Opinion of the European Economic and Social Committee on the "Assessment of the experiences gathered by the EESC to evaluate the economic, social and employment impact of structural reforms in the EU"
Date: 2003-10-30
Institutions: European Economic and Social Committee
Subjects: ESC opinion, economic situation, impact study, labour market, social impact, structural policy

5.2.2004

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Official Journal of the European Union

C 32/103

Opinion of the European Economic and Social Committee on the ‘Assessment of the experiences
gathered by the EESC to evaluate the economic, social and employment impact of structural
reforms in the EU’

(2004/C 32/23)

On 27 March 2003, the European Parliament decided to consult the Economic and Social Committee,
under Article 262 of the Treaty establishing the European Community, on the ‘Assessment of the
experiences gathered by the EESC to evaluate the economic, social and employment impact of structural
reforms in the EU’.

The Section for Economic and Monetary Union and Economic and Social Cohesion, which was
responsible for preparing the Committee’s work on the subject, adopted its opinion on 16 October 2003.
The rapporteur was Mr Vever.

At its 403rd plenary session, held on 29 and 30 October 2003 (meeting of 30 October), the Economic
and Social Committee adopted the following opinion by 74 votes to 27, with 26 abstentions.

On 27 March 2003 the EESC was requested by the European
Parliament to evaluate the economic, social and employment
impact of structural reforms in the EU. The EESC asked its
counterparts and socio-professional correspondents in the
various EU countries if they would like to contribute to this
evaluation. The process included the organisation by the EESC
— with an eye on this opinion and another request from the
Commission for an opinion on the Lisbon strategy — of a
conference in Brussels on 8-10 October 2003 (‘The Contri-
bution of Organised Civil Society to the Lisbon Process: For a
More Participatory Union’). The reflections made lead the EESC
to make the following comments.

1. Summary

The EESC reaffirms its support

1.1.
for the structural
reforms carried out in the countries of the Union, particularly
following the Lisbon mandate, aimed at making Europe
more competitive and ensuring that its economic and social
development model is sustainable. It also points out that the
issue is a demanding one: it involves not only doing better
than before but, above all, doing better than elsewhere. Now,
the EESC is concerned by a growing gap between the aims set
for these reforms, the delays in implementing many of them,
and the persistent deterioration in growth and employment in
Europe. Without a turnaround, there is a risk of this strategy
of reforms degenerating into a ‘bubble’, with an inflation of
objectives, concepts and participating states, but as many
deficits as regards sharing of responsibility, implementation
and impact.

be spelt out more clearly that we are justified in having the
common ambition of being the prime beneficiaries of the
world’s number one market, and that the reforms planned will
determine the future of our European type of development in
an open economy.

The EESC is greatly concerned about

1.3.
the current
absence of real growth prospects for Europeans; this greatly
complicates the implementation of reforms, because it feeds
disquiet and weakens social cohesion. The EESC agrees that
there is a need for a European growth initiative, which has
been the subject of several convergent proposals (e.g. Italian
Council presidency, EU Commission, Sapir report, Franco-
German statement) and which has just been supported by the
European Council of 16 and 17 October 2003. The EESC
therefore recommends that the transnational research and
infrastructure investments on which our future depends should
be promoted, in particular through loans and public/private
sector partnerships on a European scale, though without any
relaxation of the discipline that the stability pact imposes on
national budgets.

1.4.
In particular the EESC deplores the absence of a
common economic policy consistent with the creation of the
euro: this should be put right without further delay, and should
include an alignment and simplification of tax provisions on a
European scale. The integration of the employment guidelines
and the broad economic policy guidelines into a more effective
policy mix would also be a useful step towards better economic
and social governance throughout the EU.

1.2.
The EESC would stress first of all the need to make the
Lisbon mandate more credible to Europeans and thus disarm
criticism about its real significance and social cost: it should

The EESC notes that the single market is still far from
1.5.
being completed even as it is being enlarged:
its identity,
cohesion and security should be strengthened, in particular by
contemplating transnational Community inspections, the joint
management of external customs, a European statute open to

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SMEs and even the emergence of services of general interest
on a European scale in those areas where this would be
justified. New initiatives remain necessary to ensure higher
quality and a real simplification of red tape in Europe (more
impact analyses, where the EESC is ready to play its part, and
more occupational self-regulation).

1.6.
The EESC is also concerned by the extent to which the
EU lags behind in the field of research, just at a time when the
Lisbon aim of competitiveness is based on the trump cards of
a knowledge-based economy. It would be particularly advisable
to boost the budget appropriations for the framework research
programme so it can achieve a real threshold of effectiveness,
while at the same time focusing it more on authentically
European technological programmes. European technological
innovation would get a big boost if there was a greater
convergence of defence policies as part of a common security
and foreign policy, including a more effective mutual opening-
up of the relevant public procurement markets.

