogue with a common view, a European View, a
for European decision-makers and academics, shared vision that will coordinate our efforts for
which tackles issues relevant to contemporary the prosperity and well-being of Europe and its
European politics. The Journal is also an open citizens.
medium for people debating Christian Democrat
and like-minded values, ideas and solutions. Looking at the contents of the first edition of the
European View, I am convinced that this new
The concept of a shared European view was, just publication is bound to reinforce the dialogue for
a few decades ago, only a theoretical possibility common approaches in Europe and, ultimately,
argued by a few ‘romantic’ visionaries. help fulfill the vision of a united Europe.
Nevertheless, our political family has managed I would like to thank the Authors of this edition
to make this vision a reality. From the days of for their valuable contributions, as well as the
our founding fathers until today, we have finally Editors, Advisors, and the entire team for their
succeeded in creating a common identity for all commitment and ideas. Furthermore, for those
European citizens. who would like to join our efforts, I would like
to extend an open invitation for new concepts
Indeed, most Europeans share a common vision and ideas for future editions of the European
about the future of our continent and the world View.
in general. For many, this evolution is firmly
linked to the institutional development of the
European Union. Undoubtedly, the European Antonio López-Istúriz
Union embodies the shared identity of Europeans Secretary General of the European People’s
and, therefore, offers an alternative perspective Party, Member of the European Parliament.
in global affairs.
5
Volume 1 - Spring 2005

7. Editorial
By Wilfried Martens
There are many reasons to be optimistic about investments. Both enlargement and the euro
the European economy. 2004 was the best year were two pivotal structural changes that have
for global GDP growth in decades. Most parts increased competition in the European econo-
of the world recorded improved growth per- my and added to its productivity.
formance. The prospects for 2005 remain favo-
rable, although growth is likely to improve at a The changes brought about with the introduc-
slower, more sustainable, pace. Global trade has tion of the euro are continuing to bolster the Eu-
also recovered strongly since the downturn of ropean economy. They will, in due course, lead
2001 and, while it continues to be an important to quite dramatic improvements, but it will take
engine for growth, it is currently expanding at time. Europe has prevailed over many crucial
close to double the rate of GDP world growth1. challenges and, therefore, the potential exists
for a new, prosperous chapter in the European
Europe is slowly recovering and the foreseeable economy.
future looks brighter for European economies.
Nevertheless, we are obligated to openly ad- The fact that the Lisbon Strategy is at the center
mit that the European Union is lagging behind of agenda of the new Commission, led by Presi-
its competitors. In March 2000, the European dent José Manuel Durão Barroso, gives us new
Council concluded that a strategy was neces- confidence and new hope. The forming of the
sary to ensure that European economies would Lisbon Strategy Commissioners Group and the
continue to prosper. A major effort was needed launching of the ‘Growth and Jobs’ strategy,
by the EU, in order for the continent to perform were strong signs of the Commission’s renewed
in a rapidly changing global economy. commitment.
The Action and the Strategy were clearly set at There is no denying that the Lisbon Strategy was
the Lisbon Council. As a result, Europe made a partially based on wrong assumptions on the fu-
commitment to itself and its citizens; a commit- ture of economic growth. But limited economic
ment for prosperity and growth. Unfortunately, growth was, for the most part, just an excuse to
the failure of this commitment is well known sidetrack our actions. Now, our task is to con-
and is, therefore, thoroughly debated in this vince European societies that we cannot afford
publication. But nothing is lost yet; all the ele- any more failures or policy deviations. On the
ments of success are still there. other hand, failure of the Lisbon Process – and
the ‘Growth and Jobs’ Strategy - will cost us mil-
Europe, today, is the largest economy in the lions of jobs and vital economic growth.
world, together with the United States. It is the
largest trading partner in the global economy The ageing of our societies and the overall de-
and still one of the largest receivers of foreign mographic changes will create new realities
1
International Monetary Fund: Economic Summit, Stanford, California, February 11, 2005
7
Volume 1 - Spring 2005

8. for the European economies in years to come.
Globalisation, the emerging economic powers
of Asia and changes of employment distribution
on a global scale will constantly challenge us
and our capacity to find new solutions for the
safeguarding of European prosperity.
Leadership in the global economy is not only
about competitiveness but also about credibil-
ity. Abandoning the Lisbon Goals would only
undermine our global prestige.
Not surprisingly, European decision-makers to-
day agree on the need for radical reforms in
the economies of EU Member States. However,
structural changes are never easy and the posi-
tive results of reform never come quickly. Mean-
while, many different interests and concerns
have to be tackled and citizens reassured.
More importantly, we should intensify our ef-
forts but, not for the sake of the economy itself
-our main concern is the future and well-being
of Europeans. The European citizen deserves a
prosperous future in a modern society, with bet-
ter jobs in a world-class market.
This first edition of the European View, the
Journal of the Forum of European Studies, is
dedicated to the current challenges for growth
creation and economic development in Europe.
I would, therefore, like to take this opportunity
to warmly thank the Authors of this edition for
their analytical insights and visions and all those
who have worked tirelessly for the success of
the European View.
Wilfried Martens, former Prime Minister of Bel-
gium, is the President of the European People’s
Party and the Chairman of the Editorial Board
of the European View.
8
European View

