Communication from the Commission to the Spring European Council in Barcelona - The Lisbon Strategy - Making change happen
Date: 2002-01-15
Institutions: European Commission
Subjects: EU Member State, European Council, competitiveness, continuing education, economic and social cohesion, economic reform, full employment, research and development, social change, sustainable development

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 15.1.2002
COM(2002)14 final

COMMUNICATION FROM THE COMMISSION
to the Spring European Council in Barcelona

THE LISBON STRATEGY — MAKING CHANGE HAPPEN

EXECUTIVE SUMMARY

It  is  now  almost  two  years  since  the  Lisbon  European  Council  set  the  bold  and
ambitious  ten-year  goal  of  making  the  Union  the  most  dynamic,  competitive,
sustainable  knowledge-based  economy, enjoying full employment  and  strengthened
economic and social cohesion.

Since  then,  the  European  Council  has  made  its  Spring  meetings  the  focal  point  for
economic, social and environmental policy issues, in the light of the overall objective
of  ensuring  sustainable  development.  The  European  Council  in  Barcelona  will
therefore review progress made and agree the key priority areas for attention over the
coming year. This report seeks to set the agenda for this meeting.

Progress to date is encouraging…..

The  initial  phase  of  defining  policy  objectives  and  drafting  policy  reforms  is
coming  to  a  close.  Many  of  them  still  have  to  be  formally  adopted  and,  once
adopted, it may still take some time before their effects are felt.

There  have  already  been  notable  policy  successes  such  as  new  rules  for
telecommunication  markets;  co-operation  in  areas  such  as  education,  pension
reforms and research and new programmes to tackle inequality and social exclusion.

The successful changeover to the euro has shown the European Union’s capacity to
deliver. The euro has reinforced basically sound economic fundamentals. The current
downturn  has  interrupted  the  steady  fall  in  unemployment  and  is  slowing  the
creation of new jobs.

…but some key proposals are stalled

There  have  also  been  disappointments  –  areas  such  as  the  Community  Patent,
financial  services,  energy  and  the  Galileo  satellite  system,  where  deadlines  for
agreement  set  by  the  European  Council  have  been  missed  and  progress  has  not
always  been  fast  enough.  The  European  Parliament  and  Council  must  now  act  to
close this “delivery gap” if credibility is not to suffer.

The roadmap must be pursued on all fronts…

The  European  Union  must  stand  by  the  agreed  policy  of  macro-economic  stability
and  maintain  the  momentum  behind  the  whole  of  the  Lisbon  strategy.  The  Lisbon
objectives reinforce  each  other  and  only  an  integrated  approach  will  guarantee  that
they can be met. This means:

–  Closing  the  delivery  gap  on  structural  and  economic  reforms  and  ensuring  that

sustainable development is an integral part of these reforms.

–  Continuing to foster economic and social cohesion and taking the necessary steps

now to ensure safe and sustainable pensions for the future.

–  Developing entrepreneurship within a competitive business environment

…but some areas need priority action

2

To achieve the targets for the end of the decade, the European Union must push up
its potential for growth.

In the current conditions, there are three priority areas where the European Council
in Barcelona should give a decisive impulse to action; areas which can help to speed
up the Union’s recovery and which are important for its long-term needs:

–  The further development of employment policies, with a particular focus on
active labour market reforms. This means looking at tax and benefits systems,
rewarding  people  who  work  longer  and  improving  childcare.  Barriers,  in  areas
such  as  skills  and  languages,  which  discourage  people  moving  to  different  jobs
within their companies, or in other sectors or countries will be tackled. Steps by
the  social  partners  to  anticipate  and  manage  change  should  be  encouraged.  This
will help  the European  Union to  move  closer,  even  in  the  current  climate,  to  its
goal of full employment and better jobs.

–  Connecting  Europe  and  connecting  markets.  This  can  be  done  through  further
reforms  and  completing  missing  links  in  key  network  industries  and
accelerating  financial  market  integration  by  delivering  the  right  regulatory
framework.  This  means,  for  example,  setting  dates  for  opening  energy  markets
and agreeing key remaining financial services measures, but the Union must move
ahead, at the same time, with investment in priority infrastructure projects which
will  make  the  internal  market  more  dynamic  and  more  competitive.  Recent
telecoms  reforms  must  spur  the  roll  out  of  fast  broadband  telecoms  network.  A
more interconnected Europe, as well as efficient and well functioning services of
general  economic interest, will keep the European Union on its  growth path and
help to provide higher quality services to everyone throughout the Union.

–  Increasing  investment  in  knowledge  to  ensure  future  competitiveness  and  jobs.
The European Union must step up the effort in the areas of research, innovation,
education  and  training,  and  increase  its  impact  by  pursuing  a  more  integrated
approach  and  place  these  policies  under  a  common  banner:  a  European  area  of
knowledge.  New  networks  of  excellence  will  be  set  up  and  the  European
dimension  of  lifelong  learning  could  be  backed  up  by  European  level
qualifications. Action will focus as well on getting business to spend significantly
more on research and innovation.

By sending a signal of confidence and exercising political leadership, the Barcelona
meeting  will  give  new  impetus  to  the  Lisbon  strategy  and  to  economic  policy  co-
ordination. Moreover, in doing so, it will reinforce economic governance, which will
help to shape a strong economy and society and will also support the euro.

3

TABLE OF CONTENTS

Executive Summary ................................................................................................................... 2

1

2

3

POLITICAL AND ECONOMIC CONTEXT ............................................................. 5

PROGRESS TOWARDS THE LISBON GOALS ...................................................... 7

POLICY RESPONSE ................................................................................................ 13

3.1

Maintaining the momentum ....................................................................................... 13

3.2

Sharpening the focus in 2002..................................................................................... 18

3.3

Beyond Barcelona ...................................................................................................... 25

The report is supported by a Commission Staff Working Paper analysising developments and
policy progress since the Lisbon European Council.

4

1

POLITICAL AND ECONOMIC CONTEXT

The  European  Council  will  meet  in  Barcelona  just  a  few  weeks  after  the  euro  has
become a tangible reality in people’s hands.

The euro is a powerful symbol of European integration. It shows what the European
Union can achieve when the political will is there.

The  same  ambition  must  now  be  applied  to  economic,  social  and  environmental
policy  if  the  EU  is  to  meet  the  strategic  goal  for  this  decade:  to  become  the  most
competitive  and  dynamic  knowledge-based  economy  in  the  world  as  decided  in
Lisbon European Council two years ago.

By making its annual Spring meeting the focal point for the overall economic, social
and  environmental  strategy  of  the  European  Union,  the  European  Council  has
committed  itself  to  providing  leadership  at  the  highest  political  level.  The
forthcoming meeting in Barcelona will put that leadership to the test.

There  is  every  prospect  of  success.  Economic  and  Monetary  Union  has  delivered
macro-economic  stability  and  current  conditions,  even  in  the  present  downturn,
remain  basically  sound.  This  reflects  the  role  played  by  the  European  Union’s
Stability and Growth Pact.

This  provides  a  setting  for  the  action  on  employment,  research  and  innovation,
economic  reforms,  social  cohesion  and  the  environment  set  out  in  the  Lisbon
strategy;  actions  which  reinforce  each  other  to  create  a  more  dynamic  and
competitive  internal  market  and  addresses  short-  and  long-term  challenges  for
society as a whole.

Since its launch by the Lisbon European Council the strategy has been strengthened
in  two  respects.  The  Nice  European  Council  launched  the  Social  Policy  Agenda
which sets out the measures to achieve the Lisbon objectives of more and better jobs
and a modern welfare state within a more inclusive society. The principal lines of the
Lisbon strategy were completed in Göteborg, where the European Council added an
environmental  dimension  and  confirmed,  with  the  European  Union’s  Sustainable
Development  Strategy,  the  need  to  ensure  the  consistency  of  the  different  policy
strands with long-term objectives.