1.7. While stressing how the various structural reforms
interact on one another, the EESC would point out that their
state of implementation from one country to another varies
greatly in the different areas that they cover: opening-up of
markets, access to funding, public spending equilibrium,
encouraging innovation, adapting the labour market, modern-
improving education and training,
ising social protection,
simplifying red tape and consolidating sustainable develop-
ment. The EESC also notes that the reforms are generally
further advanced in those states that have respected the
discipline of the stability pact than in the others. The EESC
would stress the need for more detailed information on
national states of play and proposes incorporating into the
Europa website a database highlighting best practices involving
the Lisbon strategy reforms.

1.8.
The EESC would emphasise the central role that the
actors of organised civil society have to play to ensure the
reforms are a success, and regrets that this obvious fact, which
is not yet
is explicitly mentioned by the Lisbon mandate,
stressed enough in all the Member States. The preparation of
the spring summits should be the subject of systematic national
debates with business circles, the social partners and other civil
society players. Initiatives from them should be given more
encouragement and highlighted in the annual reports of
the states and the Commission, such as in the database
recommended by the EESC on best practices in implementing
the Lisbon reforms. The EESC, for its part, intends to contribute
directly to this improvement of information.

The EESC would conclude by stressing the need to
1.9.
ensure that the structural reforms are, on the one hand, backed
up by a revival of economic growth through the completion
of the single market and the development of trans-European
investments and, on the other hand, are discussed better, better
understood and better allocated among all those who have to
share responsibility for them: they must not only be pushed
forward by political leaders but also be backed up ‘on the
ground’ by the economic and social players. The EESC is
convinced that this greater synergy between political decision-
makers and civil society players will decide the success or
failure of the structural reforms now being carried out in the
EU.

2. The processes of structural reform carried out in the

EU

2.1. The various structural reform processes

2.1.1.
The economy and society constantly have to adapt
and reform. But reforms have recently gathered pace under the
pressure of social developments, commercial and cultural
exchanges, technological changes, European integration and
economic globalisation. Many structural reform ‘processes’
regarding economic, social and employment matters have thus
been set in motion in the EU during the past decade, with a
view to restoring EU competitiveness, boosting its economic
growth, creating more jobs and ensuring the sustainability of
its development and its environment. Some of these reforms
(e.g. continued opening-up of the single market, introduction
of the euro) have been undertaken primarily at European level,
with the EU institutions playing a leading role. Other reforms,
however, have been initiated by one state or another at
level, according to autonomous policy
a strictly national
guidelines, at
its public authorities (e.g.
economic liberalisation in the United Kingdom), or within a
framework of close cooperation with the social partners (e.g.
the Wassenaar economic and social contractual process carried
out in the Netherlands). In recent years, structural reforms
have gathered pace in all the Member States in accordance
with guidelines adopted jointly by the 15 Member States and
implemented in each of them. While these reforms fall under
the heading of shared objectives,
including periodic and
comparative assessments, each Member State is allowed a high
degree of freedom of initiative and application in the light
of the diversity of national contexts and situations. Many
interactions have thus developed around these reforms
between the various levels of power and between the Member
States.

the initiative of

2.1.2. With the Maastricht Treaty of 1993 and the coming
of the single currency, one central economic reform process at

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European level has been the machinery of the stability pact,
accompanied by the annual adoption of the broad economic
policy guidelines. The 15 Member States also agreed in Cardiff
in June 1998 to launch structural reforms designed to open
up the markets in goods, services and capital.

The 1997 Treaty of Amsterdam, while specifying
2.1.3.
that
the stability pact also included a growth target for
jobs (hence the official title of ‘stability and growth pact’),
supplemented the adoption of broad economic policy guide-
lines with guidelines for employment, which were then spelt
out by the Luxembourg process in November 1997. The
Cologne summit in June 1999 also drew up recommendations
as part of a European employment pact.

2.1.4.
An overview of the various structural reform process-
es was then undertaken under the Lisbon strategy agreed to by
the 15 Member States in March 2000. Taking as its foundation
the new assets of the knowledge-based economy, this strategy
set itself the ambitious target of putting the EU in the forefront
of world competitiveness by 2010, organising a revival of the
single market (particularly in financial services,
intellectual
property and the opening-up of the energy sector and infra-
structures) and pushing through a series of economic, social
and administrative reforms in the Member States (particularly
as regards training, research, the labour market, social welfare
and administrative simplification). Fifteen years on, this Lisbon
strategy is a logical extension of the 1992 programme that the
Delors I Commission launched in 1985 with a view to
completing the European single market by that date, and also of
the White Paper on growth, employment and competitiveness,
which the Delors II Commission presented in 1993 to boost
the impact of the programme for the single market.

2.1.5.
The 15 added to this raft of reforms in Gothenburg
in June 2001 by deciding on an overall approach for taking
the requirements of sustainable development into account in
all EU policies.

2.1.6.
Since 2003, an integrated cycle decided by the
Barcelona European Council of March 2002 has been set in
motion by the Commission to improve the interaction of these
various economic, social and employment reforms, with a
central role confirmed for the spring summit, as well as other
rendezvous for the other quarterly European summits and for
the various Council meetings throughout the year, with three
years being allowed for adjustment to these reforms.