9. José Manuel Durão Barroso
Working Together for Europe’s Future:
A New Start for the Lisbon Strategy
By José Manuel Durão Barroso
Over recent months the Progress has been made, but it has been nei-
European Council has ther fast nor far enough
presented two impor-
tant sets of proposals. Five years ago the European Union launched
In January in its pro- an ambitious agenda for reform. It has become
posed Strategic Priori- fashionable to argue that nothing has been
ties for the Union over the coming five years1, achieved over the intervening years. That, of
it launched the idea of a partnership for the re- course, is not the case.
newal of our continent; a partnership for pros-
perity, solidarity and security. First, progress has been made in strengthening
key parts of the internal market – telecoms and
Early in February, it started to put flesh on the energy markets are more open, a Single Euro-
bones of that partnership in presenting its new pean Sky is in the process of being established,
Strategy for Growth and Jobs in the European Europe’s trans-European transport networks
Union2. This represents a fresh start for the Lis- are advancing (with renewed support from the
bon agenda, launched in March 2000. European Investment Bank). In other areas of
the internal market, from public procurement to
The Commission’s starting point is the need to electronic commerce, the necessary legal frame-
restore dynamism to our economy and create work has been put in place. These reforms are
the conditions to boost employment. These are starting to deliver lower prices and new oppor-
concerns that matter to every citizen. These tunities for jobs and investment.
must be the solid foundations of a society built
on social justice, quality of life and opportunity Second, reforms are underway in most Member
for all. States, from a downward trend in income tax
levels to the development of active labour mar-
The challenge is to spark the renewed European ket policies to pension reforms and investment
growth that will allow the Union to reinforce its in childcare.
commitment to solidarity and sustainability.
Third, we have seen the arrival of the euro in
The Commission’s underlying conviction is one people’s pockets and our recent enlargement is
of realistic optimism; the Union possesses all the opening new markets, spreading prosperity and
ingredients to free Europe’s untapped potential. presenting fresh opportunities for investment.
The mid-term review of the Lisbon Strategy is
simply the moment to “turn up the heat”. At the same time it is clear that despite substan-
tial progress, not enough has been done. The
Europe has a lot to be proud of. It is peaceful, gap with our major competitors is both widen-
prosperous and diverse. Today it is the largest ing, if we look across the Atlantic and narrow-
economy in the world together with the United ing, as new Asian economies start to catch up.
States. It is the world’s largest trading partner Reforms at both the EU and national levels have
and one of the largest recipients of foreign in- neither gone fast nor far enough, with key pro-
vestments. It is also attractive; to countries want- posals – such as the patent or the creation of a
ing to join, to businesses wanting to invest, to single market for services – remaining on the
people wanting to work or visit. table of Parliament and the Council. Moreover,
1
STRATEGIC OBJECTIVES 2005 – 2009, Europe 2010: A Partnership for European Renewal Prosperity, Solidarity and Security,
COM(2005) 12, 26.1.2005
2
Working together for growth and jobs - A new start for the Lisbon Strategy, Communication to the Spring European Council,
COM (2005) 24, 2.2.2005
9
Volume 1 - Spring 2005

10. Working Together for Europe’s Future: A New Start for the Lisbon Strategy
some Member States have dragged their feet in of business investment. This is particularly
implementing rules of reforms already agreed true for the slower adaptation of infor-
upon. The result has been that people do not mation and communication technologies
yet feel “the Lisbon factor” in their daily lives. throughout the economy. This difference
is estimated to account for around half
The urgent need for change of the EU-US productivity growth gap.
Yet the case for change, in the face of global • Finally, enlargement is also creating a
competition and an ageing population is, if any- major challenge for social cohesion and
thing, even stronger today than it was in 2000 for the convergence of our economies.
when the Lisbon reforms were launched:
Nonetheless, this is not about facts and figures,
• Today Europe’s potential growth aver- this is about real lives. Already, far too many
ages only 2%. This is a decline of one people in Europe who are looking for a job
full percentage point in just one genera- cannot find one. There is widespread denial of
tion. During the same period, the United opportunity, particularly to women and young
States has increased its potential growth to people. Furthermore, we are, as of now, strug-
3.5%, and the dramatic rise of new econ- gling to pay for under-funded pensions and
omies like India and China continues. costly health care.
• Globalization. It is a crucial and inevi- To meet these challenges, we need to take ur-
table development that no government gent action. We must catch up for lost time.
can control because globalization is, to Only by pulling together and working along the
a large extent, shaped by technologi- same lines can we maximize EU’s potential.
cal progress, which fortunately cannot be
brought to a halt by individual governments. The refocused Lisbon Strategy must provide
growth and jobs
As a result of globalization, global com-
petitiveness has been increasing since While maintaining stability-oriented macro-eco-
2000. New global partners have emerged nomic policies, which have delivered low infla-
more rapidly (China in the industrial sec- tion and low interest rates, we need to modern-
tor, India in the services sector), while ize our economies to ensure that the European
the US and Japanese economies have Union can sustain and develop its unique model
recovered more quickly than Europe. of society.
• Our ageing population will have far reaching The Lisbon Strategy provides the right response
consequences, some of which are already to meet these challenges.
strongly felt on our labour markets, health
spending and pension systems; this car- • Foremost, it is Europe’s response for Eu-
ries with it the risk of weakening our social rope’s challenges. The Union does not wish
model. One consequence of ageing is that to import the American model, nor to de-
our population, particularly, our working regulate to compete with China and India.
age population is shrinking. Some estimates, The current pressures of competition should
suggest that the Italian population will by force us to see what is happening in the
2040 have fallen from 52 million in 1990 to world and adjust to realities, notably by re-
just 38 million. Change on this scale calls viewing and adapting our Social Model.
into question future growth and our abil-
ity to maintain high rates of employment. • The Lisbon Strategy quite rightly empha-
sizes the need for growth and employment
• Moreover, our growth potential has suf- through greater competitiveness. Those el-
fered because our productivity has not ements are vital if the EU wishes to be a
grown as rapidly as that of our competi- world leader and continue to progress.
tors; this has been compounded by a lack
10
European View

11. José Manuel Durão Barroso
• The Lisbon Strategy offers intelligent solu- • making Europe an attractive place to invest
tions and innovative action that can lead to and work,
growth and job creation. The proposed syn- • placing knowledge and innovation at the
ergies (for example, between education and heart of European growth, and
research, or between environment policies • shaping the policies that allow EU business-
and innovative industries) and the central es to create more and better jobs.
place given to knowledge, are the keys to
our development. It should be underlined A more attractive place to invest and work
that China, Brazil and Russia are consider-
If Europe is to prosper it needs to become a
ing strategies similar, in many points, to the
more attractive location for businesses of all
Lisbon Strategy.
sizes across the Union.
The Commission has set out a new, more focused
approach to reforms in order to get things done. This approach recognises the value of the EU’s
industrial base, as well as, the particular impor-
In setting out at the beginning of February the tance of Europe’s small and medium-sized busi-
contours of a revised Lisbon Strategy and by nesses (SMEs). They represent 99% of our busi-
placing the priority on growth and jobs, the nesses and two thirds of employment. There
Commission was responding to past criticisms are simply too many obstacles to becoming an
of Lisbon. This had been confirmed in the Re- entrepreneur or starting a business. The Union
port of the High Level Group3, chaired by the cannot afford to miss these opportunities.
former Dutch Prime Minister, Wim Kok, which
reported to the European Commission last No- This is why we continue to stress actions to
vember. make the Internal Market work better, partic-
ularly in the area of services and of financial
Criticisms ranged from the lack of delivery in markets. But responsibility lies primarily with
the field, to the use of the so-called “Lisbon” Member States to apply the rules approved by
method: there is a lack of commitment from the European Parliament and the Council. There
Member States to implement agreed changes, it must not be anymore “feet-dragging” in key
is too complex, there are too many goals, there areas of reform.
is no clear sense of direction, there is too much
emphasis on Brussels, the open method of co- Another area will be actions to ensure a fair
ordination or benchmarking is inherently weak, competitive environment and implementing the
etc... right approach for regulations at the national, as
well as, at the European level. Competition rules
However, making a realistic assessment does not will continue to be applied proactively, while
mean being pessimistic: quite the contrary ! in March the Commission will bring forward a
new initiative on better regulations. One of the
Europe has a long-established capability – 1992, elements of this initiative will be to ensure that
the euro, the recent Constitution - to roll up its the Commission draws on external technical ex-
sleeves and do better. The renewed Lisbon Stra- pertise to help design impact assessments for
tegy retains the main objectives and means of specific proposals.
delivery not out of idealism, but because these
goals are vital to preserve and develop a Euro- Finally, open markets at home must be matched
pean answer to the challenges facing the Un- by open and competitive markets abroad. Busi-
ion. nesses in the Union need to take full advantage
of global markets. This requires the support of
The renewed Lisbon Strategy injects a new public authorities, both through the bilateral re-
and stronger focus, aiming to deliver jobs and lations that the Commission negotiates on be-
growth by: half of the Union, and, in particular, through the
successful conclusion and implementation of
3
Facing the challenge, Report from the High Level Group chaired by Wim Kok, 3 November 2004
11
Volume 1 - Spring 2005