The short-term economic outlook for the Barcelona European Council

At first sight, economic and political conditions could hardly be more different from
those  prevailing  in  March  2000,  or  even  at  the  time  of  last  year’s  Spring  Council
meeting.

The  economic  slowdown  in  the  United  States,  exacerbated  by  the  uncertainty
following the terrorist attacks on the United States and the subsequent political and
military situation, is a major political challenge for the Union. It has also had serious
direct and indirect economic and social consequences.

–  Business and consumer confidence, already fragile, has weakened further.

5

–  Growth  forecasts  for  the  European  Union  for  2001  and  2002  have  been  sharply

cut back.

–  Business investment has slowed considerably as firms of all sizes in the European

Union have waited to see the direction in which the economy is heading.

–  The  four-year  fall  in  unemployment  has  been  interrupted  and  job  creation  looks

set to slow considerably.

Nevertheless, there are grounds for cautious optimism that the current downturn will
be  short-lived.  European  financial  markets  have  absorbed  the  shock  well  –  greatly
aided by the  arrival of  the  euro.  The  downturn  reflects a largely  cyclical  change  in
the  global  economy,  which  has  been  compounded  by  an  unprecedented  set  of
political and economic events.

Current conditions do not call into question basically sound economic fundamentals
or the need to pursue the Lisbon strategy. Structural reforms are a major part of the
long-term  solution. Moreover, falling inflation has allowed short-term interest rates
to fall by 1.5 percentage points within the euro area (mirrored by cuts in Denmark,
Sweden  and  the  United  Kingdom)  over  the  last  year.  These  have  yet  to  work  their
way  through  into  the  economy  and  there  may  be  scope  for  further  reductions  as
inflation continues to decline.

Unless the broader political situation worsens, a moderate pick-up is foreseen for the
first  half  of  this  year,  as  confidence,  consumer  spending  and  investment  start  to
return. Growth is likely to gain momentum in the second half of the  year as export
markets outside the European Union start to recover.

As recent experience has shown, developments outside the European Union can have
a  major  impact  here.  This  reinforces  the  case  for  structural  reforms  that  make  the
Union less  vulnerable  to external  shocks,  be they political or economic. But it also
highlights  the  importance  of  engaging  fully  in  efforts  to  reform  and  reshape  the
international  landscape,  and  to  play  an  active  role  in  relation  to  the  current  trade
round launched in Doha.

The  Barcelona  European  Council  will  be  a  critical  moment  for  the
Lisbon strategy

In Barcelona, the European Council will assess the progress that has  been made.  It
should  consolidate  successes,  highlight  weaknesses  and  set  priorities  for  the  next
twelve to eighteen months.

It will do this at an important moment for the Lisbon strategy:

–  The Commission has by now tabled most of the main policy proposals.

–  The  second  phase  of  agreeing  and  adopting  those  policies  is  well  underway.
Success or failure is largely in the hands of the European Parliament or Council,
who must take decisions in key areas of the strategy.

–  The  final  phase,  where  agreed  policies  are  implemented  and  start  to  have  an

impact on the ground, has barely begun.

6

But transforming new policies into visible results, as this report shows, needs actions
from all the parties involved.

There have already been important successes - such as the recently agreed Telecoms
Package – which have resulted from the close co-operation between the Commission,
the  European  Parliament  and  the  Council.  But  in  some  other  crucial  areas  of
economic and structural reforms progress has been slow or disappointing.

The European Council must overcome this “delivery gap” before it grows any wider.
It must send a signal of confidence and give a clear political impulse in those areas
where the need for progress is most urgent. The Lisbon strategy set a comprehensive
agenda  and  progress  must  be  made  on  all  fronts,  even  if  not  all  elements  can  or
should be given the same attention by the Spring European Council each year.

2

PROGRESS TOWARDS THE LISBON GOALS

The reform calendar set out below shows the most significant measures launched at
Lisbon and the extent to which associated target dates have been met.

The Lisbon Reform Calendar :
Indications of the year in which Lisbon reforms are planned to take effect

((cid:1) indicates necessary measures adopted/taken;
* indicates that the target date risks being missed because of insufficient progress in Council
and the European Parliament).
2001 (cid:1) Local loop unbundling

(cid:1) State aid scoreboard and register

Strategy for simplifying the regulatory environment (Some delay)

2002

New framework for public procurement * (2001 deadline for agreement missed)
(cid:1) New framework for electronic commerce (except VAT treatment of e-commerce

where 2001 deadline for agreement missed)
First two year National Action Plans against exclusion and poverty
Social Policy Scoreboard

2003 (cid:1) New framework for telecommunications
Single market for risk capital *
Further opening of electricity markets for business customers *
Sixth Framework Programme for research
Community Patent* (2001 deadline for agreement missed)

(cid:1) Liberalisation of international rail freight using trans-European rail networks

2004

2005

Single European Sky
Further opening of gas market for business customers *
Energy tax framework *
Framework for the taxation of savings

Single market for all financial services *
Opening of gas and electricity markets for residential customers
Start of a mandatory European emission trading scheme for CO2

Second stage of opening of market for postal services

2006
2008 (cid:1) Liberalisation of all international rail freight

Galileo satellite navigation system enters into operation * ( 2001 deadline for
agreeing structure missed)

2009

Possible new or final stage of opening of markets for postal services (subject to
study in 2006 on the impact of liberalisation)

7

A separate Staff Paper supporting this report provides a more complete assessment of
the  progress1  and  lists  the  actions  implementing  the  Lisbon  strategy.  A  fuller
description  of  those  actions  which  are  part  of  the  Social  Policy  Agenda  will  be
provided in a separate Social Policy Scoreboard to be published before Barcelona.

The  table  below  illustrates  that  for  the  European  Union  to  become  the  “most
competitive  and  knowledge-based  economy  in  the  world  …”,  much  remains  to  be
done  in  moving  towards  key  Lisbon  targets,  but  that  in  most  cases  some  Member
States are already leading the way.

The  “Best  Performance  Indicators”  used  in  that  table  represent  the  unweighted
average  of  three  best  performing  Member  States.  They  are  useful  in  providing  an
indication of what can and should be achieved over time2, although they only serve
to  measure  progress  towards  EU-wide  targets  and  do  not  set  binding  targets  for
individual Member States.

Table 2 : Progress towards certain Lisbon goals and indicators of best
performance

Lisbon (data
available )

Barcelona
(Latest data)

EU Best
Performance
Indicator *

EU 2010
Target

General 

1. 
background

economic

a.  GDP  per  capita  in  1995  PPS,
US=100 (99/01)

b. Growth rate of GDP at constant
prices 1995 (99/01)

c.  Productivity  per  employee  in
PPS, US=100 (99/01)

2. Employment

a. Overall (% of active population)
99/01

b. Women
99/01

c. Older workers (55-64)
99/01

3. R&D

a. Total (public and private) R&D
expenditure as % GDP
Years 98 / 00

65.1

2.6

74.0

63.2

52.8

37.2

65.1

1.6

72.2

63.9

54.7

38.3

96.0

4.9

106.0

73.6 **

69.0

66.0

1.87

1.90

3.1

70
67 (2005)

60
57 (2005)

50

1

2

This assessment draws on agreed structural indicators. In several cases, comparable  EU-wide  data  do
not  yet  cover  the  period  since  the  Lisbon  European  Council  and,  in  the  case  of  environmental  and
cohesion indicators, provide a picture which is four to five years out of date. This highlights the need to
give  priority  to  statistical  work  in  all  areas  of  the  Lisbon  strategy.  See  Commission  Staff  Working
Paper, SEC(2002) 29, 15.1.02.
Such best performance indicators must be treated with a degree of caution, for example, because some
of  them  are  particularly  sensitive  to  the  economic  cycle.  Nevertheless,  their  evolution  over  the  years
ahead will help to show progress, both in relation to other Member States and in relation to the general
Lisbon targets where they exist.