2.2. The aims of the structural reforms

The main aim of the reforms is to boost the economic
2.2.1.
competitiveness of a Europe that is largely open to the world,
while consolidating and adapting the European model of
society founded on mutual dialogue and fundamental social
rights. These structural reforms that will determine the future
are made necessary by the need for sustainable European
economic and social development in a world of accelerating
change.

2.2.2.
The European economy today has to compete with
both our large high-tech industrial partners, particularly the
USA and Japan, and the new low-cost emerging economies.
The main structural changes concerning the competitiveness
of the European economy are linked to:

2.2.2.1.
the acceleration of technological change, which is
global and which goes hand in hand with the increased
obsolescence of products and technology, fiercer worldwide
competition and relocation on a large scale to countries where
costs are lower, many of which, moreover, are constantly
making progress as regards education, training and vocational
and technological skills;

the WTO trade negotiations, which are scheduled
2.2.2.2.
to continue — despite the recent
failure of the Cancun
ministerial conference in September 2003 — in order to
implement the Doha agenda, which involves a broad pro-
gramme to support international development and the open-
ing-up of economies on a worldwide scale, covering industrial
products, services and agriculture, and equipped with new
framework rules on competition, intellectual property, public
health, and the environment;

changes in social behaviour, affecting jobs and the
2.2.2.3.
labour market in particular, with a continuation of the recent
reduction in annual working time, which is often managed in
a more flexible and personalised manner;

2.2.2.4.
an ageing of the population, which affects all
European countries and raises a series of questions concerning
both better management of the various age groups on the
labour market and the question of how to finance social
welfare.

2.2.3.
Another important objective of the reforms is to
strengthen EU cohesion around its single market, an issue
which will be even more important with the enlargement of
the EU to 25 in 2004.

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the arrival of

the euro needs to be
2.2.4. Moreover,
accompanied by a policy of economic convergence by the
Member States, in accordance with the criteria of the stability
and growth pact.

2.2.5.
Finally, there is a need to ensure that economic and
social development in Europe is sustainable, as regards the
balance of public finance, the viability of jobs (competitiveness,
training, mobility), the solvency of social security — especially
retirement and health provisions — the strengthening of social
cohesion and environmental protection.

2.3.

Public perception of the reforms

2.3.1.
As regards these various objectives, certain questions
have also been raised about the sense, the effectiveness and
following the major
even the feasibility of
the reforms,
slowdown in economic growth,
the disturbances on the
financial and stock markets over the past two years and the
rise in unemployment. In particular, the highly ambitious goal
set in Lisbon to make Europe the most competitive economy
in the world by 2010 seems to many to be over-optimistic.
This particular aim was set in March 2000 at a time when
European growth, driven by the emergence of
the ‘new
economy,’ finally seemed to have emerged from a 25-year
slowdown and rejoined, some hoped for a fairly long period,
the club of high annual growth rates, even exceeding double-
digit level in the case of Ireland. But this economic scenario
quickly changed with the bursting of the technological and
stock exchange bubble and the renewal of
international
tensions. In addition, the aim of maximum competitiveness
laid down in Lisbon may also arouse fears, insofar as opinion
may wonder about the price to be paid to catch up with
competitors in the developing countries, where wages and
social protection are incomparably lower and the most
emergent economies, such as China, combine these features
with productivity,
investments and tech-
nologies of the highest level. Such doubts should not be
underestimated and could even, if they were left unanswered,
contribute directly to jeopardising the success of the processes
undertaken.

industrialisation,

2.3.2.
The EESC, for its part, is still confident that the goals
of the reforms adopted in Lisbon, including that of world
competitiveness, will be achieved provided they are ‘read’ in an
appropriate manner. The EESC basically sees the Lisbon
objective as the 15’s clearly expressed political will to give
themselves the means of ensuring their growth, their jobs and
the sustainability of their economic and social development

model through reforms that ensure their compatibility with
the increasing constraints of an economy open to international
competition by taking as their base our best real or potential
assets, especially education and training, the spirit and capa-
bility of innovation and the pooling of our principal resources.
In particular, it is perfectly legitimate and feasible for Europe,
its companies and its citizens to seek to be the prime
beneficiaries of the world’s number one market — 500 million
producers and consumers with diversified but, overall, com-
paratively high real incomes — following the completion and
improvement of their single unified and enlarged market. Such
a view can only consolidate the credibility of the Lisbon goals,
even if all kinds of challenges must be met to achieve them.

2.3.3.
The EESC does not underestimate the determination
and perseverance now required to implement these reforms.
Major progress has already been achieved, but the greatest
efforts still lie ahead of us if we are to have any hope of
achieving these goals. This means in particular an improve-
ment in the methods for implementing them.

3. EESC comments on structural reform methods

3.1. The main areas of progress on reform methods

3.1.1.
The Lisbon strategy has, firstly, given the 15 the ‘road
map’ which had hitherto been lacking. By setting a series of
goals to be achieved between now and 2010 and deadlines for
implementing reforms, it has provided a multiannual timetable
of operations for us to join forces and together build an
attractive, open and competitive Europe Site. The annual
review of this strategy at a spring summit, makes it possible to
draw up assessments, make comparisons and update priorities
accordingly.