12. Working Together for Europe’s Future: A New Start for the Lisbon Strategy
the Doha Development Round, which includes innovation from biotechnology and the in-
a new package of global trade measures. formation society to promoting eco-innova-
tion; a new generation of technologies that
Knowledge and innovation can help address the current challenges of
society such as climate change, the search
Europe has some of the best minds and the for alternative energy sources and energy ef-
most innovative companies in the world. Eu- ficiency.
rope’s citizens only have to look at Airbus or
listen to their mobile phones to feel this in their More and better jobs
daily lives. Europeans can be proud of their in-
dustrial base and of the many millions of inno- Higher levels of employment are a key driver
vative small and medium-sized businesses that for sustained growth, but also a crucial element
are the backbone of our economy; small busi- in improving cohesion throughout the Union.
nesses that nevertheless need the opportunity A job is the best weapon against poverty. By
to grow. helping to create the conditions for higher rates
of employment the renewed Lisbon Strategy is
Member States also need to increase their sup- spreading prosperity and reducing the risks of
port to EU schools and universities. They are social exclusion.
an investment in the success of tomorrow, and
a guarantee of a more inclusive, fairer society • For this reason, the renewed Lisbon Stra-
today. tegy places emphasis on national reforms to
modernise labour and social policies.
The renewed Lisbon Strategy attempts to rein-
force the Union’s knowledge base to boost fu- Such reforms are also the first step to ad-
ture growth: dressing the EU demographic challenges.
The Commission will soon be launching a
• Member States must speed up efforts to broad debate on the impact of an ageing
meet the 3% research spending target. population with a Green Paper. Similarly, a
Green Paper on legal migration4 launched
• As a result of future reform on state aid rules, in January 2005 will help the Union develop
Member States and regional and local actors long-term solutions to filling gaps, particu-
should be able to use new ways of support- larly skills gaps, in its labour markets.
ing research and innovation, particularly by
the EU’s SMEs. One idea, for instance, could • Bolstering employment means equipping
be the creation of “Innovation Poles”, partly people throughout their lives with the skills
drawing on EU funding to bring together the they need to adapt to change and ensuring
Union’s best scientific and business minds. that the national tax and benefit systems
help people to enter the workforce and of-
• The EU universities should be a world ref-
fer the right incentives for them to remain
erence for high standards, but this requires
there.
better and more modern management within
a European Area of Education. The renewed
• But it is important to recognise that this is an
Strategy also proposes the setting up of a
area where primary responsibility for change
flagship “European Institute of Technology”.
lies with Member State authorities and the
It can build on the Union’s strong track
social partners. This will be reflected in the
record in technology, but also attract good
approach of the new Social Agenda for the
ideas and people from around the world.
Union, which was just presented.
• Also highlighted is the need to keep the
Union at the cutting edge of science and Of course, the social partners have a particu-
4
Green Paper on an EU approach to managing economic migration, COM(2004) 811 final, 11.1.2005
12
European View

13. José Manuel Durão Barroso
lar role to play in taking Lisbon forward in this by Member States only after broad consul-
area. The Union’s tradition of social dialogue, tation of stakeholders and their Parliaments.
backed up by appropriate action at the EU level, • Member States to identify a “Mr or Ms Lis-
has been an important factor for economic and bon” at the government level to drive this
social progress. process forward.
• Simpler reporting – in the future, there will
The social partners are well-placed at the Euro- be only one Lisbon report at the EU level
pean - but also at the national level - to help de- and only one report at the national level.
liver lasting growth and quality jobs. The Com-
mission has invited them to lead by example Finally, we need to reach beyond governments;
in identifying concrete actions at their Tripar- we need to convince the social partners, other
tite Summit ahead of the March 2005 European institutions, national parliaments, and citizens.
Council. Their support needs to be secured for our goals
of growth, job creation and reform. This means
Why will Lisbon deliver this time around? communicating regularly why Lisbon matters
and how it makes a difference. This is a shared
The key to success in this second phase of the responsibility between all the EU and national
Lisbon Strategy depends on people understand- institutions.
ing the message of urgency and by presenting
a more focused approach. Success will be criti- Ultimately, making a success of the Lisbon Strat-
cally linked to ensuring real ownership of the egy is crucial for the future of the Union, but
Lisbon Strategy at a national, regional and local also for our credibility.
level. Lisbon’s objectives must become part of
national political debate.
The Commission will, of course, play its role José Manuel Durão Barroso is the President of
as guide and facilitator, contributing to develop- the European Commission.
ments at the EU and national level. However,
the renewed Lisbon Strategy also proposes to
simplify Lisbon “governance” to make it clearer
who is responsible for doing what and to make
it easier for Heads of State, Governments and
the European Parliament to provide strategic
guidance on what needs to be done.
This is essential as nothing can be done un-
less we have greater political will and a strong-
er commitment from Member States, since so
much of the Lisbon Strategy depends on action
by them.
To help to build this ownership, the Commis-
sion has proposed:
• A more integrated approach to macro-eco-
nomic and employment policy co-ordina-
tion within an integrated Lisbon cycle.
• A clear role for the Commission, European
Council and Parliament.
• A Community Lisbon Action Programme
to focus the work that is needed, to be
complemented by National Lisbon Action
Programmes. These should be developed
13
Volume 1 - Spring 2005

