Opinion of the European Economic and Social Committee on ‘Better economic governance in the EU’
Date: 2004-09-15
Institutions: European Economic and Social Committee
Subjects: EU situation, division of powers, domestic market, economic policy, governance, labour market, operation of the Institutions, stability pact

23.3.2005

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Opinion of the European Economic and Social Committee on ‘Better economic governance in the
EU’

(2005/C 74/06)

On 29 January 2004 the European Economic and Social Committee, acting under Rule 29(2) of its Rules
of Procedure, decided to draw up an opinion on ‘Better economic governance 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 13 July 2004. The rapporteur
was Mr van Iersel.

At its 411th plenary session (meeting of 15 September 2004), the European Economic and Social
Committee adopted the following opinion by 130 votes in favour and 3 votes against, with 7 abstentions.

SUMMARY

The European Union is entering upon a new phase. 2004 is
the year of the accession of ten new Member States, of a new
Commission, of a new European Parliament, and hopefully also
the year of the Constitution. In the course of this year the
Midterm Review of the Lisbon Strategy is being prepared for
2005. The Commission's analyses, including those in the Broad
Economic Policy Guidelines, draw attention to shortcomings in
the progress of integration. These shortcomings are partly due
to the weak points in the current economic situation, but also
partly to insufficient readiness on the part of the Member
States to hold firmly to objectives and promises which they
themselves agreed upon. It is of great importance to activate
economic growth and breathe new life into the Lisbon Strategy.
This opinion focuses on the governance of
this strategic
concept, which is essential to the credibility and effectiveness
of
the Union. There is an urgent need for a confidence-
inspiring institutional framework in terms of the proper divi-
sion of tasks within the Union – who is responsible for what,
and when? – and in terms of
the implementation in the
Member States of objectives and directives decided upon by the
European Council and the specialised Councils. There are
successful models for a ‘new style’ Lisbon Strategy: they include
Europa '92 and Economic and Monetary Union. The opinion
argues strongly in favour of the Community method. There is a
need for an integrated approach on the basis of a previously
agreed plan comprising successive steps.

The Commission's analysis, set out in its Communica-
1.3
tion of 21 January 2004 (2) and the 2004 Update of 7 April
2004 (3), confirms the trends of 2003. Its recommendations
remain equally urgent. For that reason the EESC gives explicit
consideration in this opinion to institutional and administrative
i.e. good governance. Governance is the central
preconditions,
theme for the EU of 25. (4)

1.4
The EESC's concerns are shared by many. Like the
Commission, industry and social organisations, successive presi-
dencies – Ireland and the Netherlands - place very great
emphasis on practical action and implementation. Solemn
declarations with no follow-up are counter-productive. Imple-
mentation is a vital objective (5).

1.5
The Broad Economic Policy Guidelines evaluate the
macro-economic and budgetary policy of the Member States,
trends. Thus they
employment policy and internal market
provide a practical illustration both of the different responsibil-
ities of the EU and national policy levels and of the diverging
realities in the Member States.

1. Introduction

1.1
The European Union is at a critical stage. It faces major
challenges: enlargement, the need to give positive stimuli to
economic growth and competitiveness, the draft Constitution
and the need for a decisive response to declining confidence in
the Union. These difficult
for effective, coherent
policy and proper implementation thereof. On the basis of the
Broad Economic Policy Guidelines 2003-2005,
the EESC has
issued two opinions on the subject in the past year (1).

tasks call

1.2
However, deeper reflection is needed. Effective policy
and integration are unthinkable without a clear and credible
institutional
framework which guarantees the follow-up to
European commitments.

(1) OJ C 133 of 6.6.2003
OJ C 80 of 30.3.2004

1.6
The subdued economic growth, and the failure of the
Member States to comply with the agreements to which the
European Council has committed itself, have led to the
following overall picture:

— budgetary policy: a further gradual decline in discipline;

(2) Communication from the Commission on the Implementation of
the 2003-05 Broad Economic Policy Guidelines, COM(2004) 20
final)

(3) The 2004 Update of the 2003-05 Broad Economic Policy Guide-

lines, COM(2004) 238)

(4) The EESC issued an opinion on this in 2002 – see OJ C 221 of

17.9.2002

(5) In parallel to this, there is also more and more emphasis on better
EU regulation: see the Better regulation Action Plan, 2003, and the
Conclusions of the Competitiveness Council of 17 and 18 May
2004

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— a delay in strengthening competitive power through a

— strengthening

growth

potential

in

Europe

through

knowledge-based economy;

economic reforms;

— insufficient productivity-enhancing investment, in particular

in ICT and in knowledge and training;

— strengthening the sustainable nature of this growth.