The open coordination method, which has by and
3.1.2.
large been chosen in the various Member States for undertaking
these reforms, puts a new spin on the subsidiarity concept,
which is no longer a pretext for dividing up European and
national powers. Instead, the proper application of subsidiarity
links and ‘bridges’ to be established
should enable useful
between the European, national and, where appropriate,
regional or local
levels of power, while at the same time
justifying a mutual ‘peer review’ of policies from country to
country that will encourage the spread of best practices.

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3.1.3. Moreover, the public authorities, whether they be
European, national or even regional, are not the only ones
affected by the reforms: the private sector, the social partners
and the whole of organised civil society also have a leading
role to play, as the Lisbon mandate indicates very explicitly. It
should particularly be emphasised that Unice and ETUC played
an active role in preparing the spring summits by presenting
their contributions before each of them, and by taking part,
with the Commission, in preparatory summits of the social
partners at the invitation of the Council presidency. In addition,
by recently reaching agreement on a multiannual timetable for
organising their social dialogue, Unice, CEEP, UEAPME and
ETUC affirmed their wish to fulfil one hundred per cent their
and
autonomous
implementing structural reforms at European level. This
illustrates the growth of a ‘horizontal’ dimension to the
subsidiarity concept (with responsibilities being shared out
between public authorities, civil society associations and the
private sector), in addition to its traditional ‘vertical’ dimension
(Europe, states, regions).

contractual

defining

role

and

in

Several national professional organisations have also
3.1.4.
taken the initiative to make their own critical and reasoned
assessment of the state of progress of these reforms, including
their spontaneous or contractual contributions, and present
them directly to the spring summit. Evidence of this can be
found in the detailed national reports of the member feder-
ations of UNICE, which concern each of the fifteen EU Member
States — plus Norway and Turkey — drawn up for the last
spring summit in March 2003 in Brussels (1).

3.1.5.
The interactions between economic guidelines,
employment guidelines, completion of the single market and
structural reforms are also clear and have been demonstrated
since the beginning of 2003, when the Commission brought
out its annual reports on these different areas at the same time
as part of an overall ‘implementation’ report.

One thing in particular to be deplored is a definite
3.2.2.
lack of concrete information from the Member States about
the real state of national reforms at each spring summit. The
Member States now seem to favour new debates on the goals
already set in Lisbon, even if this means adding new guidelines
— without any clear justification — instead of helping to
assess and compare national reforms, something that the
Commission is finding very difficult to do with any accuracy
in the absence of any such collaboration from the Member
States.

3.2.3.
This lack of information generally goes hand in hand
with delays in implementation and breakdowns in discipline
on the part of the Member States. It is worth mentioning here
the growing difficulties that many Member States have in
meeting the stability pact’s requirements on equilibrium in
the persistent deficiencies in transposing
public finances,
directives into national
law and the growing number of
violations of the rules of the single market.

3.2.4.
Also worth emphasising, in several Member States,
is the alarming lack of involvement of the social partners and
civil society in both the definition and implementation of
reforms, and in the drawing-up of reports on their progress.
This situation, moreover, was largely behind the member
federations of Unice presenting their own national reports to
the last spring summit.

4. EESC comments on the results of the structural

reforms

4.1.
The structural reforms carried out in the EU, particu-
larly through the Lisbon strategy, have mainly concerned the
following fields, though they are intended to provide each
other with mutual enhancement:

— continued opening-up of the markets,

— improved access to funding,

3.2. The main weaknesses in reform methods

— balanced public spending without increasing the tax

burden,

3.2.1.
Coordination between the various economic, social
and environmental processes, which has been undertaken by
the Commission since 2003, still remains embryonic since so
far it is still too formal and has no decisive impact on national
political choices. It has not yet been followed by sufficiently
permanent cooperation between the various Councils of
ministers or between the Member States themselves, so,
whatever happens, a ‘running in’ period will be necessary as
regards procedures and behaviour, especially during the first
three-year coordination cycle (2003-2006).

— fostering innovation,

— adapting the labour market,

— modernising social welfare,

— boosting education and training,

— cutting red tape,

— consolidating sustainable development.

(1) www.unice.org/lisbon.

As regards the opening-up of markets,

4.2.
the most
significant progress has been made in the telecommunications
and, to a lesser degree and with some delays, energy sectors —

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gas, electricity — where prices are often still too high. The
postal sector, which is most often in the public sector, is still
highly compartmentalised, despite initial limited liberalisation
in Europe. There are still
interconnection, equipment and
modernisation delays in transport infrastructures, due mainly
to the actual
trans-European network
projects being put off too often.

implementation of

under the heading of foreign and security policy badly affects
Europe’s position in this field and its derivatives (cf. new
materials, electronics, etc.). As regards the granting of patents,
some countries maintain a good national level (cf. Finland,
Sweden) but Europe on average continues to lag way behind
the USA or Japan. The absence of a Community patent,
pending the translation of the recent political agreement into
concrete facts, casts a dampener on the situation.