15. Angela Merkel
Tapping Germany’s Potential
for a Prosperous Europe
By Angela Merkel
Germany is a country Quite a lot has to change in Germany, to enable
full of opportunities, the country with its economic and social system
but it must once again to survive in the future, in the tougher interna-
utilise them better. An tional competitive environment, and to make it
economically strong attractive for companies at home and abroad to
Germany is also good invest and produce in Germany. Reforms are
for Europe and for the implementation of the also required to enable Germany to tackle the
Lisbon Strategy, which is to be resurrected. most serious problem it’s currently facing: its ex-
Europe’s largest economy has to become again cessive level of unemployment.
what it used to be in days gone by: an engine of
growth for the entire continent. Unemployment is the gravest source of in-
justice in Germany
Where does Germany stand today?
Unemployment in Germany passed the 5 million
Germany’s economy is not growing enough. mark for the first time at the start of February
The economy grew by 114% in the first decade 2005, and in the meantime it has actually risen
following the establishment of the Federal Re- to 5.2 million. To this figure we must add many
public. The talk was of an economic miracle, more people who are undertaking retraining or
and not without reason, even though this mira- further education, or who no longer register as
cle had been achieved through people’s hard unemployed, because they see no chance of
work. Another 54% of growth was achieved in finding a job.
the next decade. Growth was still around 23%
in the eighties. A good 50% of the unemployed have been out
of work for more than 12 months. In Germany
Actual growth in the German economy in the only 18% of the unemployed find a new job
years between 1993 and 2003 came to 13.6% within six months. Comparatively, in Denmark
overall. In the same period, the other 14 EU for example, 60% of the unemployed return to
states were able to demonstrate actual growth the labour market within six months.
amounting to an average of 26.9% - almost
twice that of the German results! In addition to serving the purpose of securing
a person’s livelihood, work also makes a con-
The CDU has some clear ideas about how our siderable contribution to that person’s sense
country can be guided to more growth, and of identity and self-worth. For that reason, the
hence to more employment and prosperity for problem of unemployment is not an exclusively
its people. Just like the other successful econo- financial problem. For many people, produc-
mies in Europe, we must tap into our potential. tive work and contact with other people, is a
key part of their social life; unemployment, and
Italy, for example, has managed to create over particularly long-term unemployment, leads to
a million new jobs in the last three years; Fin- a loss of satisfaction with life, to a drop in self-
land takes first place in the PISA test; Ireland esteem and to a disheartening feeling of being
is recording economic growth of 5.2%; France excluded from society.
provides a nursery school place for every child;
Denmark has almost halved its unemployment; Nor, for that reason, can high unemployment
unemployment is below 5% in the Netherlands; be viewed as an exclusively fiscal problem. The
and Sweden has the highest level of research much larger economic cost factor lies in the
investment in Europe. waste of many people’s capacity for work. A so-
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Volume 1 - Spring 2005

16. Tapping Germany’s Potential for a Prosperous Europe
ciety that permits unemployment to any signifi- staff. In this area too, we are prepared to learn
cant extent is wasting knowledge and skills. The from the positive experiences of some of our
available potential for employment is, in part, European neighbours.
allowed to lie fallow. Experts estimate the cost
to the national economy of under-employment Germany needs a new start to achieve pros-
in the form of the loss of goods and services to perity for all
be 15% of GDP.
People, once again, need hope and prospects.
The CDU expressly rejects the assumption that Only a clear course, coupled with decisive ac-
unemployment is the result of not enough tion, will restore confidence. For that reason we
work. From caring for people, through to envi- must remember the core aims of stable econom-
ronmental protection, there are plenty of exam- ic policy:
ples of work that is useful and desirable, but is
not undertaken because there is no demand for • Rising personal income, growing employ-
workers at wages and levels of remuneration ment and stable national budgets require
that exceed the market value of the work done. annual growth of at least 2.5 to 3%.
This, in fact, is one of the essential reasons for • Full employment must, again, be defined as
underemployment in Germany. The above as- a realistic objective. Germany can achieve
sumption is also discredited by the fact that this target just as other national economies
around 17% of Gross Domestic Product is cur- can.
rently earned in the ‘shadow’ economy. As a • The CDU stands for a stable currency and
result of this, € 370 billion bypass the fiscal au- hence, adherence to the Maastricht criteria,
thorities untaxed every year. because this represents the most important
factor for safeguarding the purchasing pow-
One further reason for this development is the er of all citizens.
extension of the welfare state with a system of • The foreign trade balance is an important
social security payments, in which false stimuli commodity, which can only be maintained
and false guidance are inherent in the system. in the long term if our national economy as
This has turned the welfare state into a competi- a whole becomes more competitive.
tor of private industry, acting in some cases as
an alternative to employment. In some circum- The CDU orients its actions on the Christian
stances, the wages offered in the employment view of the individual, which gives it an ethi-
market may not be an adequate incentive to cal basis for responsible politics. We also place
work, when compared with the social security great importance on the basic values of liberty,
payments, particularly if these are supplement- solidarity and justice, as well as the principle of
ed by illicit work. subsidiarity. Our view of humanity obliges us
to adhere to the model of a society based on
In the course of the expansion of the welfare employment. If one is to take responsibility for
state, numerous provisions for the protection of the conduct of one's own life, one must be em-
employees were established in law. Yet, as a re- powered to do so, by means of an income from
sult of these regulations, companies will arrange employment, which opens up the opportunity
for overtime hours to cover a rush of orders, to do just that.
rather than take on new employees. Thus, many
regulations that were originally created for the We are sure that with a joint effort we can re-
protection of employees have now developed turn our country to the elite group of the most
unwanted side effects, in that they frequently successful nations in Europe within ten years.
prevent more employment. We will strengthen the forces of growth and
so create significantly more employment once
Germany needs a structural reform of its labour again. In this way, we will secure prosperity for
market, leading to a fundamental simplification everyone.
and debureaucratisation of employment law
and creating more flexibility in work schedules This all depends, however, on the rigorous im-
in order to facilitate the employment of new plementation of some necessary reforms. Only
16
European View

