Opinion of the European Economic and Social Committee on the Broad Economic Policy Guidelines 2005-2008
Date: 2006-02-15
Institutions: European Economic and Social Committee
Subjects: EU policy, budget policy, economic growth, economic policy, education policy, employment policy, globalisation, innovation, social security

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Opinion of the European Economic and Social Committee on the Broad Economic Policy Guide-
lines 2005-2008

(2006/C 88/16)

On 10 February 2005, the European Economic and Social Committee, acting under Rule 29(2) of its Rules
of Procedure, decided to draw up an opinion on the: Broad Economic Policy Guidelines (2005-2008)

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 27 January 2006. The rappor-
teur was Mr Metzler.

At its 424th plenary session, held on 14 and 15 February 2006 (meeting of 15 February), the European
Economic and Social Committee adopted the following opinion by 79 votes to 18 with nine abstentions.

Conclusions and recommendations

be a mistake to believe that the maximum level of market inte-
gration is always the best level.

The EESC took the initiative to draft an opinion in anticipation
of the 2006 spring summit so as to provide those involved in
formulating EU economic policy with proposals for the way
forward based on consensus among the various interests that
make up civil society.

lifelong learning, equality of opportunity,

The Committee also believes that correct decisions in the areas
of
for
families, education, research and innovation are key to the
knowledge-based society. The framework and the incentives for
creating an innovation-friendly environment must therefore be
improved further. In general terms, the Committee also empha-
sises that promoting enterprise deserves particular attention.

support

of

and

change,

globalisation

demographic

In the context of continuing weak economic growth in the
euro area and indeed in the EU as a whole, and of the chal-
lenges
the
Committee expresses the view in its own-initiative opinion on
The Broad Economic Policy Guidelines (2005-2008) that — as
an integral part of the Lisbon Strategy — a coordinated macro-
is
policy that actively promotes growth and employment
needed to overcome the current economic and employment
problems in the EU. The crisis of confidence that prevails in
the large euro area economies can similarly only be overcome
by adhering to the fundamental principles of sustainability in
finance and social policy. The Committee therefore agrees with
the Commission that a fiscal policy in the countries of the EU
that complies with the respective commitments that have been
made is indispensable.

1. Preliminary remarks

1.1
This own-initiative opinion on the Broad Economic
Policy Guidelines (2005-2008) of the Integrated Guidelines for
Growth and Jobs (2005-2008) should be taken as complemen-
tary to the opinion on the Employment Guidelines — 2005-
2008 (1). Again, the Committee is critical of the arrangements
for the consultation procedure, which,
the
subject matter, are not conducive to the coherence of the two
opinions. Dealing with the broad guidelines and the employ-
ment guidelines together would better reflect the many ways in
which the two areas are interrelated.

in the light of

the

To improve

1.1.1
the Lisbon
Strategy, the European Council decided at its spring summit to
integrate the economic policy and employment guidelines and
to include them in the Lisbon process.

implementation of

The Committee supports the Commission's call
for social
security systems to be modernised so as to ensure their sustain-
ability. In order to reduce unemployment, the flexibility of the
labour markets must also be increased. What is important here
is to ensure that social security, on which many people quite
rightly rely, is maintained. At the same time, it is important to
mobilise the potential of available workers. In this area, the
social partners and Member State governments have a role to
play in creating an innovation-friendly balance between flex-
ibility and security.

The Committee believes that, as well as an appropriate macroe-
conomic policy to stimulate growth and employment, microe-
conomic reforms are needed to strengthen the potential for
growth. This means measures to strengthen competition and
cut red tape, and further development of
the EU internal
market. However, the Committee takes the view that it would

1.1.2
In its opinion on the Broad Economic Policy Guidelines
2003-2005 (2), the Committee warned of the need to better
focus the policy mix on growth and full employment. This
recommendation is just as pertinent today.

Under its Treaty obligations, the ECB must, alongside
1.2
price stability, also take account of
the
economy in terms of growth and employment. In line with the
individual areas of macroeconomic policy
coordination of
under the Cologne process,
it must do this in constructive
dialogue with those who make decisions on fiscal and wages
policy.

the real needs of

(1) See the EESC opinion on the Proposal for a Council Decision on guide-
lines for the employment policies of the Member States, in accordance with
Article 128 of the EC Treaty – OJ C 286, 17.11.2005, p. 38.

(2) See also the EESC opinion on the Broad Economic Policy Guidelines
2003-2005 (OJ C 80, 30.3.2004, p. 120) from which the present
opinion follows on.

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1.3
The integrated guidelines are to be considered as recom-
mendations for the economic policies of the Member States.
However, under the subsidiarity principle, implementing them
responsibly is a matter for the Member States. ‘In areas which do
not fall within its exclusive competence, the Community shall take
action, in accordance with the principle of subsidiarity, only if and in
so far as the objectives of the proposed action cannot be sufficiently
achieved by the Member States and can therefore, by reason of the
scale or effects of the proposed action, be better achieved by the Com-
(Article 5 EC Treaty). Notwithstanding the above,
munity.’
economic policy remains a matter of common concern (Article
99(1) EC Treaty).