— uncertain investment climate;

— shift of certain investments to regions outside the Union;

— downward pressure on employment;

— labour market policy: insufficient reforms and adaptations.

1.7
In the meantime, the economic picture in Europe looks
slightly more positive, but the revival remains fragile. Economic
growth in the US is higher. At the same time China and India,
above all, are developing with increasingly surprising speed.

1.8
There is a globalisation of financial flows and invest-
ments, but within the globalisation there are significant socio-
economic and political differences between world regions. The
entire world is the reference framework for Europe.

This year there is a need for the Commission and

1.9
Council to reflect further on approach and instruments:

— The EU is entering upon an entirely new stage: ten new
Member States, a new EP, a new Commission, gradual adap-
tation of the Commission apparatus to the new conditions
– all this when the Constitution has not yet been accepted.

— The enlargement is extensive in quantitative terms, but the
Union is also entering a new era in qualitative terms. It is
becoming significantly more diverse.

The Stability and Growth Pact has for years provided a
2.2
firm foundation and confidence between the Member States. A
disappointing economic trend is now undermining the agreed
discipline. The procedural rules are clear enough, but lack of
effective enforceability of agreements seems to be a problem.
Nonetheless, a large number of Member States both inside and
outside the euro zone are still making efforts to take account of
the required budgetary discipline. The Scandinavian Member
States are particularly successful in this respect.

led the Commission last November

2.3
Differences of opinion on Stability and Growth Pact
procedures
to begin
the European Court of
proceedings against
Justice (1). It feels that the Council has not in this case respected
the powers allocated to the Commission. Such a deep difference
of opinion is not conducive to consultation between partners
in the Ecofin Council.

the Council at

2.4
The Commission notes that governments' room for
manoeuvre has diminished significantly. Only five Member
States appear to have a budget balance or surplus in 2003,
while others had a substantial and rising budget deficit.
It
appears from the Commission's report of 7 April, the 2004
Update, that the budget situation in a number of Member
leading to higher levels of
States has rapidly deteriorated,
public debt. These in turn necessitate debt reduction measures
at the expense of investment to boost growth and employment.

2.5
The Commission addresses special recommendations to
these Member States. Despite a similar short-term economic
trend, the budgetary objectives of the Member States diverge
greatly. This leads to a broad spectrum of recommendations.

— Developments in markets for products and services and
continuing nervousness on the financial markets impel the
Member States increasingly towards the same policy posi-
tions and towards effective integration.

The Commission does not appear to have a set of instru-
2.6
ments enabling it to assess adequately the quality of govern-
ment expenditure in the Member States. It is therefore difficult
to test these against the agreed budgetary framework.

2. The analysis for 2004

The Broad Economic Policy Guidelines 2003-2005 are

2.1
intended to achieve an integral approach to:

2.7
The annual report examines social security, the labour
market, the internal market and the Lisbon process. It contains
a range of many small and large objectives. Achievement of
these objectives depends only partly on Community decision-
making. Many aspects of policy are reserved for the Member
States. In addition there are subjects over which even central
government has only a marginal influence, such as the intensifi-
cation of ‘knowledge’.

— macro-economic policy, directed towards growth and stabi-

lity;

(1) See judgment of the Court (Full Court) of 13 July 2004, Case C-27/

04

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social

regards

the labour market,

Community powers apply mainly to the internal market.
2.8
As
security, pensions,
budgetary policy, R&D, taxation and infrastructure, it is mainly
Member States which are responsible, even though in some
cases restrictions are placed by ‘Brussels’ on the policy freedom
of the Member States. In these cases, too, the Commission
often makes guiding recommendations. However, Member
States vary in the extent to which they follow them.

The labour markets comprise various segments, between
2.9
which there are only limited movements of workers. This leads
the Commission to observe that, as well as the creation of
millions of new jobs in recent years, there is also a large rise in
still a low percentage of older
unemployment. There is
workers, and there remain obstacles for women on the labour
market. Inactivity also has inevitable negative effects on the
national budgets.