17. Angela Merkel
then will we be able to continue to guaran- who returns to employment becomes a taxpayer
tee social security in the future. The profound and social security contributor, thus contributing
changes to the economy and society that we to the financial recovery of the community.
are experiencing at the start of the 21st. century
demand courage for change and renewal. Ways must be found to reduce labour costs, so
that employment growth can take off again. As
Firstly, we are rapidly developing into a knowl- long as we hold one of the top positions world-
edge-based society, demanding new solutions wide in terms of labour costs, we will continue
from politicians. The volume of knowledge to see a loss of jobs in our country. The hope of
available worldwide is growing explosively, and more employment can only be fulfilled if there
at the same time new knowledge is going out is a clampdown on labour costs.
of date ever more quickly. The significance of
knowledge as a competitive factor for compa- For this reason we need a social reform policy
nies and national economies, and as a very per- that distances itself from earnings-related contri-
sonal resource for the future of each individual, butions, and places the financing of social secu-
can by no means be underestimated. We must rity systems on a new basis, such as the reform
help to create the right conditions to ensure that of the health service provided by the solidarity-
everyone finds a place in society with his or based health premium model of the CDU and
her talents and abilities. Our success depends CSU. We need longer and more flexible work-
crucially on making sure that all talents – those ing hours, because this will also lead to a fall in
of the craftsman, the scientist, the engineer, etc. labour costs. We need major tax reform, which
– are called upon and encouraged. will make tax rates simpler, lower and fairer.
The success of Germany depends crucially on
The second major change is the fact that, in light the replacement of the existing complicated tax
of globalisation, Germany is today involved in system, with its excessive number of special ar-
an international competitive environment of rangements and tax structure options, by tax
an entirely new nature, from which our coun- laws that are based on simplicity and transpar-
try cannot disengage itself. As a country that is ency and provide incentives to work.
short of raw materials, Germany depends on its
ability to assert itself in global trade by means of Germany is a highly developed country, which
the development and marketing of state-of-the- is particularly dependent on the development of
art products and services. The only raw material new products. This will require a significantly
that we have in good measure is the diligence greater effort to raise the level of education and
and intelligence of our people. We must exploit training in our country. In order to be competi-
this potential to the fullest. tive internationally, our focus will have to be on
sectors of the economy with high added value.
Demographic trends represent a third signifi- Our future lies in innovation, research and de-
cant change. Whereas the global population is velopment of new processes and better products
growing, in Europe, and above all in Germany, and services that are relevant to customers.
a massive drop in population figures is antici-
pated. This will have a considerable impact on We must push open the door to the knowledge-
the ability of the social security system to cope, based society, because economic success will in
on the number of people of working age and future be even more dependent on high-quality
the structures of the employment market, as research and good education and training sys-
well as on the need for additional homes and tems. We must do more than ever before, to
care institutions for the elderly. ensure that key technologies are not just devel-
oped in our country but, also converted here
The many different changes in the world are into profitable products. We must also see to it
forcing us to question and - where necessary that we become flexible enough in our employ-
– to rearrange the priorities of our political ac- ment structures that we can survive with the
tions. Our welfare state will only endure in the entirety of our potential in worldwide competi-
long term if we can overcome the problem of tion.
underemployment. Every recipient of state aid
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Volume 1 - Spring 2005

18. Tapping Germany’s Potential for a Prosperous Europe
Nothing threatens our prosperity and our social modern products and processes and the most
security more so than inertia and resignation. effective production methods, our country has
There is no alternative but to embark on sup- indeed numerous options for action and pros-
porting the modern, knowledge-based society. pects for success. The CDU is convinced that
However, this support goes way beyond what there can be positive developments for people
is technologically feasible. We Christian Demo- in Germany, even in the age of globalisation.
crats place the individual at the centre of our
politics. Our range of policies is directed at the Germany can win in global competition if it is
strong, just as much as, at those who are too prepared to subject outdated regulations on in-
weak to help themselves. Solidarity remains a dustry, commerce and employment to inspec-
core element of our politics. tion. The telecommunications industry has in the
past undergone an enormous structural change,
For this reason, economic and social policy are, and in doing so, it has made a significant contri-
for us, linked in an indissoluble combination. bution to the creation of new jobs. We have to
An economic policy without social justice will recognise where our business structures are no
not achieve social peace and will undoubtedly longer relevant, under changed circumstances,
lead to losses to the national economy. On the and where new regulations are required.
other hand, a social policy that does not take
into account economic profitability, robs itself In comparable European countries, it is possible
from its source of income. The social market to see that there are effective strategies to coun-
economy combines economic performance and ter unemployment. A report by the EU Commis-
social responsibility to create an orderly politi- sion describes, for example, the labour market
cal whole. in Denmark as the “most flexible and effective
in Europe”. Denmark underwent a comprehen-
The social market economy has formed the core sive reform of the tools of labour market policy.
competence of the CDU for over 50 years. All Business taxes have been cut. This removed a
the great social legislation in Germany has been burden from companies and set the economy
developed and legislated in Parliament by the in motion. Additional dynamism resulted from
CDU. Thanks to the social market economy, our moderate wage settlements. They have made
country has an impressive economic and social the creation of new jobs affordable once more.
order. The CDU intends to reinvigorate this or- At the same time, protection against wrongful
der under changed circumstances. dismissal has been cut back and as a counter-
move, they pushed up redundancy payments.
What used to be a common assumption: 'If the
company is doing well, the workers are doing An added factor is that additional wage costs are
well too,' is frequently no longer valid today. comparatively low in Denmark, as the system of
People feel insecure. We are faced with a new social security is financed to a greater degree,
social question: How can we succeed in secur- out of taxes. Furthermore, the rule that the un-
ing employment and welfare under globalised employed must accept a job within one year,
conditions? provided they are offered one, has proved to
be particularly effective. Denmark managed to
We are convinced that solid answers can only halve its unemployment rate from around 10%
be found if we succeed in permanently combin- in 1993 to 5.6% in 2003. In Ireland, where they
ing market and humanity in a new Social Market have comprehensively restructured the labour
Economy. Our vision is one of the ‘We’ society, market in recent years, the unemployment rate
which leaves no one behind and looks to the fell from 15.4% in 1993 to just 4.6% in 2003.
future together, with self-confidence and curi-
osity. Projections have shown that labour cost reduc-
tions, wage restraints and longer working hours,
We can win the future – we have options for would lead to significant successes in Germany,
action! as well. The effect of this would be to largely
eliminate unemployment in our country, with-
Germany must remember its strengths and ex- out any resulting drop in the income of work-
pand on them. In the competition for the most ers.
18
European View

19. Angela Merkel
Tapping Potential
Germany is standing at crossroads. The chal-
lenge is to set a new course for the years ahead.
At its party conference in Leipzig in 2003, the
CDU passed plans for the future of the social
security system and for the restructuring of in-
come tax law in Germany. The party confer-
ence in Düsseldorf in 2004 passed a plan for
economic upturn and for more jobs. The CDU,
thus, has a comprehensive programme that puts
it in a position to succeed in taking over po-
litical responsibility in the Federal Republic by
2006 at the latest.
Economic growth cannot be ordained by gov-
ernment. But governments have the opportunity
and the duty to act in those situations where
growth is fettered and obstructed by outdated
regulations, which were once useful to protect
employees from arbitrary actions and exploita-
tion, but which today impede new attitudes.
Politicians have the opportunity and the duty to
put people in a position, by means of a good
education and training, where they can each
contribute their talents and abilities to this soci-
ety, for the benefit of all.
Politicians have the opportunity and the duty to
remove entirely any decrepit, bureaucratic regu-
lations, or to replace them with flexible regula-
tions.
Germany has every opportunity to survive in
global competition, provided that the basic con-
ditions are set correctly. Our programme shows
the way to achieve this aim.
Angela Merkel is the President of the CDU of
Germany.
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Volume 1 - Spring 2005