This opinion gives an overview of

1.4
the European
economy as a whole without ignoring the particular character-
the Member
istics of
States.

the individual national economies of

2. The issue at hand

Starting point: Current economic development

2.1
After four years of disappointing economic growth in
the EU, in 2005 it again reached only 1.5 % (EU25) and 1.3 %
(euro area). Nonetheless,
there were significant differences
between the Member States. Despite the economic growth, the
European economy did not benefit fully from the upturn in the
global economy. Europe has fallen even further behind other
industrialised countries and regions.

2.1.1
Due to the fall in the value of the euro, external trade
has recently had a significant impact on economic activity.
European consumer confidence, however, has improved only
haltingly since 2003, and for several months in 2005 actually
got worse, which has led to a commensurately limited increase
in consumer demand. Domestic demand is still not capable of
boosting the economy. The ongoing uncertainty among Euro-
pean consumers is also expressed in the savings ratio, which is
high by international standards.

investment in stocks than to capital

2.1.2
Capital investment, which had fallen almost continu-
ously since the beginning of the downturn in 2001, picked up
again last year. Affordable finance resulting from low interest
rates and growing company profits means that the environ-
ment remains favourable to investment, but more to high-
growth financial
invest-
ment. However, the Committee is concerned about the flow of
capital to the USA, which is symptomatic of weak investment
in Europe. Making Europe a more attractive place to do busi-
ness therefore remains one of the key priorities if a sustained
increase in investment is to be achieved. One of the main
reasons for the low level of investments is the current weak
consumer demand. At the same time, despite persistently high
energy prices, the inflation rate remains at an acceptable level.
This is especially true of underlying inflation (which disregards

energy and unprocessed foodstuffs), which remains well below
the headline rate of inflation. However, geopolitical risks and
capacity bottlenecks in crude oil production could potentially
cause inflationary pressures in the future. The challenges posed
by the developments in the price of crude oil will be discussed
in more detail later on.

2.1.3
The Committee is surprised that, despite the favour-
able finances and good level of returns, the booming profits of
the large enterprises in 2003 and 2004 have not resulted in
research and productive investments that would allow the EU
to alleviate the competition it has to cope with. Instead, the
liquidities piled up are channelled to give extra returns to the
shareholders, to buy back the companies' own shares, in order
to stimulate them on the stock exchange, or to set up merger
restructurations. The
and
Committee is particularly concerned by the 'short-termism'
which hampers the necessary long-term business investments.

acquisitions

trigger

that

off

2.1.4
One of the European economy's main problems, as
well as current weak demand and lower growth than elsewhere
in the world, is high structural unemployment. Thus, the recent
economic upturn has only had a very limited positive impact
on the labour market. At around 9 %, unemployment remains
too high. As a result, the European economy is not realising its
full potential for wealth creation. In addition, the current weak-
ness in investment
future
growth.

limits the potential

further

for

2.1.5
This trend towards a ‘jobless recovery’ has similarly
been observed in the labour markets of other comparable
the labour
industrialised countries and regions. However,
market situation there is in most cases much more favourable.
According to Commission estimates (3), growth in 2005 and
2006 will result in the creation of over three million new jobs
in the EU. The effect on the unemployment rate will, however,
be limited, as an increase in the participation rate due to
people being encouraged back into the labour market by the
improved economic situation is to be expected.

Thus, bringing the untapped labour force into employ-
2.1.6
ment remains one of
the biggest challenges the EU must
address. Specific programs should be implemented to facilitate
the access of women and young people in the labour market
and others to reintegrate older workers.

Further challenges: Globalisation and demographic change

Alongside the current economic and finance policy
2.2
problem areas such as the unsatisfactory situation of the labour
market and of unemployment
in particular and increasing
public budget deficits, further challenges await the EU. These
are already recognised, but their full effects will only be felt in
the future.

(3) Commission Autumn forecast 2005.

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2.2.1
Firstly, the EU must face up to tougher economic
competition. The fast-growing economies of China and India
have brought new competitors onto the scene who, ten years
ago, did not play a significant role in the world economy. The
global labour force has doubled, and relations between capital
and labour have changed on a worldwide scale. Because of
their economic development, the populous countries of India
and China have far less capital per employee at their disposal
than the traditionally industrialised countries.

customer base, and the capital markets will see changes in
savings patterns and the demand for investment funds. It is also
to be expected that the general intensification of competition
resulting from globalisation will have an effect on the labour
market and will need a different organisation of work in the
framework of social dialogue. The concept of life-long learning
comes into its own in this context (4). Dealing with demo-
graphic change will also be a challenge for social dialogue and
civil society.