2.10
The employment level in 2005 is forecast as 64.5 %
for the whole Union, but in the meantime there are consider-
able differences between the levels in the Member States.
Employment develops better in those countries where the
social partners agree on the need and the methods required to
make the labour market and working hours more flexible. The
Commission maintains that achieving the employment objec-
tive of 70 % in 2010 will depend crucially on the implementa-
further reforms of the labour market (1). Hence its
tion of
powerful plea for implementation of the recommendations of
the Employment Taskforce (2).

flexibility of

In addition to changes in social security, the Commis-
2.11
sion argues for greater differentiation in wage formation,
greater
the labour market while maintaining
adequate labour protection, and more mobility. As a conse-
quence of diverging legislative trends and the results of socio-
considerable differences
economic
between Member States. This can be seen, among other things,
in the number of hours actually worked and in productivity.
This partly explains the difference in growth between the EU
and the US.

consultation there

are

particularly for lagging investment in the so-called ‘new high-
tech sectors’.

Demographic trends and the ageing of the population
2.13
give increasing cause for concern both because of the pressure
on budgets and because of the (burdensome) effect on growth.
Some countries have started making promising efforts at
pension reform, which amount to an actual raising of the age
of pension entitlement.

2.14
There is insufficient competition on the markets for
products and services. National protection still exists. The
internal market is still not completed. New proposals have been
launched in competition policy. Legislative work in the finan-
the 42
cial services sector is proceeding properly: 36 of
planned measures have been definitively adopted. The tax
provisions on private investment are also improving.

The

transposition of Community directives

2.15
into
national law is increasingly sloppy. The deadlines are not taken
sufficiently into account and the transposition of directives into
law often takes on a national content. This occurs, for example,
when Member States have made concessions in Brussels with a
view to a compromise in the Council, and regret these later.
Monitoring this process is becoming more and more difficult.

2.16 Without doubt there are positive signals in knowledge
and innovation, but because of inadequate risk capital, R&D,
patents and ICT the results lag behind expectations. Most
Member States are well short of the goal of spending at least 3
% of GDP on research and development as agreed at the Barce-
lona Summit. The Scandinavians
seem to be the most
successful. With a view to the 3 % target a one-third/two-thirds
split between government and business was provided for. It is
clear that in most cases neither the government nor business
reaches the target envisaged.

2.12
The Commission notes that the trend towards slower
productivity growth in Europe since 1995 is continuing. Here
again there are substantial differences between the Member
States. In Europe, Finland, Sweden and Ireland are keeping pace
with the United States. Lagging productivity growth is partly
due to differences in the introduction of ICT and in innovation
in industry as a whole. New productivity-boosting investment
is introduced more slowly in Europe. This has consequences

(1) Economic Forecast, Spring 2004, page 31
(2) Jobs, Jobs, Jobs – Creating more employment in Europe – Report of
the Employment Taskforce chaired by Wim Kok, 26 November
2003

2.17
Even at a time of economic stagnation, the sustain-
ability of the economy still requires just as much attention and
specific legislation. There are various sides to sustainability, as
shown by the energy sector. The Commission rightly empha-
sises the environmental aspects, and here special mention must
be made of the unfavourable situation in the new Member
States. The Commission compares developments with global
agreements. But energy can also become a threat to sustainable
growth through oil price rises as a result of demand (China)
and through the political control on which energy sources
depend.

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2.18
In order to restore confidence in enterprises and on the
stock markets after the financial scandals in a number of firms,
proposals are put forward for a European variant of ‘corporate
governance’.

and adequate predictability of legislative processes. The creation
of this kind of stable climate is not guaranteed and therefore
has a high priority. The EESC agrees with the Commission that,
with a view to stable development, it is desirable for the Ten to
have a separate timescale for achieving financial and economic
objectives.

2.19
This first progress report covering a number of years
(2003-2006) gives a mixed picture. In its final assessment, the
Commission notes some progress with regard to the labour
market, competition policy, the environment of firms, new
technologies, education and pensions. Things are going less
well with the integration of markets, R&D, and social and
environmental adaptations. The rapid deterioration in the
budget situation of a number of Member States, and the lack of
political will to do something about it, are described by the
Commission as distinctly worrying. It concludes that the idea
of reaching the agreed result in 2006 is an illusion if the
reforms are not speeded up. It would be equally damaging for
the prospects of the Lisbon process by 2010.

The Commission judges in Update 2004 that the new
2.20
Member States have problems comparable to those of the 15
earlier Member States (EU-15) as regards budget situation, debt
burdens and employment. So far the Ten have made remark-
able progress, demonstrated inter alia by more rapid economic
growth than in the EU-15, although there are considerable
differences in development among the Ten. At the same time
the Commission points out that there is an enormous gap to
be bridged between the Ten and the EU-15.