21. José María Aznar
Europe’s Challenge for Growth: The Path to Follow
By José María Aznar
In April 1999, British in every year but one; in contrast, in that same
Prime Minister Tony period the EU economy grew by less than 3% in
Blair and I issued a joint every year but one.
declaration at Chequers
on economic reform Since the early 1980s, the process of rapid con-
and employment. We vergence that had begun in the post-war period
proposed that the future Portuguese Presidency had come to a halt. European GDP per capita
should hold a meeting of heads of state and was stuck at around 70% of the US figure. And
government to reformulate the European Un- in the second half of the 1990s this process ap-
ion’s economic strategy. peared to have worsened: during the period
from 1995 to 2001, the US accounted for 60% of
total growth in the world economy, whereas the
The Portuguese Prime Minister, António Gu-
EU, with an economy of a roughly similar size,
terres, received the idea favourably and began
contributed barely 10%.
working on it with enthusiasm and intelligence.
In March 2000, the European Council approved
The US had been capable of achieving full em-
a broad programme of economic reforms in
ployment. Yet in Europe, millions were on the
Europe, the “Lisbon Agenda”, about which so
dole queues. For those of us who believed that
much has since been written.
the best social policy is employment, the ex-
istence of millions of unemployed and, more
The agenda was certainly ambitious in its aim:
worryingly, the apparently structural nature of
to make the European Union, over the first dec-
unemployment, suggested that there was clear
ade of the twenty-first century, into the most
room for improvement to the so-called “Euro-
competitive and dynamic economy in the world,
pean social model”, for all its undeniably posi-
capable of sustained growth, job creation and
tive features.
enhanced social cohesion.
It was fundamentally important then, to capital-
It was a goal born out of a time of optimism. In
ise on that moment of optimism to propose a
March 2000, let us not forget, the general percep-
structural reform of the European economic sys-
tion of the potential of the European economy
tem. Europe needed to ensure greater growth,
was favourable. We had successfully completed
without which it would quite simply be impos-
a process of nominal convergence, culminat-
sible to meet the high social and environmental
ing in May 1998 with the decision to launch the
demands of European citizens.
third phase of Economic and Monetary Union,
and the introduction of the euro lay ahead. The
These, then, were the ambitions of Lisbon.
problems of fiscal consolidation seemed to be
a thing of the past; even the leading economic
Time to take stock
organisations predicted that Europe would be
the area of greatest growth in the two following
Five years have passed. We are now halfway
years, 2001 and 2002.
through the decade, and as decided in 1999, the
time has come to make a “halfway review” of
For many people, however, this climate of hope
the Lisbon agenda.
did not dissipate a serious concern with the
underlying problems of the European econo-
We must be honest with ourselves. Europe has
my—the problems that the initiative I had the
been incapable of keeping up with the United
honour to co-propose sought to address. During
States as a driving force in the world economy.
the 1990s, the US economy grew by over 3%
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Volume 1 - Spring 2005

22. Europe’s Challenge for Growth: The Path to Follow
Generally speaking, the European economy has Worse still, there may be some who simply re-
gone through a period of great weakness. With sign themselves to this situation; or even those
millions on the dole queues, “social Europe” has who turn it into theory. Some may say that this
feet of clay. behaviour is part of an alternative “European
model”, in which economic dynamism is un-
True, there have been certain notable excep- necessary, since our collective preferences are
tions. Countries such as Ireland have given an different.
example of how to achieve high growth rates
and prosperity. Many of us do not agree. On the contrary, we
believe that structural reforms are unavoid-
In seeking to explain the poor European results, able, however difficult they may be, and that
one might resort to the excuse of adverse eco- we should not relinquish the pole position the
nomic events. The financial crisis and the sharp European economy deserves. And the inescap-
rise in oil prices in 2000, 2003 and 2004; the ability of reform derives precisely from the fact
accounting and financial scandals; the effects of that without it the “European social model” will
the terrorists attack of September 11, 2001; and end up falling apart. It will be incapable of with-
the definitive entry into the global economy of standing phenomena that are inevitably bound
heavyweight competitors such as China and In- to happen, such as the retirement of the “baby
dia, to mention only the two most important. boom” generations, putting extraordinary pres-
sure on the pension and health systems. Pre-
But these economic incidents have not only af- serving the social system, which has taken so
fected the EU; indeed, many of them had a more much common effort to build requires sustained
direct impact on the American economy, which, growth, full employment and reform.
nonetheless, has reacted with resilience.
I do not, however, agree with those who view
Since 2000 the European Union has failed to Lisbon as a complete failure. This seems to me
achieve its forecast growth rate of 3%. It has to be an excessively harsh judgement. In simple
scarcely managed to grow at over 1%, in con- terms, we have made progress, but, not much
trast to the much faster rate of the United States. and not enough.
What is even more worrying is that this differ-
ential is forecast to remain unchanged in the I would like to cite just a few examples, starting
years to come. from the text approved at the European Council
in Barcelona in March 2002. The meeting set out
At this point, in undertaking a review of the Lis- a specific calendar of targets. Today, more than
bon agenda, we need to reflect on the reasons two years on:
why the European economy has been growing
at a slower rate for nearly twenty years, both • it has been agreed to completely open up
during periods of expansion and moments of the electricity and gas markets, which will
greatest weakness. And, naturally, we need to bring direct benefits to consumers and com-
ask why Europe appears incapable of creating panies. It is worth remembering that this
the same jobs as the American economy. would have been unthinkable at the time of
the Lisbon Council;
Some may consider it to be inevitable, as if it
were somehow a natural phenomenon. Some • the essential part of the financial services ac-
may think that it doesn’t really matter whether tion plan has been completed, which will
Europe’s growth rate continues to lag behind make it possible to provide our common
America’s, not to mention China’s or India’s; currency with an integrated financial mar-
that it’s not worth the effort required to approve ket and increase competition; moreover, the
the necessary reforms; that it’s not so serious Lamfalussy process is yielding good results,
if Europe continues to be less competitive be- with notable reductions in the time taken to
cause of high taxes, rigid employment markets approve the necessary directives;
and the fragmentation of its national markets.
22
European View