4.3.
As regards access to funding, the progress achieved
and ongoing in the integration of European financial markets
is largely due to the introduction of the euro. Various measures
have also been taken in several countries to facilitate access to
start-up funding and help SMEs. But access to venture capital is
still grossly inadequate in Europe, particularly when compared
with the United States, which harms the vitality of SMEs and
innovative companies on the European market. In addition,
unification of
too
dependent on rules that have been delayed, when self-
regulation initiatives by the professionals concerned could
have been encouraged more.

the European financial market

is still

4.4.
As regards public sector deficits, everyone can see that
situations are very different from one country to another: the
reports of the Commission and Council stressed that while
certain Member States can be pleased to have achieved a
positive balance in their public sector finance (cf. Denmark,
Finland, Ireland, Luxembourg, Sweden), others have seen their
deficits grow alarmingly (cf. Germany, France, Italy and, until
recently, Portugal), reaching or exceeding the limits fixed by
the stability pact. Those countries which have big deficits
today are also those which, comparatively, have been lagging
behind in implementing structural reforms. Countries which
have a better balance on public sector financing are generally
further forward with their structural reforms, even if some of
them, particularly in northern Europe, also have high taxation.

4.6.
As regards improving the labour market, situations
vary greatly from country to country, as the appended tables
show. Even if none are problem-free, some have a high level
of employment overall, while others have to cope with
structural under-employment and an alarming level of unem-
ployment. Major reforms are in hand to improve the operation
of the labour market, particularly to improve flexibility and
the matching of vacancies to job applications, bearing in mind
the ageing of the population. The consultations with the social
partners, and the negotiations with them and between them,
aim in particular to ensure that the new measures actually lead
to better jobs and working conditions in the face of the
challenge of international competitiveness. Some interesting
initiatives have been taken, for example in France, to encourage
job seekers to start their own businesses by cutting red tape
and ensuring that, at least initially, they do not lose their
unemployment benefit.

4.5.
As regards stimulating innovation, the general use of
the Internet and the widespread access of companies to new
technologies has made it possible to improve significantly the
quality of goods and services, and make a lot of progress on
productivity. This trend is often accompanied by the use of
international divisions of labour to take account of compara-
including wages, an increase in sub-con-
tive advantages,
tracting and the relocation of manufacturing (cf.
textile,
electronics, toys, etc.), or even of services (cf. business account-
ing) to emergent non-EU economies. But research expenditure,
although significant in many countries (cf. Finland, Sweden,
France) remains insufficient in several countries and far below
the objective of 3 % of GNP fixed by the Lisbon strategy. They
are also too much out of step with each other and with the
European common R&D policy. Finally, the lack of a real
alignment of economic and technological defence resources

4.7.
As regards the modernisation of social security, many
reforms are in hand to restore financial equilibrium in the face
of the ageing of the population affecting all EU Member States.
This involves in particular adapting the length of benefit
contribution to longer life expectancy, reforming pension
schemes in both the public and private sectors, so as to reflect
the best practice of both sectors, and ensuring that ‘seniors’ are
not encouraged, or even forced, to leave the labour market
prematurely (1). The use of supplementary insurance schemes
and pension funds is encouraged. While such reforms are
spreading, they are also encountering problems of implemen-
tation and effectiveness, particularly too much early retirement
(cf. Belgium, France, Greece).

(1) Older workers, OJ C 14, 16.1.2001.

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As regards education and training, most EU countries
4.8.
have highly efficient and developed educational systems (par-
ticularly in northern Europe), which, however, are sometimes
still too divorced from economic needs and realities. Initiatives
have been taken recently, for instance through legislation,
interprofessional agreements, and exchange programmes, to
improve these links and develop apprenticeship schemes (cf.
France, Luxembourg, Spain, Italy, Portugal). The generalisation
of internet access also helps to improve training.

firms, because of

4.9.
As regards the simplification of rules, this is a need
common to all EU countries, even if some (cf. Denmark,
Finland, the UK, Sweden) have started sooner than others to
introduce programmes and methods to remedy this. Priority is
generally given to simplifying the procedures for setting up
companies and small
their impact on
economic activity and jobs. This necessary simplification of
administrative charges and procedures should be accompanied
by more effective combating of the underground economy,
which may get even bigger with EU enlargement. Another
priority is the best way to transpose EU directives, where, as
the six-monthly scoreboards published by the Commission
show, situations vary greatly from country to country, but
where the longest national delays (cf. France, Greece, Italy)
should nevertheless be
reduced following government
measures.

4.10.
As regards sustainable development, the national
measures taken to implement the Kyoto agreements are having
variable results. Environmental protection is by tradition more
anchored in legislation, programmes and codes of conduct in
the countries of the North, but new measures have been taken
in the other EU countries, and exchanges of good practices have
had some success (cf. voluntary codes, company governance,
environmental protection charters,
labels, checks and the
distribution of emission licences, etc.).

5. The EESC’s conclusions on the impact of structural

reforms

The EESC notes first of all that all the countries of the
5.1.
EU have actually undertaken structural reforms, with common
objectives,
to revitalise their competitiveness, strengthen
growth, boost jobs and to ensure the sustainability of their
economic and social development.