2.21
In the EESC's view ‘comparable problems’ does not
mean that the new Member States display the same pattern as
the EU-15. A comparison with the so-called ‘cohesion coun-
tries’ works only to some extent. The new Member States are
in some countries, and
‘emerging markets’. Unemployment
especially in a number of regions,
Industrial
is very high.
restructuring is in full swing. This leads to high percentages of
friction unemployment. Dependence on foreign investment is
considerable.

legislation and of

The adaptation of

2.22
social and
economic practice to the highly developed EU-15 level can be
accompanied by shocks. Stability, which is essential in order to
maintain the rising level of internal and foreign investment,
and monetary supervision
presupposes

financial

effective

2.23
A feeling of urgency is indeed developing in the
Union. Community orientations regularly reappear in conclu-
sions by the Commission, in those of the specialised Councils
and in those of the European Council. Recent letters from
government leaders reveal the same underlying concerns (1). In
essence a Community onward path is being sketched out, but it
is not clear who can be held responsible for management and
implementation at any given time.

3. Internal market, employment and the Lisbon process

As regards the internal market, for the coming year the

3.1
Commission calls for urgent action on two fronts (2):

— New efforts on key subjects such as the Community patent,
the directive on intellectual property, the directive on the
recognition of professional qualifications and the Action
Plan on Financial Services, essential for growth and employ-
ment. Further postponement could have a domino effect.

— The Member States are called upon to achieve ‘better
governance’, i.e. effective cooperation among the Member
States and actual implementation.

3.2
Both are necessary for the Lisbon objectives and as a
basis of an enlarged internal market. More internal trade and
competition force enterprises to achieve greater efficiency and
higher productivity, which in a relatively high-wage area such
as the EU is the key to competitive strength and long-term
prosperity.

3.3
At present internal trade is declining in practice, while
prices within the Union are tending rather to diverge than to
converge. The balance between EU investments in the rest of
the world and external investments in the EU is negative for
the Union.

(1) Letter from Prime Minister Blair, President Chirac and Chancellor
Schröder dated 18 February 2004, and the ‘Joint Contribution to
the Spring Council 2004’ by government leaders Aznar (Spain),
(Italy), Durão Barroso
Balkenende
(Portugal), Miller (Poland) and Parts (Estonia)

(Netherlands), Berlusconi

(2) Report on the implementation of

the Internal Market Strategy

(2003-2006) of 21 January 2004 – COM(2004) 22 final

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3.4 With regard to the internal market, the Commission
presents the following picture. Work is now being carried out
on the so-called ‘new approach’ directives. There is still no real
internal market for services. Services account for more than 50
% of European GNP and for 60 % of employment: hence the
priority of the recently proposed directive on free movement of
services. The liberalisation of network industries (energy, trans-
port and telecommunications) is in progress, but we are aware
how many problems and blockages are involved there. The
lack of harmonisation of some taxes continues to play havoc
with the internal market. But the removal of fiscal distortions is
well under way. So is the Action Plan on Financial Services.
The Commission starts from the premise that the failure of
governments to apply the rules on public procurement clearly
pushes prices upwards. This subject will once again be on the
agenda. In connection with the ageing of the population, the
Commission also wishes to promote international access to
health services. The European patent question continues to be
dogged by delays.

3.5
Simplification of the rules is tackled on the basis of the
‘Better Regulation Action Plan’. But there is still a long way to
go. A number of Member States are not implementing the
agreed impact assessments.

3.6
Implementation is a serious problem. The internal
market is based on confidence. Particularly in connection with
enlargement, this confidence will need to be strengthened. For
the European Union's new phase, the following statement is
significant: ‘But real success in an Internal Market composed of 28
countries will require a different attitude and different working rela-
tionships. Member States must take full ownership of their Internal
Market and work in partnership with each other and with the
Commission to make it work in practice.’ (1)

3.7 Work is also being done on the Employment Strategy.
Responsibility for this lies mainly with the Member States. But
at European level also, social systems are on the agenda, firstly
because of the national budget policy to be applied within the
agreed European framework, and secondly in connection with
the reforms of labour markets and the ageing of the popula-
tion.