2.2.2
Everything possible must be done so that the conse-
quences so far of globalisation and the increased international
division of labour may be seen also as an opportunity for the
future of Europe. Following the opening up of China's
economy and those of other south-east Asian countries, it is
true that there is increased competition for investment. At the
same time, however, huge markets have opened up to Euro-
pean exporters. Rising prosperity in that part of the world
means that these markets offer significant potential. Economic
policy must provide appropriate support for the associated
structural change. This includes the development of the global
framework for the protection of minimum environmental and
social standards and of property rights.

2.2.3
The EU must also face up to globalisation and the
dramatic rise in oil prices also associated with the increase in
worldwide demand for oil. Thanks to lower consumption and
an increased use of other energy sources, the EU in particular
has significantly reduced its dependence on oil. It is precisely
competing industrialised countries, such as China,
that are
more heavily affected. Furthermore, the EU could well benefit
disproportionately from oil-exporting countries using their
income to buy imports.

2.2.4
The second big challenge for Europe's economies will
be demographic change and the resulting ageing of the popula-
tion. However, the scope for the EU to influence this is limited,
since — as the Commission has correctly pointed out elsewhere
— many issues relating to demographic change fall within the
remit of the Member States or the social partners. Moreover,
demographic change is a social phenomenon on which
economic policy measures can have only a limited impact. It is
therefore all the more important to create the conditions in
which the necessary adjustments can be made in a timely
fashion.

2.2.5
The main causes of demographic change are the conti-
nuing rise in life expectancy, the expansion of the over-60s age
group and the persistently low birth rate. The change in age
structure affects all the markets of an economy: the labour
market will, from 2020, increasingly face a shortage of young
workers, the product markets will have to adapt to a different

If the aim of creating a competitive, knowledge-based
2.2.6
economy is to be achieved, business must be in a position to
promote and develop technological and organisational change,
productivity and innovation. This can only be achieved
through constant adaptation of workers' qualifications to chan-
ging demand and through dynamic business strategies. To do
this, firms must incorporate training into their strategy as a
medium and long-term investment, not as something requiring
a rapid,
if not immediate, return on investment. Vocational
training and lifelong education and further training must not
be looked at in isolation, but should be fundamental elements
of workers' career planning. There must be sufficient motiva-
tion in all age groups to take part in training. This should be
achieved by placing value on skills and making career paths
more dynamic. From this perspective, skill audits and validation
of professional achievements are tools which should be devel-
oped through individual career plans linked to corporate objec-
tives (5).

Lisbon strategy

2.3
The growth of the world economy in the last five years
underpins the ambitious goals of the Lisbon strategy, which are
to sustainably increase competitiveness and secure jobs. The
principles of the Lisbon agenda should be fully assimilated.
Only if it has confidence in its own strengths and the courage
to change can the EU fulfil its goal of becoming the world's
leading knowledge-based economy with secure and better jobs.
this Committee (6) and of
The reports of
the High Level
Group (7) (Kok Report) for the European Council, assessing the
results so far in relation to the Lisbon strategy, state however
that there is still a long way to go before the aims can be
reached. Straitjacketed by a monetary policy which does not
give it the option of reviving demand through expenditure,
economic growth in the EU is noticeably lagging behind that of
the United States. The average growth rate for the EU for the
years 2001-2004 was a mere 1.5 %. No progress was made in
reducing the gap with other comparable industrialised coun-
tries and regions in terms of EU per capita GDP and produc-
tivity growth.

(4) See EESC opinion on Economic Growth, Taxation and Sustainability of

Pension Rights in the EU (OJ C 48, 21.2.2002, p. 89).

(5) See EESC opinion on European business competitiveness (OJ C 120,
20.5.2005, p. 89) points 5.4.6.3 and 5.4.6.4, and EESC opinion on
Increasing the employment of older workers and delaying the exit from the
labour market (OJ C 157, 28.6.2005, p. 120), point 4.3.5.4.

(6) See EESC opinion on Improving the implementation of

strategy (OJ C 120, 20.5.2005, p. 79).

the Lisbon

(7) Facing the Challenge, the Lisbon Strategy for Growth and Employment,
report from the High Level Group chaired by Wim Kok November
2004.

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2.3.1
At the same time, the Lisbon agenda offers a broad
basis for strengthening the domestic economic dynamics of the
EU and its Member States (8).

2.3.2 Most Member States have the potential to increase
growth by increasing the employment rate.

2.4
Some of the causes of Europe's weak growth and the
hitherto disappointing trend in the labour market also lie in as
yet unsolved structural problems that are common to all the
large economies in the euro zone. Furthermore,
there is
consensus across all Member State governments that both fiscal
consolidation of public budgets and improved economic
growth are necessary.

2.4.1
The EU must itself be an engine for growth if it is not
to continue losing ground to other economies and if it is to
achieve the ambitious Lisbon goals.

2.4.2
The Committee believes that the social partners and
other representative civil society organisations have a signifi-
cant role to play in this discussion. In addition, the Committee
refers once again to its opinion on improving the implementa-
tion of the Lisbon strategy (9), which this opinion complements
and updates.