The main areas where progress has been made, and
5.2.
which enable us to remain confident about the Lisbon strategy
despite the delays in implementing it, concern:

5.2.1.
the awareness of the need for reforms in view of the
challenges of competitiveness and demographic and techno-
logical changes, irrespective of traditional political divisions;

5.2.2.
the development — even if it needs to be stepped up
— of initiatives taken by business and socio-professional
circles, particularly on a European scale, to help make the
reforms a success;

5.2.3.
in particular, the involvement of the social partners
in the development of the reforms concerning working life
and social issues (cf. training, labour market, social protection);

5.2.4.
distribution of
Internet;

with the opening-up of telecommunications, speedier
information technology and access to the

5.2.5. more concern about sustainability and the future (cf.
management of public finance, reform of social welfare,
consumer safety, environmental protection).

The main delays which must be made up, and which
5.3.
would make it possible in particular to rectify economic
growth, concern:

5.3.1.
completing the single market in fields such as energy,
transport infrastructures and services, including financial ser-
vices, so as to improve reliability and reduce costs: the EESC
thus deplores the fact that Europe persists in not giving priority
to its single market in order to ensure its growth;

better balance in public finances, under conditions
5.3.2.
that favour investments and growth, and a start towards
European harmonisation of the main tax rules impacting
directly on the operation of the single market;

5.3.3.
real European dynamism in technological research,
which at present is inadequate in terms of the ambitions
proclaimed in Lisbon;

5.3.4.
directives into national law.

simpler rules and greater rigour in transposing EU

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5.4.

The EESC also stresses that:

make public opinion ask questions, lead the EESC to submit
the following recommendations.

5.4.1.
reform vary greatly from one country to another:

national situations and the state of progress on

on the whole, indicators are often better in the
5.4.1.1.
northern EU countries (cf. opening-up of markets, public
finance equilibrium, productivity, education, research, employ-
ment, environment), although this progress coincides with the
constraints of heavier taxation;

the countries of

5.4.1.2.
the south, which mostly lag
behind, have taken corrective steps, but they need more time
to overcome these handicaps, especially as many of them are
long-standing and of a cultural nature;

5.4.1.3.
the state of national public finances often reveals
the state of reforms, as bigger deficits are often a sign of delays
in implementation.

5.4.2.
At present even the best-placed EU countries perform
worse than their biggest international competitors (when over
and above progress and delays from one year to another, the
issue is not so much for the EU countries to do better than
before, but to do better than elsewhere).

The public’s perception of

5.4.3.
the reforms is often
lukewarm if not critical, owing to fears of losing acquired
advantages without any visible quid pro quo in terms of more
jobs or sustainable social welfare, as these positive effects are
taking their time to appear (cf. weakness of growth, higher
unemployment). Now, the EESC is concerned by a growing
gap between the aims set for these reforms, the delays in
implementing many of them, and the persistent deterioration
in growth and employment in Europe. The European strategy
of reforms should not be allowed to degenerate into a ‘bubble’,
with an inflation of objectives, concepts and participating
states coinciding with equally growing deficits as regards
sharing of responsibility, implementation and real impact.

in particular at

the Lisbon Summit,

The EESC notes first of all that while the EU correctly
6.2.
identified,
the main
structural reforms needed at European and national level, the
application of ‘good governance of the reform’ is still largely
lacking in practice. The EESC should not therefore place too
much stress on the importance of better methods to carry out
the structural reforms. In this connection, the EESC would
stress the following priorities:

One prime condition for making the reforms a
6.2.1.
success is to try harder to explain their goals: in particular,
awareness and understanding of the issues must be improved.
The preparation of the spring summits should give rise, in
the various Member States, to genuine debates involving
representatives of organised civil society.

This requirement goes hand in hand with better
6.2.2.
consultation of
socio-professional organisations on the
reforms to be carried out, their prospects, their effects, their
conditions and their state of implementation. Through these
consultations, it is also advisable to seek an optimal distri-
bution of the contributions necessary, together with better co-
responsibility in the implementation of reforms. In addition to
the legislator and the public authorities, the actors of civil
society also have an important role to play (initiatives by
socio-economic groups, social partners’ agreements, etc.). The
states should therefore encourage the actors of civil society
more to assume all their responsibilities in implementing the
reforms, by delegating as much as possible to them, rather
than the public authorities.

The state of implementation of the reforms should
6.2.3.
be better spelt out in the annual reports of the Member States
and the Commission at the spring summit, which should
mention not only the measures taken by the public authorities
but also the initiatives taken by the socio-economic groups
and the social partners concerning these reforms.

6. EESC recommendations for boosting the impact of

the structural reforms

6.1.
The current deficiencies in terms of the economic,
social and employment impact of the structural reforms, which

6.2.4.
Following the refocusing of the monitoring and
evaluation of the processes set up at the beginning of 2003,
with the annual presentation of a summary report by the
Commission, steps must be taken to ensure that this mutual
interaction of processes becomes more effective. One could
thus better integrate the employment guidelines and the broad
economic policy guidelines, and not just synchronise the two.
This would help simplify the annual process of setting the EU’s
economic and social guidelines.