8

                                                
b. Share of total R&D expenditure
financed by industry (%).
Years 98 / 99 (Source:
OECD/Eurostat)

4. Education and training

a. Public spending on education
as % GDP
Years 99, 00

b. Early school leavers (% not in
further education)
Years 99, 01

c. Lifelong learning (%
participation of adults)
Years 99, 01

5. Internet Penetration

a. EU homes (% homes)
Years 00 / 01

b. EU broadband (% homes,
cable/ADSL access)
Year 01

c. EU schools (% all schools)
Year 01

6. Public Procurement

a. Value of tenders published in
EU Official Journal (% of GDP)
Years 98 / 00

7. Venture Capital

a. Early stage (% of GDP)
Years 99 / 01

b. Expansion (% of GDP)
Years 99 / 01

8. State Aid

a. Aid as % GDP
Years 95-97 / 97-99

9. Social Cohesion

a. Risk of poverty (after social
transfers)
Year 97/98

55.1

55.9

68.1

5.0

5.1

18.7

17.7

6.7

7.2

8.2

8.3

21.4

-

9.4

-

18.4

37.7

2.5

-

5.8

89

60.6

14.9

99

100 by end
2001

1.8

2.4

3.9

0.038

0.104

0.036

0.099

0.079

0.192

1.1

0.9

0.5

-

-

-

-

18

18

10

Source  of  data  is  Eurostat  unless  otherwise  indicated.  The  full  data  series  is  periodically  updated  on-line
http://europa.eu.int/comm/eurostat.
*  Unweighted  average  of  the  three  best  performing  EU  Member  States  **
2001 Best Practice estimate based on 2000 figures for DK, NL, and 2001 figure for UK.

Assessment of progress in the two years since Lisbon

The main messages from the assessment of progress towards the European Union’s
strategic  goal  are  summarised  below.  Achieving  the  Lisbon  objectives  requires  a
sustained  EU  growth  rate  of  3%.  Given  the  slowdown  that  the  European  Union  is
going  through,  it  is  all  the  more  important  to  be  successful  in  implementing  the
reforms  leading  to  a  continued  rise  in  the  employment  rate  and  higher  labour
productivity.

Since Lisbon the gap in GDP per capita between the European Union and the US has
remained unchanged. According to the latest data, GDP per capita in the Union was
equivalent to 64% of that of the US. The difference in labour productivity per hour

9

explains  around  one  third  of  this  gap.  The  other  two  thirds  are  due  to  the  smaller
number  of  yearly  working  hours  per  worker  and  the  lower  employment  rate  in  the
Union.

Progress  across  the  whole  of  the  Lisbon  strategy  is  needed  if  this  gap  is  to  be
narrowed substantially.

(a)

Employment3

Progress towards the goal of full employment is distorted by the current conditions.
These  have  interrupted  the  sustained  period  of  falling  unemployment  and  job
creation.

The  creation  of  more  and  better  jobs  by  business  across  the  European  Union  will
depend on how rapidly the European Union’s economy emerges from the slowdown.
Nevertheless,  employment,  and  particularly,  labour  market  polices  are  helping  to
increase the  number of people with a job.  The  European  Employment  Strategy  has
helped to drive those reforms and their continuation should be a priority, drawing on
the  exchange  of  best  practice  within  the  Union.  Given  the  current  climate  steps  by
the  social  partners  to  anticipate  and  manage  changes  within  different  sectors  and
companies should be encouraged.

The  High  Level  Task  Force  on  skills  and  mobility4  has  underlined  the  need  to
remove  barriers  to  geographical  mobility  and  to  ensure  people  have  relevant  and
adaptable  skills  which  will  help  them  move  between  different  occupations.  This
should  be  backed  up  by  a  transparent  and  integrated  labour  market  information
system.  At  the  same  time,  it  is  clear  from  the  structural  indicators  related  to
education (lifelong learning, early school leavers) that little progress has been made
across the European  Union in turning lifelong learning into a  daily reality for most
adults.

The  Council  and  the  European  Parliament  have  continued  work  on  a  number  of
legislative  proposals  in  fields  including  health  and  safety  at  the  workplace,  the
involvement of workers and equal treatment between women and men. New debates
have  been  launched  on  issues  such  as  the  quality  in  work  and  corporate
responsibility.

(b)

Research and innovation

Momentum has built up behind the European Research Area. This  is helped  by  the
agreement  last  December  on  the  main  lines  of  the  sixth  Research  Framework
Programme.  Positive  trends  have  continued,  particularly  in  science  and  research  in
relation to the growth in the numbers of patents in relation to the population or the
number  of  science  graduates  in  the  Union.  The  Union  is  particularly  strong  in
academic and fundamental research, but European researchers and businesses do not
technologies,  such  as
capitalise  sufficiently  on 

their  expertise 

in  frontier 

3

4

information  see  proposed  Joint  Employment  Report  2002,  COM(2001)  438.

For  further 
http://europa.eu.int/comm/employment_social/empl&esf/ees_en.htm
Final  report  of  the  High  Level  Task  Force  on  skills  and  mobility,  14  December  2001,
http://europa.eu.int/comm/employment_social/general/index_en.htm.

10

                                                
biotechnology and the life sciences5 and other clean, environmental technologies.

Changes in the business environment are also important here, but so is accelerating
measures to support financial market integration and improving the supply of venture
capital once the cyclical contraction seen in 2001 is reversed, as well as getting early
agreement on the Community Patent.

Not enough progress has been made to strengthen the European Union’s underlying
knowledge base. The level of investment in education is still too low, the take up of
lifelong  learning  limited  and  too  many  young  people  still  leave  school  with  no  or
only basic qualifications.

(c)

Economic reform

There  has  been  significant  progress  in  some  areas  of  the  internal  market  and
economic  reforms6,  particularly  linked  to  creating  the  regulatory  framework  for
electronic  commerce  and  communications  sectors.  The  role  of  the  eEurope  2002
action plan has been important. Substantial progress was made on connecting schools
to  the  Internet7.  The  internal  market  has  brought  clear  benefits  in  terms  of
important  areas  such  as
competition,  greater  choice  and 
telecommunications and energy markets.

lower  prices 

in 

At the same time, all Member States have been taking steps to improve the business
environment, making it easier for companies to innovate and grow and encouraging
risk-taking and innovation. Efforts to simplify the regulatory environment identified
in Lisbon and in the European Charter for Small Businesses must continue.

However,  as  pointed  out  in  the  report  on  the  functioning  of  product  and  capital
markets,  further  efforts  are  needed  to  improve  the  performance  of  the  internal
market.  Price  convergence  seems  to  be  slowing  down  in  recent  years.  Moreover,
progress  on  structural  and  economic  reform  has  not  been  uniform.  Some  Member
States  must  still  make  substantial  efforts  to    meet  the  target  from  the  Stockholm
European  Council  of  having  98.5%  of  adopted  EC  legislation  implemented  at  a
national level by March 2002.

A large part of the 1500 infringement cases underway against the Member States for
not  correctly  applying  internal  market  law  relate  to  barriers  to  cross-border  service
provision,  even  though  service  markets  are  one  of  the  areas  to  which  the  Lisbon
European  Council  attached  particular  importance.  Unfortunately,  little  progress  has
been  made  on  moving  forward  with  the  Commission’s  plans  for  integrating  the
service sector. Some of the most important structural reforms - including some where
agreement was required by the end of last year – covering electricity, gas, the Galileo

5

6

7

This  view  was  reflected  at  the  stakeholder  consultation  meeting  on  biotechnology  and  life  sciences
organised by the European Commission in September 2001. http://europa.eu.int/comm/biotechnology.
For further information see the Report on economic reform : functioning of Community Product and
capital markets (the Cardiff Report, COM(2001) 736 and Internal Market Scoreboard No 9, Nov 2001.
http://europa.eu.int/comm/internal_market/en/update/economicreform/index.htm.
Also Competitiveness report 2001, http://europa.eu.int/comm/enterprise_policy/competitiveness/doc
/competitiveness_report_2001/index.htm
The Commission will shortly publish a Communication on eEurope 2002 : Benchmarking, monitoring
and future challenges.