Overcoming the crisis of confidence

In some Member States,

2.5
the uncertain employment
situation has led consumers to postpone or shelve decisions to
purchase. This leads to a wait-and-see policy, which weakens
domestic demand. Transactions which would have a beneficial
impact in the long term are postponed and economic growth is
adversely affected. It is worrying that in certain Member States,
where there was a drop in consumption linked to the economic
downturn of 2001-2003, consumption has not risen signifi-
cantly despite the subsequent upturn in the economy. Much
the same applies to business investment decisions. There is a
risk that self-fulfilling expectations will become entrenched and
that stubborn economic imbalances will persist. This risk must
be addressed with appropriate measures.

The crisis of confidence among employees and consu-
2.5.1
mers is made worse in many countries of the European Union
by revelations about mistakes and impropriety on the part of
managers and entire management structures. The Committee
considers it important that European countries, supported by
the European Union, should pay more attention to and do

(8) Council of the European Union, Presidency Conclusions (19255/
2005, 18.6.2005), in particular points 9-11, and the Communica-
tion from the Commission to the Council and the European Parlia-
ment on Common Actions for Growth and Employment: The Community
Lisbon Programme (COM(330) 330 final, 20.7.2005).
(9) See EESC opinion on Improving the implementation of

the Lisbon

strategy (OJ C 120, 20.5.2005, p. 79).

more to correct the shortcomings in qualifications and integrity
among managers. In addition, consideration should be given to
how,
through greater transparency and, where appropriate,
tougher rules on liability, people with executive responsibility
might be encouraged to concentrate firmly on their tasks and
to act in a socially responsible manner.

2.5.2
Overcoming the crisis of confidence in the large
economies of the euro zone is one of the key tasks. Only a
strategy of sustainable financial and social policies will maintain
and strengthen public confidence in national governments and
the EU institutions (10).

2.5.3
Unburdening public budgets and strengthening social
security systems will only be possible if there is a sustained
improvement in the labour market. Labour market reforms that
are appropriate both to the increasing pace of economic
change and to social security must be placed at the centre of a
sustainable economic policy. In line with the Lisbon Strategy,
the state can perform a guiding role in supporting the appro-
priate investment and the creation of jobs in new areas as a
positive response to globalisation.

It is therefore of the utmost importance that, through
2.5.4
improved coordination in the areas of
trade, competition,
industry, innovation, education and training, and employment,
attention is focused on these new areas and the opportunities
they offer. Civil society as a whole should act in accordance
with its responsibility.

It

is essential

2.5.5
that monetary and fiscal policy also
stimulate growth and employment (11). What
the Member
States really need is coordination of economic policy. However,
care must be taken to ensure that economic policy measures to
stimulate demand do not undermine confidence in stability.

3. Macroeconomic policy for growth and jobs

Budgetary policy

3.1
Structural reforms without sufficient demand have nega-
tive effects on employment. The high long-term pressure on
expenditure resulting from the ageing population must be
taken into account now. In such circumstances, fiscal policy
could, as part of a balanced macroeconomic policy, also help
stimulate effective demand (12).

(10) See also the opinion of the EESC's Section for Economic and Mone-
tary Union and Economic and Social Cohesion on Strengthening
economic governance – The reform of the Stability and Growth Pact –
Rapporteur: Ms
Florio (ECO/160 – CESE 780/2005 fin.,
31.1.2006).

(11) The EESC has repeatedly advocated this, recently inter alia in its
opinion on Employment policy: the role of the EESC following the enlar-
gement of the EU and from the point of view of the Lisbon Process (OJ C
221, 8.9.2005, p. 94).
(12) See also the opinion of

the European Economic and Social
Committee on the Broad Economic Policy Guidelines 2003-2005 (OJ
C 80, 30.3.2004, p. 120, point 1.4).

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3.1.1
To do this, the Member States need to make their
budget planning more realistic and more transparent. A critical
look at what government does, and more disciplined expendi-
ture, would demonstrate the quality of public expenditure and
contribute to higher growth. This also applies to all levels of
the EU. Stricter implementing mechanisms are needed within
individual countries in order to address the underlying causes
of the deficit risks. The Commission's 2005 autumn forecast of
the level of government deficits underscores the need for
consolidation. Despite the continuing (albeit weak) economic
recovery,
the
EU25 for 2005 and 2006 will be around 2.7 % each year,
which is only just below the reference value of 3 %.

the Commission estimates that

the deficit of

3.1.2
Fiscal discipline is an important precondition for the
European System of Central Banks to be able to ensure price
stability over the longer term whilst maintaining relatively low
interest rates. The ECB should continue to keep a watchful eye
on inflationary pressures such as those connected with the
worldwide liquidity surplus or secondary effects of the rise in
the price of energy. The Committee thus supports the Commis-
sion's
stability should
continue to be the ECB's top priority.

conclusion that maintaining price

Sustainability of social systems

3.2
The strong pressure to adapt social security systems
does not come first and foremost from globalisation, but above
all
from high structural unemployment and the significant
demographic change caused by the fall in the birth rate and the
increase in life expectancy, which may lead to the length of
time over which people draw their pensions getting longer and
longer. The Committee supports the Commission in all
its
efforts to boost employment and in its call
for sustained
modernisation of social security systems, as a high degree of
social security is indispensable so that the balance between
competitiveness, demand and social cohesion is assured (13).
What is important here is to ensure that social security, on
which many people quite rightly rely, is maintained.

