Source: EURLEX
Language: en
Format: md

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| 23.3.2005 | EN | Official Journal of the European Union | C 74/23 |

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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 division 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.

1.   Introduction

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| 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 tasks call 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)](#ntr1-C_2005074EN.01002301-E0001). |

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| 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. |

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| 1.3 | The Commission's analysis, set out in its Communication of 21 January 2004[(2)](#ntr2-C_2005074EN.01002301-E0002) and the 2004 Update of 7 April 2004[(3)](#ntr3-C_2005074EN.01002301-E0003), 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 preconditions, i.e. good governance. Governance is the central theme for the EU of 25.[(4)](#ntr4-C_2005074EN.01002301-E0004) |

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| 1.4 | The EESC's concerns are shared by many. Like the Commission, industry and social organisations, successive presidencies – Ireland and the Netherlands - place very great emphasis on practical action and implementation. Solemn declarations with no follow-up are counter-productive. Implementation is a vital objective[(5)](#ntr5-C_2005074EN.01002301-E0005). |

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

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| 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; |  |  |  | | --- | --- | | — | a delay in strengthening competitive power through a knowledge-based economy; |  |  |  | | --- | --- | | — | insufficient productivity-enhancing investment, in particular in ICT and in knowledge and training; |  |  |  | | --- | --- | | — | uncertain investment climate; |  |  |  | | --- | --- | | — | shift of certain investments to regions outside the Union; |  |  |  | | --- | --- | | — | downward pressure on employment; |  |  |  | | --- | --- | | — | labour market policy: insufficient reforms and adaptations. | |

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| 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. |

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

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| 1.9 | This year there is a need for the Commission and 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 adaptation 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. |  |  |  | | --- | --- | | — | Developments in markets for products and services and continuing nervousness on the financial markets impel the Member States increasingly towards the same policy positions and towards effective integration. | |

2.   The analysis for 2004

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| 2.1 | The Broad Economic Policy Guidelines 2003-2005 are intended to achieve an integral approach to:   |  |  | | --- | --- | | — | macro-economic policy, directed towards growth and stability; |  |  |  | | --- | --- | | — | strengthening growth potential in Europe through economic reforms; |  |  |  | | --- | --- | | — | strengthening the sustainable nature of this growth. | |

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| 2.2 | The Stability and Growth Pact has for years provided a 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. |

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| 2.3 | Differences of opinion on Stability and Growth Pact procedures led the Commission last November to begin proceedings against the Council at the European Court of Justice[(6)](#ntr6-C_2005074EN.01002301-E0006). 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. |

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| 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 States has rapidly deteriorated, leading to higher levels of public debt. These in turn necessitate debt reduction measures at the expense of investment to boost growth and employment. |

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| 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. |

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

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| 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 intensification of ‘knowledge’. |

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| 2.8 | Community powers apply mainly to the internal market. As regards the labour market, social 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. |

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| 2.9 | The labour markets comprise various segments, between 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 unemployment. There is still a low percentage of older workers, and there remain obstacles for women on the labour market. Inactivity also has inevitable negative effects on the national budgets. |

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| 2.10 | The employment level in 2005 is forecast as 64.5 % for the whole Union, but in the meantime there are considerable 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 objective of 70 % in 2010 will depend crucially on the implementation of further reforms of the labour market[(7)](#ntr7-C_2005074EN.01002301-E0007). Hence its powerful plea for implementation of the recommendations of the Employment Taskforce[(8)](#ntr8-C_2005074EN.01002301-E0008). |

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| 2.11 | In addition to changes in social security, the Commission argues for greater differentiation in wage formation, greater flexibility of the labour market while maintaining adequate labour protection, and more mobility. As a consequence of diverging legislative trends and the results of socio-economic consultation there are considerable differences 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. |

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

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| 2.13 | Demographic trends and the ageing of the population 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. |

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| 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 financial services sector is proceeding properly: 36 of the 42 planned measures have been definitively adopted. The tax provisions on private investment are also improving. |