11

                                                
satellite  navigation  system,  financial  services  markets,  and  procurement  markets
have  not  been  delivered.  They  have  seen  only  limited  progress,  yet  the  deadlines
were set by the Heads of State and Governments.

(d)

Cohesion8

The  European  Social  Policy  Agenda  has  given  new  impetus  and  provided  a  new
policy framework to deliver the Lisbon goals of improved cohesion.

In  the  mid  1990s  around  18%  of  the  population  or  60  million  people  were
at risk of poverty and there were significant variations across (and within) Member
States.  Without  social  transfers  this  rate  would  have  been  26%.  Similar  variations
were seen in the distribution of incomes between the richest and poorest households.
The role of welfare systems has been a  significant factor in  protecting people  from
the risk of poverty.

The  lack  of  up  to  date  figures  means  that  it  is  difficult  to  assess  the  impact  of  the
period of stronger growth and falling unemployment in the second half of the decade.
At  a  European  and  national  level  since  Lisbon  concrete  measures  to  fight  poverty,
discrimination  and  social  exclusion  have  been  agreed,  supported  by  new  action
programmes  .  Member  States  have  delivered  their  first  two  year  National  Action
Plans against  exclusion and  poverty.  This  work has drawn on the exchange  of  best
practice  and  the  development  of  agreed  indicators.  It  has  involved  not  only  the
Member States, but the social partners and civil society . However, time is needed to
allow the effects of these actions to be felt in the year ahead. The statistical basis for
measuring both economic and social cohesion must be strengthened.

At  the  same  time,  work9  on  the  impact  of  an  ageing  population  on  pensions  and
welfare systems continues to highlight what is at stake and the need for work in that
area to continue.

Differences in performance, as measured in GDP per capita, between Member States
remain  important  and  are  often  as  acute  within  Member  States  as  between  them.
However,  although  disparities  between  the  Member  States  persist,  they  have
considerably  narrowed  since  1998,  notably  in  the  cohesion  countries  (Greece,
Ireland, Portugal and Spain) where the initial gap has reduced by one third. However,
differences  between  regions  in  unemployment  levels  remain  pronounced  with  rates
averaging more than 20% in the worst affected regions.

(e)

The environment

Important policy  action has been taken in the seven months since the launch of the
European  Union’s  Sustainable  Development  Strategy  at  the  Göteborg  European

8

9

For  further  information  see  2nd  Report  on  economic  and  social  cohesion,  COM(2001)  24.
http://www.inforegio.cec.eu.int/wbdoc/docoffic/official/reports/contentpdf_en.htm
For  further  information  see  Communication  on  shared  principles  and  objectives  to  ensure  the
sustainability of pension systems, COM(2001) 362. http://europa.eu.int/comm/employment_social/soc-
prot/social/index_en.htm

12

                                                
Council10. In Barcelona, the impulse given to transport and energy policies must take
due account of the environment. Available data suggests that while  greenhouse  gas
emissions have decreased during the 1990s, meeting the agreed targets for reducing
emissions  and  the  Göteborg  objective  of  decoupling  GDP  and  transport  growth
remains  a  very  demanding challenge.  Further  steps  will  be  required,  particularly  as
traffic has been growing in line with or faster than GDP, especially for air travel and
road  freight.  The  Bonn  and  Marrakech  Conferences  have,  nevertheless,  provided  a
framework for tackling climate change. 

The adoption of the actions proposed in last year’s White Paper on transport policy11
will  help  to  move  forward  the  process  of  developing  a  sustainable  approach  to
transport.

Clean  technologies  are  also  set  to  play  an  important  role.  They  can  help  to  tackle
environmental  challenges,  but  also  to  improve  the  performance  of  the  whole
economy.  The  Commission’s  forthcoming  report  on  the  effects  of  environmental
(“clean”)  technologies  on  growth  and  employment  shows  that  realising  their  full
potential means overcoming current barriers. These result from price incentives, but
also for example, from a lack of  awareness of the cost savings that  can  result from
reducing pollution.

3

POLICY RESPONSE

3.1 Maintaining the momentum

The European  Union must stand by  the  agreed  policy  of  macro-economic  stability,
maintain the momentum behind the whole of the Lisbon strategy, and focus on areas
which can make the biggest contribution.

3.1.1 A firm commitment to the Stability and Growth Pact will help build

confidence

The  macro-economic  policy  framework  offers  stability  that  should  speed  up  the
Union’s return to stronger growth:

–  Current macro-economic policies within the Stability and Growth Pact can help to
meet  short-term  needs  in  the  economy  without  compromising  the  medium-term
goal of stability;

–  The  easing  of  monetary  conditions  associated  with  diminished  risks  to  price

stability has helped to adjust the macro-economic policy mix;

–  Budgetary policies are also helping to stabilise the economy. Sizeable tax cuts in
2001  (amounting  to  0.5%  of  GDP)  have  been  implemented  in  some  Member
States;

10

11

sustainable 

For  further  information  see  Communication  on  a  sustainable  Europe  for  a  better  world,  a  European
http://europa.eu.int/
Union 
comm/environment/eussd/index.htm
White  paper  “European 
transport  policy 
http://europa.eu.int/comm/employment_social/soc-prot/social/index_en.htm

to  decide”  COM(2001)  370.

development 

COM(2001) 

for  2010: 

strategy, 

time 

264. 

13

                                                
–  Automatic budgetary stabilisers within the Stability and Growth Pact are at work.
As a result of business cycle effects, budget balances are expected to deteriorate.

Member States that still have deficits should aim at their elimination by 2003-4 while
letting automatic budget stabilisers work within the overall limit for budget deficits
of 3% of  GDP.  If progress on  budgetary  consolidation is not made in 2002, then a
bigger effort will be needed in the two subsequent years.

Against  this  background,  the  current  slowdown  shows  that  the  European  Union
economy remains  vulnerable to  economic and political  developments in other  parts
of the world. Implementing the reforms within the Lisbon strategy would contribute
to reducing the impact of future shocks on the European Union.

–  The  European  Council  should  give  a  firm  commitment  to  the  macro-economic  stability

and to further consolidation in public finances over the medium term.

3.1.2 Maintaining momentum behind all of the Lisbon targets

In Barcelona, the European Council must ensure that the strategy moves forward on
all fronts — economic, social and environmental. They are mutually reinforcing and
only  an  integrated  approach  will  guarantee  that  the  European  Union  can  meet  the
target  of  high  growth  and  full  employment  and  remain  on  the  path  of  sustainable
development. The following should be highlighted:

(a)

Closing the delivery gap on economic and structural reforms

A “delivery gap” exists. Deadlines for decisions and their implementation are being
missed, often in the face of short-term sectoral or political interests.

This  represents  a  real  problem  with  real  costs  for  business  and  citizens  across  the
European Union.

President  Romano  Prodi  highlighted  this  gap  in  his  letters  to  Heads  of  State  and
Government  in  November  and  to  the  President  of  the  European  Parliament.  Those
letters identified the issues12 where progress must be seen before Barcelona13.

The  Members  of  the  European  Council  must  assume  responsibility  for  leadership
over  their  respective  governments.  They  should  ensure  that  their  ministers  resolve
disputes  over  the  detail  of  individual  proposals,  rather  than  accept  that  missed
deadlines are simply replaced by new ones or that they are called upon to sort out the
detail of complex proposals. The European Parliament must assume its share of the
responsibility for ensuring that the delivery gap is overcome.