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It is also advisable to improve the effectiveness of
6.2.5.
benchmarking, making it possible to disseminate the best
practices. To this end, it would be useful to create within the
Europa website, under the Lisbon strategy, an observation and
data base on the structural reforms in the EU, prompting the
states and the actors of civil society to contribute all the useful
elements of information needed to develop it. The EESC, for
its part, intends to contribute directly towards improving the
information on the initiatives taken by the actors of civil
society in the reforms.

This means using the single market with more
6.3.3.
determination as a privileged growth factor for the European
economy, by speeding up the mutual liberalisation necessary
for its completion and imposing more rigour in transposing
EU rules into national law. Better management of the single
market is more than ever necessary with the enlargement from
15 to 25 Member States in 2004. This means improving its
cohesion, identity, fluidity and security. This would justify,
both in cooperation with and as a complement to national
administrations, contemplating the introduction of:

6.2.6.
Close attention must be paid to the optimum
inclusion in the Lisbon strategy of the ten new Member States
from central Europe and the Mediterranean — and to involving
the other candidate states for membership — taking into
account their specific features and in particular the lack of
development that most of them have compared with the 15
current Member States, though this does not rule out new
Member States also being able to enjoy certain comparative
advantages in the reforms. These countries should be invited
to present their reform programme and the state of its progress
at the next spring summit in March 2004.

As regards the scope and content of the reforms, the

6.3.
EESC would particularly stress the following priorities:

The adoption of the single currency is showing
6.3.1.
increasingly clearly that there is a need for common economic
governance, something that the Member States have now
refused, other than a — still embryonic — system of coordi-
nation from Brussels. Such common governance will obviously
mean an alignment of taxation, and in particular a single
regulation to eliminate double taxation, instead of bilateral
agreements (which are as complicated as they are varied), so
as to simplify taxes on intra-Community trade and harmonise
bases of assessment. The EESC is preparing an opinion on
these various taxation issues.

6.3.2.
The stability pact to counter public sector deficits is
a useful safety net and a clear expression of the solidarity
linking all the states belonging to the euro. It should therefore
be respected. These provisions should not make us forget the
growth target which is also present in the spirit and letter of
the pact, an area where the reasons for dissatisfaction are equal
to those concerning deficits: it would be illusory to wish to
tackle national public deficits in an effective and sustainable
manner without agreeing together on a European policy that
opens up real prospects for growth. It would be just as illusory
to try and bring often rigorous structural reforms to a
successful conclusion without offering such positive and
credible prospects to Europeans.

6.3.3.1.
market;

genuine Community inspections of

the single

6.3.3.2.
at the external borders;

common management of European customs posts

better transnational coordination of public services,
6.3.3.3.
in certain fields where it would be
which could prepare,
justified, the emergence of services of general interest on a
European scale;

6.3.4.
Steps should also be taken to encourage more firms
of all sizes to really use the single European market as their
own real internal market, and redeploy themselves on this
scale. The EESC would recall its proposals for a simplified
European statute open to small and medium-sized enterprises,
and reiterates its request to the Commission to submit such a
draft statute (1).

Another reform essential for the European economy
6.3.5.
is, as the Lisbon strategy rightly points out, the promotion of
the knowledge-based economy: the EU countries do not invest
enough in the technologies of the future, and, when they do
so, they are too unfocused. The EU framework programme for
research, whose low budget (barely 5 % of national research
budgets) is scattered too thinly between the Member States,
should be clearly upgraded in order to reach a real threshold
of effectiveness and be concentrated more on authentically
European technological programmes suitable for supporting
growth in the EU countries. The framing of a more convergent
approach in the field of defence under the heading of a
common security and foreign policy, in its various aspects

(1) European Company Statute for SMEs — OJ C 125, 27.5.2002.

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(presence in space, harmonisation of armaments, new dual-
use civilian and military technologies, etc.), and including a
more effective mutual
the corresponding
public contracts, should play a key role in giving this new
dimension to European technological innovation.

liberalisation of

Legislative and administrative rules also need to be
6.3.9.
improved and simplified, and a lot of progress still needs to be
made here in addition to the several positive initiatives
taken by the Commission (e.g. codifications, White Paper on
governance, measures announced by the European simplifi-
cation programme). This means in particular:

6.3.6.
Recovery on the jobs market will come above all
from a recovery of growth, brought about by the economic
reforms (cf. deepening of the internal market, encouragement
of operators’ initiatives, attraction of investments, etc.). The
social reforms for jobs (cf. education and training, employa-
bility, better labour market fluidity) must be conceived to go
hand in hand with these economic reforms, and optimise their
impact on jobs. The positive examples of jobs market recovery
in the Netherlands, UK,
Ireland and Denmark are good
illustrations of this.