3.8
The approach to and implementation of the Employ-
ment Taskforce's recommendations depend on national deci-
sion-making. These recommendations provide strong support
for the Lisbon Process. Broad fields are involved: greater flex-
ibility
innovation,
increasing work participation and an ‘activating’ social security,
investment in education and schooling, and partnership with

entrepreneurship

promoting

and

in

(1) Report on the implementation of

the Internal Market Strategy

(2003-2006) of 21 January 2004 – COM(2004) 22 final

a view to change; all of this means active involvement of all
partners interested, and participating in processes of change.
The whole thing is probably best summed up in the phrase
‘Europe needs more people in work, working more productively’. In a
recently issued opinion the EESC expressed broad agreement
with the said recommendations of the Employment Taskforce,
albeit with some critical comments (2).

3.9
The link between the overarching Lisbon Process and
stable budgetary policy is obvious. The report to the Spring
Summit (3)
the Lisbon
strategy as a costly matter for Europe, as a result of lower
growth, insufficient growth in employment and lagging behind
in education and R&D.

implementation of

insufficient

sees

The Spring report deals with the developments in the
3.10
Internal Market and employment already mentioned above.
With regard to the knowledge economy, the Commission calls
for more investment in knowledge and networks,
including
R&D, education and vocational training.

3.11
There is still a lack of interaction between the univer-
sity and business worlds, which are too far apart. This does not
fit
in with the objective of creating a knowledge-based
economy. Interaction, as in the US, would certainly have a
productivity-enhancing effect and strengthen firms. Much of
this added value is currently lacking. Separate mention should
be made of
the balance of
incoming and outgoing researchers remains negative (4), and
this negative trend is increasing.

the brain drain from Europe:

In line with other reports,

3.12
the Commission in its
Spring report makes a number of clearly formulated proposals
investment, competitiveness and
based on the ‘triptych’ of
reforms.

3.13
The policy guidelines and the reports on the Internal
Market, the employment strategy and the Lisbon process are
comparable in terms of subjects covered and evaluation. The
Commission correlates public spending with a number of
socio-economic fields. It thus throws light on the problems
involved in shifting from public consumption expenditure to
productive expenditure.

4. The institutional framework

4.1

The EESC notes that the situation now demands that

— under difficult economic circumstances, a radical transition
from a Union of 15 to one of 25 members should take
place in as balanced a way as possible;

(2) Opinion on Employment
30.4.2004 (SOC/159)

support measures – OJ C 110 of

(3) Report from the Commission to the Spring European Council: Deli-
the enlarged European Union –

vering Lisbon – reforms for
COM(2004) 29 final/2

(4) Communication from the Commission to the Council and the Euro-
pean Parliament – researchers in the European Area: one profession,
multiple careers – OJ C 110 of 30.4.2004 (INT/216), and Commu-
nication from the Commission entitled ‘Europe and basic research’ –
OJ C 110 of 30.4.2004 (INT/229)

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— at the same time backlogs with regard to commitments
made earlier by the European Council, which have lost
nothing of their topicality, should be overcome; and

— the pace should be maintained and new impetus provided.

For the EESC, all of this is not just a matter of policy
4.2
formulation. Equally important are organisational
factors –
primarily monitoring and supervision – and political/cultural
factors. Against this background the EESC notes and approves
of the Commission's analyses and conclusions in the Communi-
cation of 21 January 2004 and the Update of 7 April 2004.
The Conclusions of the Competitiveness Council of 17 and 18
May are, alas, too general and not very concrete (1).

4.3
Enlargement of the Union calls for even more attention
to be paid to good institutional foundations and for careful
delimitation of powers and responsibilities, without which
there is a threat of further lack of discipline and watering
down (2).

4.9
The Internal Market gives cause for concern. Objectives
and agreements on free movement and a ‘level playing field’ are
incompletely implemented or not at all. The country scores
Internal Market
show that
directives discipline is declining,
to a serious
extent (3).

transposition of

in the national

sometimes

4.10
Subsidiarity is a positive principle. But one rarely
mentioned aspect is that unjustified recourse to subsidiarity
tends to lead to diverging interpretations of European legisla-
tion in the Member States.

4.11
There are also different speeds, as in the case of the
EMU. With 12 participants so far, 13 non-members are about
to arrive. An EMU of 12 participants with 3 non-participants is
a different matter from an EMU of 12 when there are 13 non-
participants, even though the new Member States add a new
economic perspective. Serious attention will have to be paid to
the requirement of budget discipline, as provided for in the
Treaty.

4.4
Over the years a pattern has developed of diverging
Community and inter-governmental responsibilities and deci-
sion-making. Even the draft Constitution clearly assumes that a
Union of 25 Member States cannot possibly operate in the
same way as a Union of 15.

4.12
The euro will have to be underpinned by the macro-
economic policy of the Member States and by the further devel-
opment and deepening of integration as a whole.