12

13

The  President  identified  the  Community  Patent,  the  pending  legislation  on  public  procurement,  the
proposals on distance marketing of financial services and on UCITs (investment funds), and within the
Financial Services Action Plan the pending proposals on market abuse, collateral, prospectuses, pension
funds, cross-border payments and international accounting standards.
From the priority package, progress has been made on all items with the exception of the Community
Patent, public procurement, pension funds, and prospectuses. In addition, decisions are urgently needed
on the Galileo satellite navigation system and the institutional framework in the Lamfalussy report.

14

                                                
The European Council should address this challenge by considering options to  bridge the
delivery gap in this area:

–  Additional Council meetings could be organised by the Council Presidency in the run up

to Spring European Councils to resolve outstanding issues.

–  The Council Presidency should make full use of qualified majority voting, where available,
to ensure decisions on Lisbon reforms are not held up, particularly in the areas set out in
this Report.

–  Heads of State and Government should ensure appropriate internal co-ordination so that

progress on the whole strategy is achieved.

Where  blockages  cannot  be  overcome  the  real  importance  and  urgency  attached  to
the  proposals  is  called  into  question.  In  such  cases  the  Commission  will  consider
withdrawing the proposal it has made. Where the lack of progress, for example for
gas and electricity, is harming competition and holding back market integration, the
Commission – as it did in the 1990s for telecommunications – will consider adopting
legislation to open markets using its powers under the European competition rules.

(b)

Ensuring  that  sustainable  development  is  an  integral  part  of  these
reforms

Sustainable development means ensuring that policies are consistent with long-term
objectives.  Economic,  social  and  environmental  objectives  all  affect  the  quality  of
life.  This  is  why  an  environmental  dimension  has  been  integrated  into  the  Lisbon
strategy.  It  should  ensure  that  each  of  these  three  elements  is  given  appropriate
weight when the direction of policy is set at the highest political level.

This  means  that  the  overall  impact  and  coherence  of  policies  must  be  assessed
against  overall  long-term  objectives.  The  Commission  as  currently  developing
mechanisms for assessing the sustainability impact of its proposals, and these will be
up and running before the end of this year.

Improving  policy  coherence  will  be  especially  important  over  the  next  twelve  to
eighteen months in the areas of transport and energy.

For  example,  although  further  opening  of  transport  and  energy  markets  will  lower
costs and lead to lower prices, it must not remove the incentives for individuals and
businesses  to  invest  in  clean  technologies  and  energy  efficiency.  This  requires  the
removal  of  environmentally  damaging  subsidies  and  the  appropriate  use  of
environmental taxes. In addition, regulators should ensure appropriate market access
for renewable sources of energy.

The European Parliament and Council:

– 

should adopt the energy tax directive by December 2002.

The Commission will bring forward in 2002:

– 

new  proposals  on  transport  infrastructure  pricing  to  ensure  that  the  prices  for  using
different  modes  of  transport  better  reflect  their  costs  to  society.  The  revenue  raised
could  be  an  additional  source  of  support  for  closing  the  missing  links  within  Trans-
European Networks, particularly for alternatives to road transport;

15

– 

– 

new proposals on safer transport systems across Europe, and

will,  in  parallel  with  continuing  negotiations  on  the  energy  tax  directive,  review  the
overall approach to energy taxation and investigate options to move forward on getting
energy prices to better reflect their overall cost to society.

Policies  and  new  infrastructures,  including  Trans-European  Networks,  must  be
compatible  with  sustainable  development.  The  Commission  will  bring  forward
proposals  seeking  to  increase  efficiency  and  ensure  the  security  of  energy  sources
following the consultation on the November 2000 Green Paper14.

(c)

Continuing to foster economic and social cohesion

Improved  economic  and  social  cohesion  results  from  the  combination  of  stronger
economic  performance,  the  delivery  of  a  knowledge-based  society  and  long-term
structural  support  of  investment  in  infrastructures  and  people,  notably  in  the  least
developed  regions.  It  builds  on  the  strength  and  ambition  of  the  European  social
model and the welfare state. That model is helping people back to work, recognising
that  a  job  is  often  the  best  protection  against  social  exclusion.  It  combines  an
affordable  system  offering  a  high  level  of  social  protection  with  a  focus  on  social
cohesion which is often felt to be lacking in the United States.

This objective is particularly important in less wealthy regions and for disadvantaged
groups  within  society,  for  whom  cohesion  is  not  just  the  by-product  of  successful
integration;  it  is  a  sign  of  solidarity.  It  implies  a  sustained  effort  in  terms  of
investment into the medium to long-term, which will become even more necessary in
the context of an enlarged European Union.

The European Council should:

–  set  a  target  for  2010  of  halving  the  number  of  people  at  risk  of  poverty15  across  the
European Union. Member States should indicate in their two  year National  Action  Plans
against  poverty  and  social  exclusion  how  they  will  contribute  to  its  achievement.  Work
should  build  on  the  social  inclusion  indicators  endorsed  by  the  European  Council  in
Laeken;

–  endorse ongoing work on the impact of ageing on healthcare and care for the elderly  in

order to strengthen co-operation and exchange of good practice.

(d)

Ensuring safe and sustainable pensions

The old-age dependency ratio – the relationship between the working population and
those  beyond  the  retirement  age  -  will  more  than  double  from  the  current  24%  to
49%  by  2050.  Projections  of  future  expenditure  on  pensions  show  big  increases  of
between 3 and 5 percentage points of GDP in most countries, and even more in some
countries.  Increases  of  such  magnitudes  give  serious  cause  for  concern  both  for
pension systems and public finances.

14

15

Towards  a  European  Strategy 
http://europa.eu.int/comm/energy_transport/en/lpi_lv_en1.html
The  target  should  be  based  on  the  average  level  in  1997  (the  latest  available  year)  of  18%  of  the
population  for  the  whole  of  the  European  Union  considered  to  be  at  risk  of  poverty  after  account  is
taken of support from welfare systems.

supply,  COM(2000)  769.

security  of  energy 

the 

for 

16

                                                
The  European  Council  should  call  for  the  continuation  of  on-going  reforms  of  pension
systems in most Member States aiming to:

–  safeguard the capacity of pension systems to meet their social aims;

–  ensure the financial sustainability of pension systems;

–  enhance their ability to respond to a changing society.

(e)

Developing 
environmentand encouraging effective competition

entrepreneurship  within 

a 

favourable 

business

A  sound  economy,  a  better  skilled  and  more  mobile  workforce,  integrated  energy,
transport  and  financial  markets,  and  a  stronger  knowledge  and  technology  base
within the European Union all represent opportunities.

Converting those opportunities into economic growth and jobs depends on business
and the  creative  spirit of  entrepreneurs across the European  Union,  as  well  as  on  a
competitive  environment  undistorted  by  private  or  state  measures.  The  vigour  of
their response that will be a key factor for success. Small businesses16, in particular,
are the  backbone  of the European  economy.  They  play  a  pivotal role  in  innovation
and job-creation.

Entrepreneurship  will  flourish  in  a  favourable  business  environment.  This  requires
progress on many fronts, which together are bringing about significant changes.

The  Member  States  committed  themselves  at  the  Stockholm  European  Council  to
reduce  state  aid  and  redirect  aid  towards  horizontal  objectives.  Even  though  they
have made some progress in reducing aid levels, they should continue their sustained
effort  and  not  allow  changes  in  the  economic  climate  to  become  an  excuse  for
retrograde steps.