3.2.1
Any reform of social security systems must go hand in
hand with specific plans to facilitate women's access to the
labour market; for that reason child-care services, schools, etc.
should also be guaranteed. Measures that make it easier to
reconcile work and family life, such as improved all-day child
care, are to be supported (14).
In countries with inadequate
childcare provision, the employment rate among women is
relatively low. Conversely, countries with high rates of female
employment have good access to childcare facilities. Statistics
show that there is a significant discrepancy between the desir-
able (2.3) and actual (1.5) number of children per woman in
the EU. A birth rate of 2.1 would be sufficient to halt the

(13) See the opinion of the European Economic and Social Committee
on the Broad Economic Policy Guidelines 2003-2005 (OJ C 80,
30.3.2004, p. 120, point 1.5.3).

(14) See the EESC opinion on the Proposal for a Council Decision on guide-
lines for the employment policies of the Member States, in accordance with
Article 128 of the EC Treaty – OJ C 286, 17.11.2005, p. 38). This
states,
‘The EESC continues to urge the
Member States to support efforts to make the world of work
compatible with family life. This is a task for society as a whole’.

inter alia (point 3.2.3):

expected decline in the European population. Putting in place
appropriate infrastructure, and organising work in a way which
enables commitments to employees to be honoured while
making part-time working more attractive for employees and
employers, and making it easier — without actually offering
incentives — to take career breaks, along with flexible working
hours, ought to make it much more attractive, at least in some
Member States, to return to work after a period of child-rear-
ing.In addition, sustained reform of the labour market leading
to increased demand for labour will strengthen the position of
employees and thus make employers more willing to help
make it easier to reconcile work and family life.

3.2.2
Governments and the social partners also have a duty
to support, through collective agreements, new employment
opportunities and a primarily innovation-friendly balance
between flexibility and security. With this in mind, and with
regard to older workers, the Committee has supported the
recommendations and the analysis made by the Commission in
its Communication (COM (2004) 146 final):
‘…social partners
should broaden and intensify their efforts both at national and EU
level to establish a new culture on ageing and management of change.
Far too often, employers continue to give priority to early retirement
schemes.’ Increasing the employment rate is key. On this issue,
the EESC believes that increasing the overall employment rate,
or in particular that of
the 55-64 age range, also means
increasing the employment rate among categories of potential
employees who are under-represented there. From this perspec-
tive, significant measures should be taken to mobilise all the
reserves of labour that exist in the EU, whether young people
who are often stuck in demoralising unemployment, which is
worrying for the future overall employment rate, or women or
people with disabilities (15).

Reducing unemployment, mobilising workers

3.3
The Committee underscores the necessity stated by the
Commission to continually increase employment rates particu-
larly in the large economies and to continually increase the
supply of workers. In order to ensure the long-term sustain-
ability of the European economy, combating mass unemploy-
ment must be given top priority.

3.3.1
High structural unemployment and the expansion of
world trade place additional pressure on labour markets to
adapt efficiently and dynamically. Export markets in particular,
but also the service sector, open up numerous new opportu-
nities as a result of rapidly expanding world trade. This raises
entirely new challenges for the ability of the labour markets to
adapt. A stable framework is needed if those challenges are to
be met.

(15) See opinion EESC opinion on Increasing the employment of older
(OJ C 157,

from the labour market

workers and delaying the exit
28.6.2005, p. 120), points 6.3.2 and 4.4.4.

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3.3.2
The European labour markets need to be able to
respond better and more dynamically to such trends as
outsourcing and offshoring. Unemployment
insurance and
social security systems and employment services should operate
in such a way that they not only provide for transition from
unemployment into employment, but also facilitate movement
between different
such as work,
training, career breaks or self-employment. Since the EU has
only a limited mandate in this area, it is up to the Member
States to manage their labour market institutions accordingly.

employment

situations,

3.3.3
In addition, there remain temporary obstacles to the
cross-border mobility of workers within the EU. The
Committee calls on the Member States to look seriously at
whether the transition periods could be ended. This requires
appropriate involvement and consultation of the social partners
at all relevant levels (16). If the transition periods are to be main-
tained, this needs to be justified with weighty and objective
arguments.

training is far higher

Since unemployment among people with no or little
3.3.4
vocational
than average, promoting
training and career development is one of the most important
instruments of employment policy. Education and training are
investments in human capital. They improve the job opportu-
nities of the individuals concerned and increase the production
factor in
capacity of businesses. Training is an important
improving productivity and international
competitiveness.
Social partners as part of collective agreements and any other
contract that affects them should agree that employees and
workers maintain and increase their human capital through
training and career development.