23. José María Aznar
• a new regulatory framework has been • The second reason is related to the method
adopted for telecommunications; of decision. Lisbon saw the establishment of
the “open coordination” method, an instru-
• the “single sky” package has been com- ment which seemed promising for areas in
pleted, allowing greater efficiency, capac- which there are no clear community powers
ity, transparency and safety in air travel and and where the classic community method
benefiting millions of users; was not applicable.
• progress has been made towards the lib- Five years down the line, experience has
eralisation of rail transport, a step which is shown that this method has been useful in
highly relevant for encouraging sustainable many regards, but its limitations have also
development. become clear. Indeed, throughout this pe-
riod, it is difficult to identify a single eco-
It is true that it has been necessary to arrive nomic reform of any importance that has
at rather unambitious - or frankly unsatisfactory been adopted using “open coordination”.
- compromises on certain specific issues. I too
would have liked to take many of them much On the contrary, I think it is significant that
further. Yet it is not true that the process of re- the most important advances of Lisbon
forms has come to a complete halt. - some examples of which I have already
cited - have all been based on the classic
What we do have to ask ourselves is why, de- community approach, with both the Com-
spite these objective advances, the general pub- mission and the European Parliament in a
lic has been left with the impression that, as a position of political leadership.
whole, the Lisbon Strategy is not working.
This coincides with the experience of the
The fact is that European citizens do not feel 1980s. At that time, the reaction to what
that the Lisbon Strategy has benefited them. was termed “eurosclerosis” (a phenomenon
This should be a central consideration in the which has sadly remained with us for more
review now beginning. than twenty years) was the “single market”
programme - essentially a raft of directives
In my opinion, there are three fundamental rea- intended to achieve integration and open up
sons for this situation: national markets. The programme was un-
questionably successful.
• First, from the outset, the central message
of European strategy (which, it should be This does not mean that I am an uncondi-
remembered, involved economic reform tional supporter of the legislative approach.
and employment) was diluted by being ex- I am well aware that on many occasions
tended to other issues; issues which were what is needed is not more regulation, but
no doubt valuable, but which had nothing better regulation; on other occasions, what
to do with that strategy. As a result, as the is needed is to deregulate, eliminating su-
years go by, the term “Lisbon” has ended up perfluous rules.
being a cover-all, used on any occasion by
all kinds of people. In the political debate - What I do believe, however, is that in areas
and we have all experienced this - the word in which the barriers are clearly identified,
is used in arguments both for and against. the legislative approach is a very powerful
instrument for opening up markets, and we
This confusion has undoubtedly been capi- should not be afraid to use it. And I also de-
talised on - someone might even say caused fend the central role of the European Com-
- by those who are least in favour of the mission in initiating the reforms and ensur-
reforms. In my opinion, this is one of the ing that they are applied in their entirety.
fundamental reasons why it has been un-
fairly discredited in the press and among the • The third reason lies in political will. I know
political class itself. very well, from my own experience, that
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Volume 1 - Spring 2005

24. Europe’s Challenge for Growth: The Path to Follow
economic and social reforms have a political areas (with the exception of Japan), while our
cost. Public interest requires us to undertake generous public health and pensions systems
them, even if there is a political price to be offer unquestionably broad coverage. We are all
paid. The lack of political will is decisive to aware of the pressures on spending that this will
understanding the limited progress made by cause in the not too distant future.
the Lisbon agenda.
In this context, I do not think that anyone can
For me, the lack of priorities and the dilution argue that it is wise to maintain a permanent
of the initial purpose; an unsuitable method of deficit. Ultimately, all deficits have to be paid
governance, which has reduced the visibility of for, either through higher taxes, higher interest
the achievements made; and a lack of political rates or by passing them on to future genera-
will are the three main reasons why the Lisbon tions. This is why I consider the central rule of
agenda did not attain the scope it sought. the Stability Pact to be so sensible when it says
that, except in conditions of grave economic re-
A framework of stability cession, government budgets must be “close to
balance or in surplus”.
The greatest success of this period has been the
introduction of the euro. I would go so far as There are many people who, while not ques-
to say that the euro is perhaps the greatest ad- tioning this rule, think that the pact needs to be
vance in the European Union’s 50-year history. more flexible in applying it. This might seem
And to use Schuman’s term, it is the greatest reasonable, but it ignores the fact that the Pact,
“concrete realization” of the European Union in as it was initially approved, already contained
the last two decades, alongside the enlargement broad elements of flexibility.
to 25 members.
There are always features of any rule that can be
In my opinion, the euro constitutes a categorical improved upon (such as ensuring greater fiscal
success, inter alia because it founded a mon- consolidation in the upper phases of the cycle),
etary union among 11 (and not 8) members, but I am afraid this is not the heart of the issue.
and above all, because this union has two solid We should not allow ourselves to be deceived
foundations: the independence of the Europe- as to the nature of this debate.
an Central Bank and the Stability and Growth
Pact. What is at stake is whether we want solid and
credible fiscal rules for our monetary union,
The slow growth rate of the European economy and, above all, whether we are prepared to as-
over the last twenty years is due to structural sume the obligations these involve; or whether,
causes, not inappropriate macroeconomic poli- on the contrary, Europe wants to play at “cheat-
cies. There have always been those who defend ing at solitaire” and moreover, to send out the
monetary or fiscal expansion as a way of solv- message that European commitments and insti-
ing lack of growth; they were around in 2000 tutions are not credible.
and they are still around today. Now those same
voices are defending the need to dispense with For this reason, although it is not a particularly
the Stability and Growth Pact, or at least to alter popular view at this time, I would like to state
it in such a way as to make it meaningless. I my defence of the current version of the Stabil-
do not agree; I think we need to consider seri- ity and Growth Pact. Despite all that has been
ously whether this is the right direction for the written, nobody has come up with convincing
future of the monetary union and the European reasons for believing that the current problems
economy. have arisen out of defects in the pact itself. Rath-
er, they appear to have derived from the lack of
The European Union continues to have the a real will to implement it.
highest rate of public spending as a percentage
of GDP of all the major economic areas of the I therefore think it would be a mistake to relax
world. Furthermore, the aging of our popula- its central features. Before doing so, we would
tion is more worrying than in other developed have to be quite sure that we could provide a
24
European View