The European Council should endorse on-going action to :

– 

– 

– 

– 

– 

reduce  State  aid  in  relation  to  GDP  and  redirect  aid  towards  horizontal  objectives  of
common interest, including cohesion objectives

finalise  by  June  2002  an  action  plan  for  improving  and  simplifying  the  regulatory
environment;

develop  quantitative  targets  in  the  area  of  enterprise,  small  businesses  and  the
business  environment,  for  example,  on  reducing  the  time  it  takes  to  register  a
company or on the availability of e-government services on line. This will help to focus
attention  on  the  areas  where  progress  is  most  needed  and  show  when  it  has  been
achieved.  Flexibility  will  be  needed  allowing  Member  States  to  use,  within  a  jointly
agreed set of targets, those which best respond to their specific priorities;

reinforce  action  along  all  ten  lines  of  the  European  Charter  for  Small  Businesses
(endorsed by the European Council in Feira in June 2000);

improve  the  tax  environment  for  businesses  across  the  European  Union  by  tackling
barriers to cross-border economic activity.

16

The  Commission  will  present  before  Barcelona  its  annual  report  on  the  European  Charter  for  Small
Businesses. http://europa.eu.int/comm/enterprise/enterprise_policy/charter/index.htm

17

                                                
The European Commission will:

– 

propose  targeted  action  in  the  short-term,  for  example,  amendments  to  the  existing
merger  and  parent-subsidiaries  directives  to  cover  the  tax  field.  It  will  investigate
medium-term,  comprehensive  solutions,  such  as  possibilities  for  companies  to  work
with  a  single  set  of  corporate  tax  rules,  which  provides  a  consolidated  common  tax
base for their EU-wide activities.

3.2

Sharpening the focus in 2002

The European Council in Barcelona should focus greatest attention on three priority
areas for the year ahead:

–  Employment policies, particularly active labour market policies, in order to reduce
unemployment and improve employment prospects for the whole  workforce, but
particularly to raise the employment rates of women and older workers.

–  Economic  reforms  to  strengthen  competition,  integration  and  investment  within
the European Union’s network industries and an acceleration of work to achieve
integrated financial markets.

–  A stronger knowledge base in the European Union.

These are areas which can make the biggest difference to the European Union’s long-
term  performance.  They  will  help  to  stimulate  employment,  investment  and
productivity in the short to medium term - not only in specific sectors but also across
the whole economy.

Wherever appropriate, the Commission will ensure that its proposals for Guidelines
on  Broad  Economic  Policy  and  on  Employment  translate  these  priorities  into
operational measures to be taken up at European and national level.

3.2.1 Developing  employment  policies  focusing  on  active  labour  market

policies for European labour markets

The  employment  rate  targets  of  the  European  Union  for  2005  and  2010  must  be
maintained  and  efforts  must  be  accelerated  to  create  more  and  better  jobs  and  get
more  people  to  work.  Measures  should  be  favoured  which  will  help  particular
groups, such as women and older workers, to enter and remain in the workforce.

–  The  European  Commission  will  in  2002  present  a  proposal  for  the  revision  of  the
European Employment Strategy to build on its achievements and to integrate the Lisbon
objectives and targets, including the timing of the Luxembourg process.

–  Member States should indicate from 2003 onwards how they will contribute to achieving
these European Union targets, by setting ambitious, but achievable national targets within
their National Action Plans for employment. This should be reflected  in the  Employment
Guidelines for 2003.

Progress  is  possible  if  action  is  taken  by  all  relevant  partners,  but  especially  from
Member States and the social partners. Action should focus on:

(a)

Removing  obstacles  and  disincentives  deterring  people  from  taking  up
and remaining in a job

18

(i)

Tax

Member States have already lowered taxes - from 1999 to 2001 – by approximately
¾ of a percentage point of GDP. This trend should be continued in order to obtain a
further reduction by 2005 in the order of one percentage point. Such reductions will
have  to  respect  fully  the  Stability  and  Growth  Pact  and  should,  in  general,  be
compensated by reductions in public spending.

–  The European Council should underline that,  where  Member  States  pursue  further  tax

cuts, they should give priority to cuts in favour of low-wage earners.

(ii)

Benefits

Comprehensive  reforms,  addressing  the  combined  effect  of  tax  and  benefits  in
creating  incentives  for  people  to  take  up  and  remain  in  the  workforce  is  an  urgent
priority for many Member States.

While such reforms should address control systems and eligibility rules for benefits,
they must focus on improving incentives which make work pay while ensuring that
the social objectives of welfare systems are not undermined.

The European Council should underline the importance of speeding up key benefit reforms
at a national level, taking account of the combined effects of tax and benefits.

Member States should pursue steps which:

–  discourage  early  retirement  for  individuals  and  the  introduction  of  early  retirement
schemes  by  companies.  This  will  help  to  increase  labour  force  participation  and  the
employment  rate  of  older  workers  and  should  contribute  to  an  increase  in  the  effective
average  retirement  age  presently  around  58  to  60  in  2010.  Efforts  should  be  more
pronounced in Member States with lower employment rates for older workers;

–  promote a gradual transition from work to retirement (e.g. encourage part-time work) and

reward those remaining at work longer;

–  address  reforms  of  means-tested  benefits,  without  jeopardising  the  social  objectives  or
undermining  incentives  for  education  and  training,  with  the  aim  of  ensuring  that  each
member of a household has an incentive to work.

The Commission will look further at how the combination of different policies impact the level
of  labour  market  participation  (such  as  incentive  systems,  penalties  for  work  in  alternative
employment after retirement).

The  social  partners  should  be  encouraged  to  support  a  more  gradual  exit  from  the  labour
force  for  older  workers.  Members  States  can  help  through  changes  in  regulations,  for
example, concerning certain benefit schemes (such as those related to health care).

(iii)

Improving  childcare  facilities  and  investigating  the  causes  of  current
gender gaps in the workplace

To increase the participation of women in the workforce, the provision of both public
and private child-care facilities should be improved. Establishing targets, which will
draw  on  future  childcare  indicators,  will  help  to  build  momentum  for  further
improvements. The lack of childcare is just one example of factors which influence

19

the participation of women in the workforce and which contribute to the existence of
a gender gap.

The European Council should set EU wide targets for 2010:

–  Childcare  should  be  available  to  at  least  90%  of  children  between  3  years  old  and  the

mandatory school age and to at least 33% of children under 3 years of age.

The Commission will launch an overall assessment in 2002 on the reasons why differences
leading to a gender gap, including in pay levels, exist.

(b)

Promoting  employability,  adaptability  and  mobility  to  manage  change
better

(i)

An Action Plan on skills and mobility

The  work  of  the  High  Level  Task  Force  on  skills  and  mobility  has  highlighted
important  barriers  to  greater  occupational  and  geographical  mobility  within  the
European Union. These barriers can result  from a lack  of key skills, the need for  a
more uniform, transparent and flexible regime for professional recognition and other
problems  associated  with  qualifications,  the  lack  of  information  about  work
opportunities  in  other  Member  States  and  obstacles  linked  to  pensions,  access  to
healthcare and social security.

The  Commission  will  shortly  bring  forward  an  Action  Plan  seeking  to  remove  the  barriers
within European labour markets by 2005. The action plan will propose steps to:

–  make education systems more responsive to the needs of the labour market;

– 

lower  regulatory  and  administrative  barriers  to  professional  recognition  as  well  as  other
barriers  resulting  from  the  way  formal  qualifications  and  non-formal  learning  are
recognised;

–  ensure  the  full  transferability  of  social  security  rights,  including  for  pensions,  across  the
European  Union.  This  should  include  a  very  practical  and  symbolic  step  to  replace  the
current  paper  forms  needed  for  health  treatment  in  another  Member  State  with  a
European Health Insurance Card. Such a card would seek to simplify procedures, rather
than to change existing rights and obligations;

–  analyse the interaction between immigration, employment and social policies.

Member States should take action to improve mobility within their territories.

–  This  requires  a  targeted  effort  combining  active  labour  market  policies  with  a
strengthening of the administration of benefit systems and more flexibility in the portability
of benefits across regions. It also requires that wages take greater account of productivity
and of labour market situations in different sectors and geographical areas.