3.3.5
Among young people in particular, vocational training
is rightly seen as a necessary condition for future employment,
although it is not in itself a guarantee of a perfect match
between skills and available work. Older people, who,
like
young people, are more likely than average to be unemployed,
also need to gain new knowledge through training and qualifi-
cation measures. The productivity potential of older workers is
not lowered by age but by obsolete skills. This can be corrected
through training. In view of this, it should be pointed out that
a policy aimed at those in their forties, fifties or above is not
sufficient (17).

4. Microeconomic reform to strengthen the potential for

growth

The EU internal market

4.1
The Committee agrees with the Commission that a
larger and deeper internal market is an essential part of an
economic policy aimed at employment and growth. However,
the Committee does not consider that the problems in imple-
menting the Lisbon Strategy lie primarily in an insufficiently
integrated internal market.

4.1.1
The integration of the market in services, which has
not yet been completed, can hardly be seen as the cause of the
poor performance of the labour markets and of economic
growth. A significant proportion of the unemployed are people
with few skills, who would reap only limited benefits from an
integrated European market in services. Whilst it is true that
removing tax obstacles would improve the conditions for
investment and that overcoming the obstacles to mobility can
make life easier for some employers and employees, this would
labour
not have a significant effect on improving national
markets. Nonetheless,
the internal
market with the aim of creating a truly level playing field in
the internal market in services could make a significant contri-
bution.

further development of

4.1.2
The Committee takes the view that it would be a
mistake to believe that the maximum level of market integra-
tion is always the best level. Particularly in markets that are
typically regional or local,
in which many service providers
operate, the volume of cross-border services will always be
limited. This is precisely the kind of area where forcing further
harmonisation could give the impression that EU policy does
not take sufficient account of specific regional circumstances
and thus lead to a hardening of existing reservations. For this
reason, the obstacles that currently exist must at least be clearly
listed and weighed against regulations that need to remain in
place due to the specifics of the Member States and to which
market participants must adapt. Priority should be given to
careful consideration of each market and each sector.

also supports

The Committee

4.1.3
the Commission's
recommendation that state aids that hinder competition should
be phased out, or that those aids should be directed to areas of
research, innovation and training linked to the Lisbon Strategy.
In the light of the aim of greater competitiveness, this would
also reduce the burden on public finances and increase future-
oriented public investment.

The Committee considers

3.4
security burden on labour to be a serious problem area.

the high tax and social

(16) The Social Dimension of Globalisation - the EU's policy contribution on
extending the benefits to all – COM (2004) 383 final, 18.5.2004.
(17) See the OECD's International Adult Literacy Survey – IALS and the
EESC opinion on Older workers (OJ C 14, 16.1.2001) and Increasing
the employment of older workers and delaying the exit from the labour
market (OJ C 157, 28.6.2005, p. 120), point 4.3.5.)

4.1.4
Integrating the European capital markets is significant
to revitalising growth in the EU. Over the last few years, there
have been considerable efforts towards creating a regulatory
framework for an integrated market in capital and financial
services.
the Committee is sympathetic to
complaints about an excessively rapid and costly round of
harmonisation.

In this context,

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4.1.5
Further proposals for harmonisation and regulation
need to be subject to a careful assessment of their necessity and
urgency. In the short term, proposals for directives that are not
urgently needed should be shelved. For the time being, it would
seem far more appropriate to concentrate on market-oriented,
cost-efficient implementation and consolidation of very recent
legislative proposals that have not yet been fully completed.
The Committee also supports the positions set out
in the
Commission's White Paper on Financial Services Policy (2005-
2010).

Competition and cutting red tape

4.2
The Committee welcomes the goals set by the Commis-
sion for freeing up trade. A slimmed-down, modern administra-
tion focused on core tasks has the potential to make savings,
but, in the absence of tools for intervention in crisis situations,
could render Member States unable to act. Member States
should seek to focus on the core functions of the state, such as
education, public infrastructure, internal and external security
and social security, as well as high standards of public health,
the
more seriously as a guiding principle.
Committee gives its full support to the Commission's state-
ments in support of
the economic significance of better
lawmaking. Increased consultation of the stakeholders during
the legislative process will facilitate more transparent decision-
making, which is in the interests of legislators and market parti-
cipants.

In this context,

Increased competition will also be a driving force for
4.2.1
promoting innovation. The policy framework for innovation
and more generally for research should be improved. The
Committee wishes to stress at this point that it has put forward
proposals in numerous opinions that are still valid (18).

4.2.2
The EESC points out that the guidelines do not pay
enough attention to the issue of cutting red tape. Thus, the
significance of the EU plans for better lawmaking is once again
highlighted, but the Committee regrets the absence of a clear
call in the guidelines for Member States to take measures to
reduce red tape,
for example by simplifying their tax and
contributions systems. The same applies to EU legislation and
its application at national
level. Streamlined decision-making
and simplified procedures would reduce costs and relieve pres-
sure on public budgets.