25. José María Aznar
better alternative, one that is compatible with main political families in the European Parlia-
the treaty and that does not lower our present ment; not out of ideological conviction or party
and future demands. Quite frankly, such an al- opportunism, but as the only way of ensuring
ternative does not exist at this moment in time. the sustained job creation the European Union
I, therefore, think we should reflect carefully be- needs. The experience of the spring Councils
fore taking any decision that might prove to be since 2000 are proof of this.
the wrong one, in a few years time.
I believe the recommendations for the future
Looking forward contained in the Commission’s report are good
ones. Indeed, there are three features that I think
Europe cannot resign itself. It cannot content are particularly important and which might set
itself with remaining as the area in the OECD the structure of the new working agenda for this
with the lowest growth rates for another ten or second phase:
fifteen years. Coupled with the disturbing de-
mographic trends, this would place us in a po- • Firstly, a large-scale raft of legislative reforms
sition of increasing irrelevance on the interna- is needed. As I have already said, the legisla-
tional stage, even if we continued to be a giant tive approach is not always the best one, but
in terms of our economic size. This is not an in certain areas I think it is essential. Natu-
agreeable panorama, but, unfortunately, if we rally, this will only be possible if there is the
do nothing to prevent it, it is a relatively likely political will to undertake such reforms.
prospect.
I would like to mention just a few of these.
In my opinion, the two central arguments that
led to the Lisbon agenda are still valid: the eco- 1) The services sector accounts for 70% of a
nomic need and the political will. Five years lat- developed economy, but nonetheless there
er, the debate on economic reforms in Europe are still too many barriers to the single mar-
needs a fresh impetus. ket in this area. Financial services, and in
particular, the retail sector strike me as being
The President of the European Commission, a clear example.
José Manuel Durão Barroso, issued an excellent 2) We also need a new reinforcement of the
report on the second stage of the Lisbon agen- policy on competition, and in particular a
da. I feel that his experience and his capacity review of state aid. I am one of those peo-
make him the right person to put forward this ple who think that the EU needs to have a
new impetus. strong industrial sector, but I do not believe
public subsidies are the right way of achiev-
But in addition to the courage of his ideas, he ing this goal.
has offered us a very relevant and clear-sighted 3) Labour reforms are quite simply essential.
analysis of everything that has been done since The rigidity of many labour markets is the
Lisbon, its strengths and its weaknesses, as well chief obstacle to employment. Flexibility in
as its evident problems of governance. this field inevitably results in more and bet-
ter jobs.
Someone has criticised his proposals for having 4) I think a commitment to improving the qual-
a certain ideological bias. I think this is deeply ity of educational systems at all levels is also
unfair. essential. The value of hard work deserves
to be extolled. Having long ago attained the
Firstly, because his contribution arose out of a target of universality, the priority of educa-
widely shared reflection, as the “Kok Report” - tion must now be quality.
from which it takes its main features - shows. 5) The reinforcement of policies on research
and development is also essential. The com-
Secondly, because the commitment to struc- mitment cannot and must not simply be to
tural reforms in the EU has always superseded spend more. Above all, it must be to spend
conventional barriers. The promoters of the Lis- better; prioritising excellence, specialisation
bon Strategy include representatives of all the and reinforcement of the science/technol-
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26. Europe’s Challenge for Growth: The Path to Follow
ogy/business system. EU - and even more intensely the countries
6) Encouraging innovation must be a priority. in the euro zone - were also to make an
The innovation deficit takes its toll in terms in-depth examination of each economy at
of productivity, competitiveness and em- certain intervals, in greater detail than the
ployment. Europe needs more innovation simple annual review contained in the an-
in its companies. Tax incentives can be a nual reports. This idea might pose problems
good way of achieving this, but they must of different kinds, and will certainly require
be complemented by cultural changes in greater resources; but we have to be pre-
business. pared to accept change if we really want to
7) In the same way, a balance must be struck give a strong boost to reform.
between legitimate environmental and health
demands and the demands of competitive- • Finally, we should not forget that the EU is
ness: proposals such as REACH should be fully integrated into the global economy.
assessed from this perspective. EU-25 is the largest trading power in the
world, and we also lead the way in flows of
A new set of laws would increase the im- direct investment. We cannot have a strategy
pact and visibility of the reform process. Evi- of internal economic reform without, at the
dently, in this terrain, the leadership of the same time, promoting an external opening-
Commission and the European Parliament is up. I am pleased to see that the Barroso re-
irreplaceable. port highlights this point.
• Secondly, we must find a better system European efforts in favour of the new Doha
for promoting reforms in areas in which Development Agenda (which the EU was
the member states have exclusive powers. so involved in launching) will be of fun-
I think the idea of demanding a single an- damental importance. But it appears to me
nual “Lisbon action plan” from each member that these are, and must be, fully compatible
state is a very good one, cutting through as with a particular strengthening of Trans-
it does the current tangle of different kinds Atlantic economic links.
of “progress reports”.
Today, the Atlantic unites the world's two
Although these are exclusive national pow- great economic powers. The United States
ers, we all can and must offer our own opin- and the EU are now the most developed
ions. Sometimes I think that we are not fully and most technologically advanced eco-
aware of the true meaning of the term “mat- nomic areas in the world. The commercial
ter of common concern” in the Treaty. and financial links between the EU and the
United States are deeper and more intense
The Commission should also work intensive- than ever. However, barriers remain in the
ly to provide stimuli and recommendations Trans-Atlantic economy, which result in lost
in this field through these “Action Plans”. opportunities for growth and employment
Each member state could decide whether or on either side of the Atlantic. The remaining
not to accept its recommendations (perhaps barriers are no longer the traditional ones,
using the “Obey or Explain” method), and but rather obstacles of a regulatory nature.
in all cases, it should involve its respective This is evident in areas such as financial
national parliament very closely in this dis- services, competition, air travel and IT serv-
cussion. The result of this exercise would ices. We must do something to tear down
subsequently be subjected to a detailed peer those barriers. It would not only be good for
review. business on either side of the Atlantic, but
also, and perhaps to an even greater extent,
The OECD and the IMF carry out a regular it would be good for developing countries.
in-depth examination of each economy. This For this reason I have proposed the creation
is a good idea; and from my own experience of a Trans-Atlantic Economic Area, a Trans-
I know the importance of this examination Atlantic Area of Prosperity, which I believe
for formulating national economic policies. would not only be compatible with multilat-
I think it would not be a bad idea if the eral order, but would be an essential com-
26
European View

27. José María Aznar
plement for more open international trade.
Conclusion
Five years ago, in Lisbon, we reached what I
have sometimes termed a “new consensus”:
Economic dynamism and social cohesion are
goals that can be attained simultaneously; they
are not opposing concepts. To be sustainable,
the “European model” requires reforms and
economic growth.
We have made some progress over this peri-
od. It would be unfair to argue otherwise. But
we have also made mistakes: on occasions, we
have not known how to focus on the right pri-
orities and, essentially, there has been a lack of
political will.
Now the time has come for a new impetus,
which will bring together the best lessons we
have learnt in this time, and correct our course,
wherever necessary.
In his recent address to the European Parlia-
ment, Commission President Barroso argued
that Lisbon: “[...] must work, because it repre-
sents the right diagnosis and the right cure, and
there is no credible alternative”. These are ideas
that many of us share, and they indicate that the
process of economic reform is in good hands.
José María Aznar is former Prime Minister
of Spain, President of Centrist Democrat
International (CDI) and President of the
FAES Foundation.
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Volume 1 - Spring 2005