(ii)

Anticipating  and  managing  change 
restructuring

in 

the  context  of  corporate

To address employment and the social aspects of corporate restructuring, a dialogue
between  social  partners  at  all  levels  is  important.  It  will  contribute  to  a  more
preventive and proactive approach; an approach which anticipates changes as well as
seeking to manage them.

20

The Commission is launching the first phase in the consultation of the social partners
on  anticipating  and  managing  change.  This  will  address  the  social  aspects  of
corporate  restructuring.  The  Commission  expects  the  social  partners  to  develop
commonly agreed approaches based on best practices.

–  The European Council should endorse the need for a positive approach to change in the
face  of  the  need  for  greater  adaptability  within  the  economy  and  call  on  the  social
partners to pursue work in this area.

3.2.2 Connecting Europe, connecting markets

The  European  Union  has  evolved  over  half  a  century  into  a  network  of
interdependence  and  integration.  Decisions  implementing  key  structural  economic
reforms launched at Lisbon must be taken in 2002. Work on creating the regulatory
framework  needed  to  achieve  integrated  financial  markets  must  be  accelerated  to
reduce the cost of capital, create jobs  and to  enable  citizens  and businesses  to  reap
the full benefits of the euro. A timetable and framework for further integration of gas
and electricity markets and for key areas of transport must be set out by the European
Parliament and Council. Missing links in Europe’s key  infrastructure  network must
be filled in and investment in basic infrastructures encouraged.

(a)

Financial markets

Progress  has  been  made  towards  the  Lisbon  targets  of  fully  integrated  securities
markets  by  2003  and  financial  services  markets  by  2005,  but  it  has  not  been  fast
enough.  This  is  crucial  to  growth,  competitiveness,  jobs  and  enterprise  within  the
European Union. Remaining administrative and legal barriers must be removed. The
UCITS  Directives  on  harmonised  investment  funds17  and  the  Regulation  on  cross-
border  payments  have  already  been  formally  adopted.  Decisions  are  needed  on  the
other key elements of the Financial Services Action Plan if the Union is to deliver an
integrated financial services sector on time as promised by the Lisbon and Stockholm
European Councils.

The European Parliament and Council should

–  adopt  by  June  2002  pending  proposals  on  distance  marketing  of  financial  services,

collateral, market abuse, and international accounting standards.

–  adopt by December 2002  pending  proposals  on  pension  funds,  financial  conglomerates

and prospectuses.

The  High  Level  Expert  Group  on  Company  Law,  set  up  by  the  European
Commission, has delivered its first report on issues related to takeover bids. Taking
into  account  its  recommendations,  the  Commission  will  bring  forward  a  new
proposal in the second quarter of this year. It would like full political agreement on
this crucial issue by the end of 2002.

17

Undertakings for collective investment in transferable securities.

21

                                                
(b)

Energy and transport

Final decisions are needed before the end of 2002 on steps to further integrate energy
and transport markets within the European Union. Further market opening will help
to improve services for businesses and citizens, while ensuring an adequate level of
service everywhere in the European Union at an affordable price.

(i)

Market opening.

The European Parliament and Council should:

– 

– 

– 

adopt as early as possible in 2002 pending proposals setting the dates and framework
for the final stage of the liberalisation of electricity and gas markets;

adopt by December 2002 proposals creating the Single European Sky, proposed rules
on airport slot allocation, as well as pending proposals on access to port services and
public service contracts;

make substantial progress on the forthcoming second package of measures intended
to revitalise European railways with a view to its adoption in 2003.

The Council must, in the light of the conclusions of the Laeken European Council:

– 

take the necessary decisions by March 2002 to start officially the development stage
of the Galileo satellite navigation system.

(ii)

Missing links

Market  opening  must  be  accompanied  by  efforts  to  improve  the  use  of  existing
networks  and  to  complete  missing  energy  and  transport  links  within  the  European
Union. This will strengthen the internal market and underpin effective competition.
In the case of energy, it will help to improve access to national grids for renewable
sources of energy and enhance the long-term security of EU energy supplies.

Following  from  its  Communication  on  European  energy  networks  in  December
the  degree  of
the  European  Commission  believes 
2001, 
interconnection between national energy grids is essential.

improving 

that 

– 

– 

The European Parliament and Council should adopt by December 2002 the revision
of  the  Guidelines  and  accompanying  financial  rules  on  Trans-European  energy  and
transport networks.

Member  States  should  achieve  by  2005  a 
interconnection equivalent to at least 10% of their installed generation capacity.

target  of  a 

level  of  electricity

Rapid agreement on the TEN guidelines should permit a better use of structural and
cohesion  funds  together  with  the  TEN  budget  to  ensure  the  necessary  investment.
This is particularly important for the further deployment of rail links to shift traffic
from the roads as well as for the cohesion countries.

(c )

Broadband networks

Realising  the  full  potential  of  a  knowledge-driven  society  means  that  citizens  and
businesses must be able to access affordable, high-speed communications  wherever

22

they are in the European Union. Broadband internet access will be a key factor  for
improving  the  performance  of  the  economy.  Broadband  networks  will  form  the
backbone of an increasingly interconnected and integrated society.

Broadband  roll  out  is  currently  not  occurring  at  a  fast  enough  pace,  reflecting  the
large investments concerned. Decisions on such networks is a matter for the market
to decide. Yet, public authorities can promote competition, in particular in the local
loop and ensure a level playing field through the  application of  the recently  agreed
new  rules  for  telecommunications.  They  can  also  help  to  stimulate  the  market  as  a
purchaser of new applications and services  which need  broadband capacity,  and by
putting government services on-line.

–  The  European  Council  should  establish  as  a  target  the  widespread  availability  of

broadband technologies throughout the European Union by 2005.

Promoting  the  roll  out  of  broadband  networks  is  only  part  of  what  is  needed.  It  is
essential  that  full  use  is  made  –  starting  in  schools  -  of  the  possibilities  offered  by
high  speed  links.  This  highlights  the  importance  of  on-going  actions  to  spread  IT
skills  throughout  the  population  within  the  framework  of  eLearning  and  lifelong
learning  initiatives.  There  is  also  an  urgent  need  in  schools  for  more  computers,
better  quality  Internet  connections,  and  better  training  of  their  teachers  as  regards
new technologies.

–  The  European  Council  should  endorse  new  targets  for  eLearning  in  European  Union
schools. Efforts should continue to meet the existing targets and new ones should include
the objective of ensuring by the end of 2002 that  the ratio of Internet connected PCs to
pupils is brought down across the European Union to one for every fifteen pupils.

3.2.3

Investing in knowledge for future competitiveness and employment

Europe is at the cutting edge of many areas of science, it has the proven capacity to
turn  ideas  into  innovative  products  and  services,  and  its  education  systems  are
generally strong.

At the same time, the European higher education and research system fails to attract
enough  people  and  investment,  both  from  within  Europe  and  world-wide.  Funding
for research and education is still not sufficient, particularly from business sources in
the case of research.

Moreover,  lifelong  learning  is,  despite  progress  in  some  Member  States,  still  not  a
reality for most people. As many as 150 million Europeans have not completed their
secondary  education;  relatively  few  adults  participate  in  life  long  learning  (varying
from one in one hundred to one in five).

(a)

A European Knowledge Area

The  European  Union  must  increase  investment  in  human  resources,  develop  the
European  Area  of  Research  and  Innovation,  transform  education  and  training
systems  within  a  lifelong  learning  perspective,  create  networks  and  centres  of
excellence in research and education, and foster European mobility.

Some progress has been made at both Community and national level to adapt policies
to  these  challenges,  but  a  stronger  European  impulse  is  needed.  A  more  integrated

23

approach should also help to ensure that the business in the European Union remains
competitive  and  that  people  with  the  right  skills  are  there  to  fill  new  research  and
development jobs as investment increases.

–  The  European  Parliament  and  Council  should  adopt  the  sixth  Research  Framework

Programme by June 2002.