4.5
The introduction of the euro, alongside a properly func-
tioning Stability and Growth Pact, should have led to greater
convergence. But too many of the agreements and decisions
are not binding.

The lack of effective results from the agreed commit-
the European

4.6
ments seriously jeopardises the potential of
Union.

4.7
In the European Council there appears to be agreement
on objectives, although they are often defined too generically
and not precisely enough. But political good intentions are not
transformed into manageable legislation and rules which are
actually enforced.

In recent years great hopes have been pinned on policy
4.8
competition,
‘naming and shaming’ and the open method of
coordination. But when the economic trend is less favourable
these do not work effectively. In practice the Member States
say nothing, or not enough, to each other about their respec-
tive shortcomings.
In these circumstances the Commission's
own scope for manoeuvre is restricted. In practice there is no
satisfactory alternative to the Community method.

4.13
law must be guaranteed under all circumstances.

The principle that the Union is based on the rule of

4.14
Thus a method must be found of ensuring that the
Commission and the Council no longer confine themselves to
merely pointing out the shortcomings or making an urgent
appeal to Member States, after which they move on to the
day's agenda. The Lisbon Process and the substantial enlarge-
ment simply require strict discipline.

4.15
The Lisbon Strategy is a strategic concept. In that sense
it
is comparable to earlier strategic concepts which led to
In those cases the planning
radical advances in integration.
involved a time limit and a strictly controlled series of stages
with close cooperation between the Commission and the
Member States. At the end of the 1960s this applied to the
customs union, anchored in the Treaty. The success of ‘Europe
'92’ was also the result of similar planning. By bringing 279
draft directives into one scheme on the basis of the 1987
Single Act, stagnation was overcome and substantial advances
in the Internal Market were achieved. Monetary Union is
another successful example. From 1993 onwards the budget
deficits of all would-be participants fell steadily. So did infla-
tion, and with it interest rates. Consequently it was possible for
the euro and a monetary policy guaranteed by an independent
Central Bank to come into being according to plan.

(1) Conclusions of the Competitiveness Council of 17 and 18 May

2004

(2) See footnote 4

(3) See Internal Market Scoreboard, Edition 13, 13 July 2004, http://
www.europa.eu.int/comm/internal_market/score/docs/score13/
score13-printed_en.pdf

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4.16
In the above cases, either the Community method was
followed with success, as with the customs union and Europe
'92, or positive cooperation by the Member States gave them
an urgently needed result, namely participation in the EMU.
The problem is that neither of these two situations applies at
present. Satisfactory progress now really depends entirely on
political will.

5.6
than
This way forward can aim at nothing other
deepening of integration. Without such deepening, a Union of
25 Member States will be able to progress no further than a
free trade area. In the global power game of the future that is
an undesirable option for the European economy, firms and
citizens.

The European Council of 27 and 28 March 2004 in
4.17
fact endorses the Commission's analysis and conclusions.
It
underlines the importance of balanced budgets, and even that
of budget surpluses, the importance of price stability, and it
insists on compliance with the Stability and Growth Pact. As
well as taking account of social cohesion and sustainability, the
Council
the Competitiveness
Council: competitive strength, energising the Internal Market
and better legislation. There must be investment in knowledge
across the board. On labour market policy,
the European
Council comes out in favour of implementation of the Employ-
ment Taskforce's report.

three priorities

foresees

for

5.7
Formulating at EU level a ‘new style’ Lisbon Process –
strengthening of competitiveness and intensifying the knowl-
edge base of
the economy, promoting sustainability, social
consultation and social dialogue – can also have favourable
effects on the independent policy of the individual Member
State.

5.8
The policy guidelines show that healthy public finances
and public and private investment require a cohesive, trans-
parent and confidence-inspiring framework, which the Council
and the Commission must guarantee. The Union has an urgent
need for dynamism, and Europe is once again at a crossroads.

5. Europe at a new crossroads

6. Recommendations and conclusions

5.1
Europe is once more at a crossroads. The economic
recovery is still fragile. The expectations of the Lisbon Process
are not being fulfilled. The European Union is entering a new
phase involving a population 20 % larger and an increase in
heterogeneity. At the same time, as a result of enlargement,
there are new stimuli and a new prospect of growth and pros-
perity.

In this process the EESC takes the following as starting

6.1
points:

— there should be a sharp distinction in analysis and objec-
tives, between that which is reserved for the European
Union and that which is reserved for Member States in deci-
sion-making;

5.2
The credibility of the Union is at stake. The importance
of public opinion and of declining support for the integration
process must be taken into account.

