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European Interview n°12

The Lisbon Strategy for Growth and Jobs.
Interview with Günter Verheugen

The Lisbon Strategy for Growth and Jobs.
Interview with Günter Verheugen
18/12/2006

Do you think the constitutive principles of the Lisbon Strategy are still adapted to the new global situation?



The Lisbon Strategy is the European Union's response to the challenges of globalisation and the ageing of our societies. These challenges will be with us for considerable time and will therefore continue to shape the environment in which European economies will have to compete. To the extent that policy makers at all levels effectively implement the agreed policies, the Lisbon Strategy is certainly the appropriate response for the European Union. The relaunch of the strategy in 2005 as the partnership for growth and jobs was an important step to ensure a clear focus of the strategy on Europe's competitiveness and to create ownership of the reform process. It is based on an integrated approach, which addresses macroeconomic, microeconomic and employment policies in a single framework and takes account of the nature of the linkages between these broad policy fields. This will make the reform effort more effective. In 2006, the Spring Council set out four priorities for action, which are of particular importance to respond to globalisation and ageing. These are knowledge and innovation; unlocking the business environment, particularly of SMEs; the labour market; and energy policy. The Integrated Guidelines on which the strategy is based are adopted for a period of three years – currently for 2005-2008 – and can be updated in the interim years to respond to emerging new challenges.

For the first time recommendations were sent to each Member State. What are they and how could they foreshadow the important review of the Lisbon community program forecasted for 2008?



The Commission assesses Member States' National Reform Programmes and the quality of their implementation. This is a central part of the Annual Progress Report, the second of which was adopted on 12 December 2006. In cases where the Commission sees a need for further action on the part of Member States, it can do so by formulating country-specific recommendations, suggesting further policies to address a key challenge that had been identified for the Member State in question. The recommendations are based on a thorough analysis of progress with reform. In keeping with the partnership approach, the Commission will only make such recommendations in areas where it has previously signalled to the Member State that more action may be required to address the challenge effectively.

With regard to this year's recommendations, the Commission's key annual report on the progress of economic reform across Europe, published on 12 December 2006, underlined that our Strategy for Growth and Jobs is working. The reform process is bearing fruit. Entrepreneurship and innovation are gaining ground in Europe and we are now starting to implement structural changes to our economies. By cutting red tape by 25 per cent by 2012 we can give the European economy a much needed extra competitiveness boost. The current economic upturn now provides a unique window of opportunity to quicken the pace of reform.

The Community Lisbon Programme is the reform programme at the EU level. It is based on the Integrated Guidelines, which will be revised in 2008. The guidelines, as well as the country recommendations, reflect the key priorities of the growth and jobs strategy, which will also guide future revisions of the Community Lisbon Programme.

What do you plan to do to make the European Union spend more than 2% of its GDP for R&D each year?



Increasing overall EU spending on research and development to approach 3% by 2010 is one of the two quantitative targets under the Growth and Jobs Strategy to which all Member States committed themselves. It is encouraging that in the 2006 Progress Reports basically all Member States have or are in the process of putting in place more comprehensive R&D strategies. If all Member States were to reach their announced spending targets for R&D, the EU as a whole would likely reach a ratio of about 2.6% in terms of GDP for overall R&D spending by 2010.

In addition to national efforts, the renewed Lisbon Strategy provides the EU with a governance structure to improve the EU's R&D performance. The EU has focused its financial support of R&D activities on the essentials. The 7th Framework Programme will boost funding of collaborative research in Europe. In particular, the Joint Technology Initiatives will realise strategic research and technology agenda that bring together industry, research community, and the financial world. The new European Research Council will focus on competitive funding for research excellence. The Commission will also launch a Risk Sharing Finance Facility (RSFF) in order to support investment in high-risk research, technological development and demonstration projects. To improve access to finance, especially for small businesses, the Commission and the European Investment Fund will support the development of risk capital provision. The Commission and Members States agreed to earmark large parts of the Structural funds, Cohesion policy programmes, and the European Agricultural Fund for Rural Development (EAFRD) for knowledge. Finally, the Commission has adopted new State aid Guidelines for risk capital with the aim of facilitating access to finance and risk capital in order to increase economic efficiency and to stimulate research.

Isn't it in the European Union's interest to promote a real industry policy such as we can observe in Germany, Spain or France?



Strengthening the European industrial base has become a major issue at Community and national level and I am pleased to see that many Member States propose actions to tackle this challenge. For example, the French model “Pôles de Compétitivité”, partly based on Italian, Danish and German clusters, incited other Member States to promote such growth poles – Hungary, Netherlands, Belgium. We need to encourage such initiatives and to develop an exchange of views on various experiences to promote industrial competitiveness.