–  The European Commission will in 2002 propose an integrated strategy for Community
education and research policies. It will be based on an integrated approach towards the
education  and  research  aspects  of  training  and  career  development,  university  issues,
the  development  of  European  knowledge  and  science  networks,  and  reinforced  co-
operation and exchanges with third countries.

This integrated strategy will include actions to:

– 

– 

– 

– 

Develop  a  transparent  and  open  European  environment  for  research  and
education.  The  practical  and  legal  conditions  required  to  ensure  genuine
mobility for all those involved in education, research and innovation should be
put in place. This will also draw on the Skills and Mobility Action Plan.

Create  European  networks  and  centres  of  excellence  in  research  and
education.  The  new  sixth  Research  Framework  Programme  will  provide
funding  for  the  creation  of  major  networks  of  excellence  in  research.  The
Commission  will  also  complete  the  mapping  of  excellence  in  research  in
selected  areas,  with  the  help  of  Member  States,  and  extend  the  process  to
enlargement countries. Consistency will be ensured with education aspects, for
which specific actions will be proposed in the integrated strategy.

Enhance  the  European  dimension  of  lifelong  learning.  The  right  of  free
movement  will  be  helped  by  a  coherent  approach  to  the  recognition  of
qualifications  and  competences  based  on  greater  comparability  of
qualifications  and  on  mutual  trust.  This  should  be  helped  by  developing
European  masters,  certificates  and  diplomas,  minimum  quality  standards  in
education  and  training,  peer  review  and  co-operation  between  qualification
authorities in the European Union.

Create  the  conditions  for  more  investment  in  research  from  private  sources.
The Commission will support the exchange of good practice and experience in
this area; use the sixth Research Framework Programme to support important
projects in which business participates; and step up the complementary use of
Framework Programme and European Investment Bank funding following the
agreement between the Commission and EIB.

Improvements in the level of private sector spending on R&D must go hand in
hand with continued high levels of public funding for research in priority areas.

The  actions  envisaged  make  it  both  realistic  and  opportune  to  set  targets  for
research spending in 2010 that will close the gap with Europe’s main partners
and help the European Union to achieve the objectives set in Lisbon.

24

The European Council should endorse action to:

– 

strengthen the European area of research and innovation by setting a target of 3% of
GDP for the overall level of public and private spending on research and development
by the end of the decade. Within that total, the amount funded by business should rise
to around two thirds against 55% today18.

(b)

Frontier technologies

At  Stockholm  the  European  Council  recognised  that  frontier  technologies,  such  as
life  sciences  and  biotechnology  alongside  other  clean,  environmental  technologies,
are a key factor for future growth in an area where Europe’s knowledge base, though
behind the US, is well-developed.

(i)

An Action Plan for life sciences and biotechnology

Although positive developments are underway, the European Union suffers from its
late entry into the life sciences area. It is also constrained by a lack of people with the
necessary  skills  and  insufficient  incentive  from  intellectual  property  rules.  There  is
also insufficient coherence in the overall regulatory and policy framework.

The European Union must actively develop policies which are forward-looking, take
a global view and which drive growth and employment opportunities in the medium-
term. If it fails to do so, it is likely to be confronted by policies shaped by others, at
home and abroad.

–  The  European  Council  should  endorse  the  importance  of  this  sector  and  provide

strategic orientations for future work.

–  The  Commission  will  shortly  present  a  comprehensive  strategy  to  address  the  specific
obstacles and opportunities for life sciences and biotechnology. The areas addressed will
include  competitiveness  and  innovation,  research,  the  regulatory  environment,  the
international context, the involvement of the public, and ethical issues.

–  The strategy will set out an action plan proposing concrete measures and will invite other
public  and  private  actors  to  participate  in  the  process.  The  European  Council  should
endorse the importance of this sector and provide strategic orientations for further work.

(ii)

Clean technologies

The development and wider take up of clean technologies will also be important for
stimulating  growth  and  employment.  They  were  signalled  as  a  key  frontier
technology by the Stockholm European Council. Realising their full potential means
overcoming  current  market  barriers  to  investing  in  them  and  creating  a  favourable
business environment.

The sixth Research Framework Programme should also play a role in supporting the
development  and  uptake  in  an  area  where  European  companies  already  play  a
leading role.

18

The  level  of  business  R&D  spending  is  higher  (around  65%  of  the  amount  spent  on  R&D),  but  a
proportion of that spending is actually financed by public research money.

25

                                                
–  The  European  Commission,  following  the  forthcoming  report  on  environmental

technologies, will develop an action plan for tackling obstacles to their take up.

3.3

Beyond Barcelona

3.3.1 Ensuring and enhancing co-ordination

The growing  interdependence of  the  economies  of  the  Member  States  adopting  the
euro,  but  also  of  those  that  are  not  participating,  calls  for  enhanced  and  effective
economic  policy  co-ordination.  This  must  ensure  further  convergence  of  the
European Union’s economies and a smooth functioning of the internal market.

The  Treaty  and  the  Stability  and  Growth  Pact  provide  a  framework  for  such  co-
ordination.  It  is  based  on  consensus  and  involves  a  common  assessment  of  the
economic  situation,  agreement  on  appropriate  economic  policy  responses,  and  peer
review leading, where necessary, to adjustment of particular policies.

The European Council should endorse a strategy for enhancing economic policy co-
ordination which should consist of:

– 

– 

– 

The assessment of the economic situation and the policy mix increasingly from
an euro area perspective, supported by an upgrading of the European Union’s
statistical base.

Greater openness in building consensus on  appropriate policies by ensuring it
takes place within common rules governing the conduct of economic policy.

The  provision  of  early  information  on  major  policy  initiatives  by  a  Member
State to other Member States and the Commission in order that they can benefit
from the views of their partners through a process of peer review.

Furthermore,  the integration of the  economic, social  and environmental  dimensions
within  the  Lisbon  strategy  makes  it  imperative  to  pay  increased  attention  to  the
consistency of the policies pursued in these fields. This implies a better co-ordination
and synchronisation of the key policy instruments used to steer its different elements,
particularly:

– 

– 

– 

the  Broad  Economic  Policy  Guidelines,  which  the  Commission  proposes
shortly after the Spring European Council;

the  Employment  Guidelines  currently  presented  by  the  Commission  each
Autumn, and

the “Cardiff Report” on economic reform presented by the Commission at the
end of each year,

They  should  be  organised  in  a  way  which  allows  the  Spring  European  Council  to
provide  the  most  effective  guidance  and  political  impetus  on  economic,  social  and
environmental questions.

26

3.3.2 Enlargement

The Lisbon strategy provides an additional way for candidate countries to adopt and
implement  key  economic,  social  and  environmental  objectives,  but  it  is  not  an
additional  condition  for  entry.  The  eEurope  Plus  initiative  launched  by  candidate
countries at the Göteborg European Council is a good example of this. They have put
in  place  a  framework  to  speed  up  their  transition  to  a  knowledge  economy.  The
Commission  believes  it could  be  helpful  if  other  similar  initiatives  were  developed
across the candidate countries.

However, the process of enlargement also presents challenges for the strategy  itself
just as it does for economic and social cohesion. It  will certainly be a further factor
for  growth,  investment  and  job  creation  across  the  Union  in  the  second  half  of  the
decade, but it will also put many of the quantitative Lisbon targets under strain.

It will involve a two-way learning process; a process which has already started with
the  participation  of  candidate  countries  in  all  Community  programmes.  This  is
helping  those  countries,  sometimes  with  the  support  of  pre-accession  aid,  to
familiarise  themselves  with  the  objectives  and  way  of  working  within  the  Lisbon
strategy.

Moreover,  pre-accession  funding  may  help  them  in  adopting,  implementing  and
enforcing those elements of “acquis communautaire” which form part of the Lisbon
strategy.

27