— to maintain credibility and avoid frustration, only realistic

objectives should be set;

5.3
Enlargement should not be allowed to lead to introver-
sion on the part of the Union. The playing field is the world:
the EESC takes the view that the main benchmark is the posi-
tion of the Union in the world – not only in relation to the
United States, but in the overall picture, including rapidly devel-
oping and extensive emerging markets such as China, south-
east Asia and India, which are demanding their own place in
globalisation.

5.4
The analyses and recommendations by the Commission
and the Council Presidency for the Spring Summit are in the
same spirit each year. There is hardly any difference of view
the Union and the
between the institutions about what
Member States need to do. Competitiveness takes an increas-
ingly central place, but time after time the Member States seem
to diverge from recommendations, and agreed decisions are
inadequately implemented or not at all. Execution and imple-
mentation constitute a serious problem.

— economic growth and the ‘new style’ Lisbon process should
occupy a central place among these objectives, both to
strengthen competitiveness
structural
changes;

and to support

— Member States should not blame ‘Brussels’ for European

objectives on which they have agreed together.

Transparency requires the necessary attention to be
6.2
given to the institutional dimension. The distribution of various
responsibilities between Member States and the Union has not
been covered sufficiently by proper consultation. Such a non-
committal approach is impossible to explain to citizens and
firms.

6.3 Moreover, more binding arrangements would provide a
support for the Member States and for the internal and external
operation of the Commission. The Commission will of course
need a firm operational basis in the enlarged Union.

5.5
For all these reasons an effective revival of the Lisbon
Process is very important. The EESC emphasises the great
importance of this long-term perspective. It endorses the focus
of the Commission and the European Council and provides a
common way forward for old and new Member States alike.

The Member States will need to take account of disci-
6.4
pline with regard to the public budget and the macro-economic
policy which they themselves agree to in the Stability and
Growth Pact.

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Official Journal of the European Union

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Inter-governmental

6.5
reflexes are tending to become
stronger. The EESC warns strongly against this tendency. No
individual Member State or group of Member States is in a
position to take over the specific role of the Commission. Of
course each Member State argues from its own position and
applies its own political emphasis, even when greater objec-
tivity and subtle monitoring are called for.

6.11
In areas which are reserved for Member States it is
difficult to offer a general menu of measures and adaptations.
The way in which this is dealt with, mainly through precise
descriptions of national situations and best practices, deserves
every support. Efforts must be made to refine these methods
further through the use of comparable statistics; the Commis-
sion will also need a set of instruments to enable it to better
assess the quality of public expenditure.

The Constitutional Treaty envisages better coordination
6.6
of policy in the 25-member Union.
In this crucial period
extending the qualified majority method will have positive
effects. Otherwise undesirable vetoes will continue. Industry,
the social partners and other social actors (universities, research
institutes etc.) can make a positive contribution to this
improved policy management.

There is always a risk of
fragmentation. The EESC
6.7
argues
for an integral approach, which can be achieved
through greater effectiveness of the Competitiveness Council, in
cooperation with the ECOFIN Council and accompanied by
better publicity. The European Council conclusions are in line
with this, as are the arguments at the basis of government
leaders' call (1)
responsible for
for a ‘super-commissioner’
economic policy.

6.8
For its part the EESC would argue that at all events the
Competitiveness Council must become more transparent. This
for improving governance. The
is a practical starting-point
Council
is not well served by a meeting-room filled with a
number of Commissioners together with an ever-changing
group of members of national governments responsible for a
variety of policy areas. Firstly, the Commission will need to
ensure that the coordination for the Competitiveness Council is
transparent and presents a clear picture to public opinion.
Given the importance of the Lisbon agenda, this is clearly also
a task for the President of the Commission. Secondly, better
organisation of the Competitiveness Council and a streamlining
at EU level should also lead to an internationally more recogni-
sable pattern of
responsibilities of national government
members. This would enhance the ability to convince public
opinion and the mutual sense of responsibility for shared poli-
cies.

6.9
On the ‘multi-speed’ question there is no formal defini-
tion with which the Union could get by. Examples such as the
EMU and the Schengen Agreement are successful. However,
diverging situations and approaches in the Member States,
presented in the Policy Guidelines, do not offer an attractive
prospect
situations, which
would be a source of distortion of competition. The procedure
provided for in the draft Constitution offers positive starting
points.

for badly defined ‘multi-speed’

6.10
For the internal market – still at the heart of integra-
tion – the ‘multi-speed’ option is an unattractive one, because it
would lead to changing coalitions on specific issues and
because it would offer reluctant Member States too easy a way
out of dilemmas.