The EESC is therefore in favour of a European growth
6.3.7.
initiative, as proposed in July by the Italian Council presidency,
the Commission, and also the high-level working party chaired
by André Sapir.
In September, France and Germany also
submitted joint guidelines of a similar nature. The European
Council of 16 and 17 October 2003 has itself just supported
the need for such an initiative, the actual details of which
should be decided on at the European Council of 12 and
13 December 2003. This would involve defining and
implementing on a European scale new growth incentives to
boost investments in research and new technologies — as
indicated previously — and in the transnational transport,
energy, telecommunications and environmental infrastructures
that will be needed if the enlarged single market is to operate
properly. The negative short-term effects that the necessary
rigours of the stability pact regarding national budgets may
have on growth would be offset by increasing loans and
funding from the European Investment Bank for such invest-
ments, involving private investors through new public/private
sector partnerships and thus helping, by these and other
measures, to restore the confidence of the various players in
the European economy.

6.3.8.
The reforms of social welfare, which have to ensure
the financial equilibrium of the various schemes (unemploy-
ment, health, retirement), are made particularly necessary by
the ageing population, the rise in the cost of health cover, and
the increased rigour which is necessary in public finance.
Like the social reforms for employment, they involve close
consultation of the social partners, who may be required, via
the contractual policy, to play a major role in the measures to
be taken.

6.3.9.1.
a new ‘less red tape’ culture geared to users’ needs
at both European level — with a code of conduct for the EU
institutions — and in the Member States, which should give
parallel undertakings and implement them at national level
with rapid, concrete and measurable results;

improving impact studies on plans for new rules,
6.3.9.2.
ensuring their autonomy and their quality; the EESC attaches
great importance to these impact studies and is ready to help
improve them as part of its advisory mission.

6.3.10.
Finally, support must be given to initiatives by the
socio-economic players, who decide whether or not Europe
adapts to its new economic and social environment. These
initiatives must provide more systematic back-up for economic
and social structural reforms and increase their positive impact.
They should be better supported by the public authorities at
both European and national level. This means in particular:

6.3.10.1. more room for freedoms and responsibilities,
particularly on a European scale, while ensuring a more
effective application of refocused rules;

6.3.10.2.
better use of self-regulation and co-regulation as
part of a partnership with the public authorities, especially in
areas concerning social dialogue, the recognition of pro-
fessional qualifications, services, environmental protection,
trade and consumers.

6.4.
In conclusion, the EESC is convinced of the need to
ensure that the structural reforms needed to make the EU
firstly, backed up by a revival of
more competitive are,
economic growth through the completion of the single market
and the development of trans-European investments and,
secondly, are discussed, understood and allocated better at the
various levels among political decision-makers and the players
in organised civil society. This involves optimising the Euro-
pean economy by invigorating its autonomous growth
capacity and ensuring better synchronisation of the efforts
required to bring this about. The effective impact of these
landscape, and
reforms in a difficult economic and social

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C 32/113

therefore their success or failure, will depend ultimately on
them being not only pushed forward by political
leaders
through laws and regulations but also — and above all — on

them being supported and passed on by the economic and
social players in their specific capacity as contractual partners
and creators of initiatives ‘on the ground.’

Brussels, 30 October 2003.

The President

of the European Economic and Social Committee

Roger BRIESCH

Opinion of the European Economic and Social Committee on the ‘Proposal for a Council
Directive amending Directive 77/388/EEC as regards reduced rates of value added tax’

(COM(2003) 397 final — 2003/0169 (CNS))

(2004/C 32/24)

On 1 August 2003 the Council of the European Union decided to consult the European Economic and
Social Committee, under Article 262 of the Treaty establishing the European Community, on the above-
mentioned proposal.

In view of the urgent nature of the work, the Committee decided at its 403rd plenary session of 29 and
30 October 2003 (meeting of 30 October) to appoint Mr Bedossa as rapporteur-general and adopted the
following opinion by 66 votes to three with five abstentions.

1.

Introduction

other kinds of charges (specific indirect taxes, direct taxes,
social security contributions and local taxes). As a matter of
fact, VAT collection requires an exact registration of turnover,
making other taxes and parafiscal charges much more difficult
to evade.

1.1.
For tax consultants, VAT rates are more a question of
political marketing and tax policy than of structural measures
with an impact on company competitiveness and competition.
However, in economic terms, any modification in the VAT
rate has an immediate and long-term impact on consumption;
cutting rates boosts consumption and thus has a direct impact
on production and jobs, particularly when local activities are
involved that do not distort competition. Creating jobs by
cutting VAT in this way also has a major indirect impact on
government income through the increased tax revenue from
corporate earnings, earned income and social security charges
and a cut in the cost of unemployment benefit.

1.3.
Despite the fact that VAT rates are often the subject of
intense lobbying and political activity, it is debatable whether
they do in fact generate significant administrative difficulties
for companies. Difficulties may perhaps be caused by having a
plethora of rates, making it hard to determine which rate
applies in a particular case. Problems do arise from time to
time.

1.2.
Unlike other levies, VAT on final consumption is a
visible tax and, because of that, is used as an excuse to cut

1.4.
The Commission is right to say that companies are at
a loss to understand how the system works, and that the rules
do sometimes lead to incredible complexity, but this is not a