In the areas of regulation, deregulation and market
4.2.3
liberalisation,
to balance the interests of
consumer protection and the environment and social policy
goals carefully with the opportunities for the whole economy

important

is

it

(18) See EESC opinions on Researchers in the European Research Area: one
profession, multiple careers (OJ C 110, 30.4.2004, p. 3), Integrating
and strengthening the European research area (OJ C 32, 5.2.2004, p.
81), The European Research Area: Providing new momentum - Strength-
(OJ C 95,
ening - Reorienting - Opening up new perspectives
23.4.2003, p. 48) and Reinforcing cohesion and competitiveness
technological development and innovation (OJ 40,
through research,
15.2.1999, p. 12).

to grow. Future legislative and regulatory activity should, more
than has been the case hitherto, be subject to legislative impact
assessment (19).

4.2.4
In particular, SMEs and other independent businesses
are disproportionately restricted in their productivity by
thickets of red tape, as they have flat management and adminis-
tration structures. The Committee therefore repeats its call for
the creation of a specific statute for SMEs (20).

The Committee also sees significant opportunities in
4.2.5
increased cooperation between the public and private sector to
provide public services (Public-Private Partnership). This latest
form of cooperation in the EU Member States and the EU itself
in providing public services should ensure that there is a level
playing field between the private and public sectors in order to
maximise the benefit to the public. Borrowing from the private
sector to finance projects should be considered when it is cost-
effective and irrespective of how the projects are designed, built
or operated.

Education and training

4.3
The concept of lifelong learning has an important role
to play in relation to the knowledge-based economy, not least
through flexible learning methods. If lifelong learning is to
become a reality, there needs to be a culture of learning within
society and the infrastructure to support it. The social partners
and civil society should promote lifelong learning as a guiding
principle. Moreover, greater use of the potential of public-
private partnerships should also be considered in the area of
education and training. At present, funding that infrastructure
needs greater support from the state, but so far not enough has
been forthcoming. Recently (in 2002), total spending on educa-
tion and training in the EU25 was 5.2 % — similar to the level
in comparable economic spaces. However, only 0.6 % was
from private money;
this is far less than in the reference
regions, and could be increased where it is cost effective over
the life-time of the project or the period of borrowing.

4.3.1
The EESC has already expressed a view on the connec-
tion between cultural exchanges and young people in the
context of an action programme on lifelong learning (21). At
this stage, the significance of this relationship for the creation
of a knowledge-based society needs to be emphasised once
again. Promoting cultural exchanges (especially among young
people) stimulates the interest in other aspects of culture and
thus makes a positive contribution to the exchange of knowl-
edge.

(19) With this in mind, the European Economic and Social Committee
has in the past called for a simplified tax system and regulatory
framework. See also the opinion of the European Economic and
Social Committee on the Broad Economic Policy Guidelines 2003-
2005 (OJ C 80, 30.3.2004, p. 120, point 4.4.2.4).

(20) See the EESC opinion on the Proposal for a Council Decision on guide-
lines for the employment policies of the Member States, in accordance with
Article 128 of the EC Treaty – OJ C 286, 17.11.2005, p. 38).

(21) Opinion of the EESC on the Proposal for a Decision of the European
establishing an integrated action
lifelong learning, 10.2.2005 (OJ C 221,

the Council

Parliament and of
programme in the field of
8.9.2005, p. 134).

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C 88/83

4.3.2
The Committee welcomes the fact that the decision on
the directive on the recognition of qualifications has removed
significant obstacles to the mobility of employees and self-
employed people. It calls on the Member States to ensure that
it
In addition, regular performance
comparisons and benchmarking of universities and schools,
such as take place as part of the Pisa study and the Bologna
process, should have a positive effect on the participants' ambi-
tion and commitment (22).

is implemented rapidly.

4.3.3
Furthermore, the European tertiary education system
is not sufficiently focused on the task of becoming a worldwide
centre of excellence for top-level research. More attention
should be paid to the concept of centres of excellence and
excellence clusters at national and European level where this is
not yet sufficiently the case. This would militate against the
brain drain of top European researchers.

Research and innovation

4.4
The expected reduction and ageing of the European
population will mean that more and more technological inno-
vation is needed in order to secure the future prosperity of
pan-European society. However, the Commission has estab-
lished and correctly pointed out that the efforts to increase
innovation in the EU have so far been inadequate (23).

activity

innovative

To boost

the
at EU level,
4.4.1
Committee regards it as essential
to remove the obstacles
which impede its spread across borders. Besides the unsatisfac-
tory labour market, the level of innovation, which is still below
what it could be, is one of the key factors in the slowdown in
the growth of productivity in the euro area. But to achieve
better results in terms of innovation, it is necessary to remove
the causes of the market segmentation which currently hinders
the spread of new technologies.

Brussels, 15 February 2006.

4.4.2
The Committee agrees with the Commission that the
framework conditions and incentives must be improved so as
to create a productive and innovation-friendly environment.