In addition the EU has also a role to play. At the beginning of 2000s, the Commission put back industrial policy at the heart of the political agenda. One of the key messages was to acknowledge the importance of manufacturing in the economy and the need to improve its competitiveness. Only synergies between EU policies will make it possible to improve their impact on industry's competitiveness. At the same time, we must ensure the search for the best combination of policies at sectoral level.

In 2005, the Commission went one step further and analysed the competitiveness of 27 industrial sectors. Following this, initiatives were proposed to tackle challenges such as IPR and counterfeiting, energy and environment, external aspects of competitiveness and market access, legislative simplification, structural change, research and innovation. Seven initiatives are sector specific and aim at addressing the main challenges in pharmaceuticals, biotechnology, chemicals, defence, space, ICT and mechanical engineering.

The majority of the groups are now working on specific issues. My services will launch a mid term review of our industrial policy in 2007.

How could the European Union adopt a real European economic policy combining monetary, budgetary and commercial aspects with the aims of internal reform? What initiatives are you planning to take in order to promote consultation between Member States, notably as far as the elaboration of their budget is concerned?



The renewed strategy for growth and jobs has brought about a new structure for economic governance in Europe. The EU now has an integrated set of guidelines that cover macroeconomic, microeconomic and employment policies. All the Member States have presented a National Reform Programme which presents an integrated strategy, based on the guidelines and covering the different policy areas in a single strategy document. This is a major change from the past when separate programmes were presented for each of these areas (Cardiff programme on structural reforms, national action plans on employment,…). Policy coordination is particularly important for the euro area, which already has a strong fiscal and monetary governance structure in the form of the Stability and Growth Pact and the European Central Bank. What the growth and jobs strategy adds is the element of structural reforms. They are now conducted and reviewed within an EU-wide framework across all Member States. Credibility of the reform effort and vigorous reforms in product, services, and labour markets will over time make the conduct of monetary policy much easier.

How do you want to incite Member States to use the internal market better, that is to prefer European suppliers to non-Europeans ones?



The Commission's key annual report on the progress of economic reform across Europe in 2006 underlined that our Strategy for Growth and Jobs is working. Thus, the answer to your question is very simple: if the renewed growth and jobs programme is properly implemented by all actors it will result in an increased competitiveness of the EU industry. In such a scenario, goods and services produced in the EU's will not only find more customers in the EU, but also on third markets.

On the one hand, the completion of the internal market and effective innovation policies at the European level are cornerstones of European competitiveness and a critical platform for the EU's success in globalised markets.

But, on the other hand, addressing barriers to trade, investment and business activity in third countries also plays a key role in improving the competitive position of European industries. Our work on trade barriers must be increasingly broadly based, moving beyond the traditional area of tariffs to include “behind the border” trade and investment barriers which are probably much more resistant to change. Harmonising regulatory approaches inside the EU, and basing them on “Better Regulation” criteria, is essential to defending our interests abroad. Our objective should be to ensure greater consistency in rules and practices between the EU and its main developed and emerging partners to ensure both better market access for European goods and services worldwide and fair competition and regulatory convergence through improved enforceable international rules. This key objective of regulatory convergence is far from being achieved with such key players as the US, India or China, although we have made a start.

Instruments such as international standardisation and regulatory dialogues should therefore play an increasingly important role. We should promote new ways of working within the Commission and with others, including Member States and industry in order to identify and tackle trade barriers more effectively. We should also put greater emphasis on a bilateral approach towards improving access to potential markets and restoring a more level playing-field with the main EU's competitors.

Don't you thing that the „European preference“, with equivalent performance and price, notably as far as the purchase of military products is concerned, is a prerequisite to obtain the opening up of defence industry markets in Europe?



So far, the circulation of defence-related products in the internal market is restricted by varying national administrative procedures in the Member-States. The Commission intends to reduce these obstacles to trade. This will contribute to making European defence industries economically more efficient and technologically more competitive. It would enable Member States to meet military needs under proper security conditions and at lower cost. To this end the Commission is preparing a general communication to be published in the second half of 2007. Opening up the national defence markets will certainly be the most important of the different objectives to be taken into account. The Commission has already announced that it will examine ways to facilitate the transfer of defence related products within the EU and to open up the national procurement markets for defence products.
Publishing Director: Pascale JOANNIN
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The Guest
Günter Verheugen
Vice-President of the European Commission responsible for Enterprise and Industry.
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