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| 2.15 | The transposition of Community directives 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. |

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| 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 Barcelona 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. |

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| 2.17 | Even at a time of economic stagnation, the sustainability 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 emphasises 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’. |

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| 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. |

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| 2.20 | The Commission judges in Update 2004 that the new 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 remarkable 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. |

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| 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 countries’ works only to some extent. The new Member States are ‘emerging markets’. Unemployment in some countries, and especially in a number of regions, is very high. Industrial restructuring is in full swing. This leads to high percentages of friction unemployment. Dependence on foreign investment is considerable. |

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| 2.22 | The adaptation of legislation and of 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, presupposes effective financial and monetary supervision 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. |

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| 2.23 | A feeling of urgency is indeed developing in the Union. Community orientations regularly reappear in conclusions 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[(9)](#ntr9-C_2005074EN.01002301-E0009). 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

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| 3.1 | As regards the internal market, for the coming year the Commission calls for urgent action on two fronts[(10)](#ntr10-C_2005074EN.01002301-E0010):   |  |  | | --- | --- | | — | 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 employment. 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. | |

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| 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. |

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| 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. |

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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, transport 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. |

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| 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. |

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| 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 relationships. 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.’[(11)](#ntr11-C_2005074EN.01002301-E0011) |

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| 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 population. |

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| 3.8 | The approach to and implementation of the Employment Taskforce's recommendations depend on national decision-making. These recommendations provide strong support for the Lisbon Process. Broad fields are involved: greater flexibility in promoting entrepreneurship and innovation, increasing work participation and an ‘activating’ social security, investment in education and schooling, and partnership with 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[(12)](#ntr12-C_2005074EN.01002301-E0012). |

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| 3.9 | The link between the overarching Lisbon Process and stable budgetary policy is obvious. The report to the Spring Summit[(13)](#ntr13-C_2005074EN.01002301-E0013) sees insufficient implementation of 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. |

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| 3.10 | The Spring report deals with the developments in the 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. |

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| 3.11 | There is still a lack of interaction between the university 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 brain drain from Europe: the balance of incoming and outgoing researchers remains negative[(14)](#ntr14-C_2005074EN.01002301-E0014), and this negative trend is increasing. |

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

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| 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

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| 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; |  |  |  | | --- | --- | | — | 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. | |

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| 4.2 | For the EESC, all of this is not just a matter of policy 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 Communication 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[(15)](#ntr15-C_2005074EN.01002301-E0015). |

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| 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[(16)](#ntr16-C_2005074EN.01002301-E0016). |

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| 4.4 | Over the years a pattern has developed of diverging Community and inter-governmental responsibilities and decision-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. |

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

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| 4.6 | The lack of effective results from the agreed commitments seriously jeopardises the potential of the European Union. |

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| 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. |

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| 4.8 | In recent years great hopes have been pinned on policy 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 respective shortcomings. In these circumstances the Commission's own scope for manoeuvre is restricted. In practice there is no satisfactory alternative to the Community method. |

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| 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 show that in the national transposition of Internal Market directives discipline is declining, sometimes to a serious extent[(17)](#ntr17-C_2005074EN.01002301-E0017). |

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| 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 legislation in the Member States. |

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| 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. |

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

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| 4.13 | The principle that the Union is based on the rule of law must be guaranteed under all circumstances. |

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| 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 enlargement simply require strict discipline. |

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| 4.15 | The Lisbon Strategy is a strategic concept. In that sense it is comparable to earlier strategic concepts which led to radical advances in integration. In those cases the planning 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 inflation, 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. |

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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. |

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| 4.17 | The European Council of 27 and 28 March 2004 in 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 foresees three priorities for 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 Employment Taskforce's report. |

5.   Europe at a new crossroads

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| 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 prosperity. |

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| 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. |

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

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| 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 between the institutions about what the Union and the Member States need to do. Competitiveness takes an increasingly 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 implementation constitute a serious problem. |

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| 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. |

