The European Union needs to raise its economic growth potential – on that, at least, the bloc’s 27 member-states and the European Commission agree. Otherwise Europe risks a speedy descent into relative economic decline, and its cherished “social model” – combining a liberal market economy with cradle-to-grave public services – will be increasingly unaffordable. Will the Commission’s latest proposals, published last week under the title “Europe 2020: A European strategy for smart, sustainable and inclusive growth”, do the trick?
As with the Lisbon Agenda, a reform programme for the 2000-2010 period which it replaces, “Europe 2020″ sets a number of worthy objectives. There are five headline targets: a) raising the employment rate of people aged 20 to 64 to 75 per cent from 69 per cent today; b) increasing investment in research and development to 3 per cent of gross domestic product; c) cutting greenhouse gas emissions by 20 per cent from 1990 levels; d) reducing the share of early school leavers to 10 per cent from today’s 15 per cent, and raising the share of people aged 30 to 34 who have completed tertiary education to 40 per cent from 31 per cent; e) reducing the number of Europeans living below national poverty lines by 25 per cent, equivalent to 20m people.
Taken as a whole, these objectives have a somewhat different focus from those of the Lisbon Agenda, in that they concentrate more on the need to improve Europe’s education systems and to step up the fight against poverty. But the targets of raising the employment rate and R&D investment are more or less identical with the goals set 10 years ago in the Lisbon Agenda.
What puzzles me about the Commission’s proposals is the thinness of the explanation as to why the five headline targets were chosen, and how they relate to the specific task of increasing the EU’s economic growth potential. There is obviously nothing wrong with saying you would like to have better educated school-leavers, less pollution, fewer poor citizens and so on. But if there is no carefully thought-out plan for integrating these aspirations with the overall objective of boosting competitiveness and growth rates, then it amounts to little more than a wish list. Eliminating or reducing poverty is a noble goal, but how exactly does it contribute to increasing economic growth potential?
I am also surprised by the lack of emphasis on maintaining long-term fiscal discipline in the EU and on restructuring public services. The Commission is fully aware of the problem, having published several pretty disturbing analyses of how state pension and healthcare systems will become an ever-increasing burden on the public finances unless they are seriously reformed.
True, one could say that the EU is already addressing the fiscal issue by means of its Stability and Growth Pact. But if the broader economic policy objectives of the Europe 2020 strategy are to be convincing, they need to be set against the backdrop of fiscal policy – because, in all honesty, it is the fiscal challenge that looks the most formidable for Europe over the coming years.
I am left with the sneaking suspicion that the Commission chose its five objectives partly for political reasons – to reflect the change in the Zeitgeist prompted by the global financial crisis, the savage recession and the discrediting of gung-ho financial capitalism. It wanted its new 10-year plan to look more “social”, more protective of vulnerable sections of society. Fair enough. But such concerns do not necessarily dovetail with the goal of increasing Europe’s competitiveness and economic growth rates.
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