4.4.3
State support for innovation should be used more effi-
ciently and better targeted so as to avoid the wrong incentives
for private investors and hence the wrong allocation of public
funds. More use should be made of projects involving close
cooperation between universities and companies in order to
link research more effectively to the private sector — without
prejudice to the need for fundamental research.

4.4.4
The rules for state aid measures should be more trans-
parent in order to facilitate access to public research funds. The
Committee also welcomes greater cooperation within the
Commission services. The Committee reiterates its call for the
general conditions for the granting of aid to be made more
SME- and microenterprise-friendly.

4.4.5
An EU-wide Community patent would also have a
positive effect on innovation. It should be possible to overcome
obstacles to this, such as the so-called language problem. The
Committee once again strongly advocates the introduction of a
European Community patent as soon as possible.

Small and medium-sized enterprises

4.5
As the Committee pointed out in an earlier opinion,
special attention should be paid to encouraging entrepreneur-
ship (24). SMEs in particular have a special potential for innova-
tion. In order to compensate for their disadvantage in relation
to established larger companies in terms of costs, they need to
hold their own through innovative products and services.
Consequently the Committee welcomes the Commission's call
for the removal of all obstacles to access to financing in general
and to the risk capital markets for young companies in
Europe (25).

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

(22) Elsewhere, the EESC has also highlighted ‘the importance of the
transparency and harmonisation of qualifications across Europe
and at international level’. See the EESC opinion on the Proposal for
the
a Council Decision on guidelines for the employment policies of
Member States, in accordance with Article 128 of the EC Treaty – OJ C
286, 17.11.2005, p. 38, point 3.8.1).

(23) The EU spends only around 2 % of GDP on R&D. See European
Commission, Recommendation on the broad guidelines
for
economic policy (2005-2008), COM (2005) 141 final, section B.2.
This percentage is not much higher than it was when the Lisbon
strategy was launched, and is still a long way off the EU target of
3 % of GDP for investment in research. The Committee recalls that
two-thirds are supposed to be provided by private industry.

(24) EESC opinion on Fostering entrepreneurship in Europe: Priorities for the
future (OJ C 235, 27.7.1998) and the EESC opinion on the Proposal
for a Council Decision on guidelines for the employment policies of the
Member States, in accordance with Article 128 of the EC Treaty – OJ C
286, 17.11.2005, p. 38).

(25) The European Economic and Social Committee has already
expressed similar views on other occasions, and has also advocated
the promotion of the entrepreneurial spirit and new business start-
ups. See also the opinion of the European Economic and Social
Committee on the Broad Economic Policy Guidelines 2003-2005 (OJ
C 80, 30.3.2004, p. 120, point 4.4.2.4).

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APPENDIX 1

to the Opinion of the European Economic and Social Committee

Rejected amendment

The following amendment, which received at least a quarter of the votes cast, was rejected in the course of the debate:

Point 2.5.1

Delete.

Reason

In the EU Member States there are 23 million economic entities and several times as many managers, the majority of
whom are employees. They work in an extremely stressful environment and assume responsibility for virtually every-
thing which takes place in enterprises which is the fault of or caused by any member of the workforce. Many managers
resign or take out insurance against the risks.

All EU Member States have legal systems, such as civil, commercial or penal codes, which set out rules governing the
responsibility of managers of economic entities.

In point 2.5.1, the Member States and the European Union are called upon to pay more attention to and do more to
correct the shortcomings in qualifications and integrity among managers.

A number of questions arise in this context and these questions must be addressed if we wish to see the EESC opinion
given serious consideration.

1. How are the European Union and its Member States to monitor the qualifications and integrity of several tens of
millions of people? Will new institutions have be set up? Are the existing legal systems not up to the task and would
it not be appropriate simply to enforce the law?

2. Why should this appeal not also be addressed to workers, calling upon them to work efficiently and properly, to
have the right qualifications and to behave ethically, bearing in mind that managers are responsible for mistakes for
which the fault lies with workers? If the EESC is indeed a body which operates on the basis of consensus, we should
also call on workers, all foundations and social and non-governmental bodies to ensure that they possess the requisite
qualifications and observe the requisite principles and ask the Member States and the EU to monitor them. Why
should we confine our attention to managers?

3. In the course of the ECO section's deliberations, whilst it was adopting its opinion, it was argued that the appeal to
the EU and the Member States should not be taken seriously as it was only an appeal. In that case, why not deal with
all problems — be they economic, social or other problems — right away in a single opinion and a single appeal, in
the knowledge that it is just an appeal. This is the course of action that the opposition used to propose to parliaments
in communist countries where the worse the economic situation became, the more the government adopted regula-
tions in the belief that it was possible to change things by issuing rules, passing resolutions and adopting appeals. I
propose that we adopt an opinion together with the following appeal directed at the EU and the Member States: ‘The
situation has to be resolved’. This would enable us to tackle not just the issue of managers but also all other matters.
The European Economic and Social Committee will then cease to be of any further use, a situation which can only
be to the benefit of the European Union and European integration.

Voting

For: 37

Against: 53

Abstentions: 9.