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| 5.6 | This way forward can aim at nothing other than 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. |

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| 5.7 | Formulating at EU level a ‘new style’ Lisbon Process – strengthening of competitiveness and intensifying the knowledge 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. |

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| 5.8 | The policy guidelines show that healthy public finances and public and private investment require a cohesive, transparent 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. |

6.   Recommendations and conclusions

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| 6.1 | In this process the EESC takes the following as starting points:   |  |  | | --- | --- | | — | there should be a sharp distinction in analysis and objectives, between that which is reserved for the European Union and that which is reserved for Member States in decision-making; |  |  |  | | --- | --- | | — | to maintain credibility and avoid frustration, only realistic objectives should be set; |  |  |  | | --- | --- | | — | economic growth and the ‘new style’ Lisbon process should occupy a central place among these objectives, both to strengthen competitiveness and to support structural changes; |  |  |  | | --- | --- | | — | Member States should not blame ‘Brussels’ for European objectives on which they have agreed together. | |

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| 6.2 | Transparency requires the necessary attention to be 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. |

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| 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. |

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| 6.4 | The Member States will need to take account of discipline 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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| 6.5 | Inter-governmental 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 objectivity and subtle monitoring are called for. |

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| 6.6 | The Constitutional Treaty envisages better coordination 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. |

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| 6.7 | There is always a risk of fragmentation. The EESC 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[(18)](#ntr18-C_2005074EN.01002301-E0018) for a ‘super-commissioner’ responsible for economic policy. |

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| 6.8 | For its part the EESC would argue that at all events the Competitiveness Council must become more transparent. This is a practical starting-point for improving governance. The 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 recognisable pattern of responsibilities of national government members. This would enhance the ability to convince public opinion and the mutual sense of responsibility for shared policies. |

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| 6.9 | On the ‘multi-speed’ question there is no formal definition 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 for badly defined ‘multi-speed’ situations, which would be a source of distortion of competition. The procedure provided for in the draft Constitution offers positive starting points. |

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| 6.10 | For the internal market – still at the heart of integration – 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. |

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| 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 Commission will also need a set of instruments to enable it to better assess the quality of public expenditure. |

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| 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. |

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| 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. |

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| 6.14 | The EESC would argue that 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 connection the EESC emphasises the importance of the Commission's role and of the Community method, which were both responsible for the success of ‘Europe '92’. The Commission 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. |

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| 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 implementation. 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:   |  |  | | --- | --- | | — | all outstanding aspects of the internal market action plan; |  |  |  | | --- | --- | | — | the outstanding aspects of the financial services action plan; |  |  |  | | --- | --- | | — | aspects of the knowledge sector which are subject to Community decision-making; |  |  |  | | --- | --- | | — | review and relaxation of excessively rigid and detailed rules; |  |  |  | | --- | --- | | — | implementation and execution. | |

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| 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. |

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| 6.17 | Other subjects, which do not depend on rule-making and sometimes only partly on public management, but which are linked to competitiveness, knowledge and economic capacity, also deserve a place in the ‘new style’ Lisbon process; these include:   |  |  | | --- | --- | | — | sectoral industrial policy arising from joint consultation between industry (including social consultation), the Commission and the Council[(19)](#ntr19-C_2005074EN.01002301-E0019); |  |  |  | | --- | --- | | — | the output of EU technology programmes and platforms, more cross-frontier cooperation between research institutes and researchers in the Union, and promotion of cooperation between university and business; |  |  |  | | --- | --- | | — | regional policy, with special emphasis on knowledge and innovation. | |

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| 6.18 | The Commission and the European Council are in 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 (European, 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. |

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| 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’. |

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| 6.20 | The European Council has called upon the Commission 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-term Review of the Lisbon Strategy for the 2005 Spring Summit. The European Council has also asked the EESC to submit its recommendations for this Mid-term Review at the same time. |

Brussels, 15 September 2004.

The President

of the European Economic and Social Committee

Roger BRIESCH

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