6.12
The EESC remains in favour of policy competition and
the open method of coordination for clearly defined policy
areas where the Community method does not apply. But this
would be on the assumption that they would yield only limited
results (certainly in the short term), because the Member States
do not of course assess each other. Some Member States are
making useful adaptations to policy, e.g. in the field of pensions
and the labour market. External publicity for this must be
improved.

6.13
The European Council notes that the Commission is
going to draw up a ‘roadmap’ to strengthen and implement the
Lisbon Strategy. ‘Better governance’ is a central starting point.
Confidence and stability require a clear institutional framework.

The EESC would argue that

6.14
the ‘new style’ Lisbon
process should borrow from the successful methods of ‘Europe
'92’. Building on existing practice, this would mean that the
reports on policy guidelines, the internal market, employment
and the Lisbon process would be summarised in a clear plan
with stages and a timetable, within which it would be made
clear what action would be expected from whom (Commission,
Council, European Parliament or Member States), on the basis
of what decision and within what sort of timescale. In this
the
connection the EESC emphasises
Commission's role and of the Community method, which were
both responsible for the success of ‘Europe '92’. The Commis-
sion presents an annual progress report and, after consultation
with the European Parliament, the ECOFIN Council and the
Competitiveness Council determine the priorities on which the
Commission bases its proposals.

the importance of

6.15
The only real progress with the Lisbon process has
been made in the internal market, at least as regards legislation
and rules. Yet there are constant shortcomings in implementa-
tion. Progress is a direct result of the Community method. The
EESC would argue for combining all internal market subjects in
a clear plan with clear deadlines:

(1) Letter from Prime Minister Blair, President Chirac and Chancellor

Schröder of 18 February 2004

— all outstanding aspects of the internal market action plan;

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Official Journal of the European Union

C 74/31

— the outstanding aspects of the financial services action plan;

— regional policy, with special emphasis on knowledge and

innovation.

The Commission and the European Council are in
6.18
favour of a ‘Partnership for Change’. The EESC fully supports this
effort. It could be a very useful concept. The Lisbon strategy
has never been regarded as a mere ‘top-down’ process.
Its
success lies in the fact that policy formulation, execution and
implementation depend on many actors: administrators (Euro-
pean, national and regional), the social partners at all levels,
firms, universities and many other social organisations making
up civil society. A clear presentation of objectives, explaining
to all political and social actors in the Union what is expected
of them, can provide a new and very necessary source of
inspiration.

6.19
Partnership for Change has great potential, provided that
it is presented in the right way. It can lead to a new kind of
communication and to new alliances between the many groups
involved in the European integration process. This too is a part
of ‘good governance’.

6.20
The European Council has called upon the Commis-
sion to form a High Level Group which would report to the
Commission by 1 November 2004 on the ongoing approach
to the Lisbon process. The report and the vision of this High
Level Group will play an important part with a view to the Mid-
the Lisbon Strategy for the 2005 Spring
term Review of
Summit. The European Council has also asked the EESC to
submit its recommendations for this Mid-term Review at the
same time.

The President

of the European Economic and Social Committee

Roger BRIESCH

— aspects of the knowledge sector which are subject to Com-

munity decision-making;

— review and relaxation of excessively rigid and detailed rules;

— implementation and execution.

6.16
For the subjects which depend on national decision-
making, such as social security, the labour market (Employment
Taskforce) and taxation, the EESC would recommend that the
Council, on a proposal from the Commission – in accordance
with policy competition and open coordination – should also
decide on objectives and implementation. But the step-by-step
plan should also provide for monitoring of the progress of
these national processes. Management is most difficult in these
areas, but there is little point in agreements which are not
implemented.

Other subjects, which do not depend on rule-making
6.17
and sometimes only partly on public management, but which
are linked to competitiveness, knowledge and economic capa-
city, also deserve a place in the ‘new style’ Lisbon process; these
include:

— sectoral

industrial policy arising from joint consultation
the

consultation),

social

between industry
Commission and the Council (1);

(including

— the output of EU technology programmes and platforms,
more cross-frontier cooperation between research institutes
and researchers in the Union, and promotion of coopera-
tion between university and business;

Brussels, 15 September 2004.

(1) See the Conclusions of the Competitiveness Council of 26 and 27

November 2003