Source: EURLEX
Language: en
Format: md

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| 11.4.2006 | EN | Official Journal of the European Union | C 88/76 |

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Opinion of the European Economic and Social Committee on the Broad Economic Policy Guidelines 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 rapporteur 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

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.

In the context of continuing weak economic growth in the euro area and indeed in the EU as a whole, and of the challenges of globalisation and demographic change, 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 macropolicy that actively promotes growth and employment is 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.

The Committee supports the Commission's call for social security systems to be modernised so as to ensure their sustainability. 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 flexibility and security.

The Committee believes that, as well as an appropriate macroeconomic policy to stimulate growth and employment, microeconomic 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 be a mistake to believe that the maximum level of market integration is always the best level.

The Committee also believes that correct decisions in the areas of lifelong learning, equality of opportunity, support 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 emphasises that promoting enterprise deserves particular attention.

1.   Preliminary remarks

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| 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 complementary to the opinion on the Employment Guidelines — 2005-2008[(1)](#ntr1-C_2006088EN.01007601-E0001). Again, the Committee is critical of the arrangements for the consultation procedure, which, in the light of the subject matter, are not conducive to the coherence of the two opinions. Dealing with the broad guidelines and the employment guidelines together would better reflect the many ways in which the two areas are interrelated. |

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| 1.1.1 | To improve the implementation of 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. |

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| 1.1.2 | In its opinion on the Broad Economic Policy Guidelines 2003-2005 [(2)](#ntr2-C_2006088EN.01007601-E0002), the Committee warned of the need to better focus the policy mix on growth and full employment. This recommendation is just as pertinent today. |

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

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| 1.3 | The integrated guidelines are to be considered as recommendations 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 Community.’ (Article 5 EC Treaty). Notwithstanding the above, economic policy remains a matter of common concern (Article 99(1) EC Treaty). |

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| 1.4 | This opinion gives an overview of the European economy as a whole without ignoring the particular characteristics of the individual national economies of the Member States. |

2.   The issue at hand

Starting point: Current economic development

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| 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. |

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| 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 European consumers is also expressed in the savings ratio, which is high by international standards. |

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| 2.1.2 | Capital investment, which had fallen almost continuously 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 environment remains favourable to investment, but more to high-growth financial investment in stocks than to capital investment. 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 business 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. |

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| 2.1.3 | The Committee is surprised that, despite the favourable 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 and acquisitions that trigger off restructurations. The Committee is particularly concerned by the 'short-termism' which hampers the necessary long-term business investments. |

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| 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 weakness in investment further limits the potential for future growth. |

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| 2.1.5 | This trend towards a ‘jobless recovery’ has similarly been observed in the labour markets of other comparable industrialised countries and regions. However, the labour market situation there is in most cases much more favourable. According to Commission estimates[(3)](#ntr3-C_2006088EN.01007601-E0003), 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. |

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| 2.1.6 | Thus, bringing the untapped labour force into employment 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

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| 2.2 | Alongside the current economic and finance policy 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. |

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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. |

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| 2.2.2 | Everything possible must be done so that the consequences 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 European 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. |

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| 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. |

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| 2.2.4 | The second big challenge for Europe's economies will be demographic change and the resulting ageing of the population. 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. |

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| 2.2.5 | The main causes of demographic change are the continuing 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 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)](#ntr4-C_2006088EN.01007601-E0004). Dealing with demographic change will also be a challenge for social dialogue and civil society. |

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| 2.2.6 | If the aim of creating a competitive, knowledge-based 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 changing 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 motivation 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 developed through individual career plans linked to corporate objectives[(5)](#ntr5-C_2006088EN.01007601-E0005). |

Lisbon strategy

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| 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. The reports of this Committee[(6)](#ntr6-C_2006088EN.01007601-E0006) and of the High Level Group[(7)](#ntr7-C_2006088EN.01007601-E0007) (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 countries and regions in terms of EU per capita GDP and productivity growth. |

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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)](#ntr8-C_2006088EN.01007601-E0008). |

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

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| 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. |

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| 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. |

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| 2.4.2 | The Committee believes that the social partners and other representative civil society organisations have a significant role to play in this discussion. In addition, the Committee refers once again to its opinion on improving the implementation of the Lisbon strategy[(9)](#ntr9-C_2006088EN.01007601-E0009), which this opinion complements and updates. |

Overcoming the crisis of confidence

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| 2.5 | In some Member States, 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 significantly 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. |

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| 2.5.1 | The crisis of confidence among employees and consumers 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 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. |

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| 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)](#ntr10-C_2006088EN.01007601-E0010). |

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| 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 appropriate investment and the creation of jobs in new areas as a positive response to globalisation. |

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| 2.5.4 | It is therefore of the utmost importance that, through 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. |

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| 2.5.5 | It is essential that monetary and fiscal policy also stimulate growth and employment[(11)](#ntr11-C_2006088EN.01007601-E0011). 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

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| 3.1 | Structural reforms without sufficient demand have negative 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)](#ntr12-C_2006088EN.01007601-E0012). |

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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 expenditure, 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 Commission estimates that the deficit of the EU25 for 2005 and 2006 will be around 2.7 % each year, which is only just below the reference value of 3 %. |

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| 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 Commission's conclusion that maintaining price stability should continue to be the ECB's top priority. |

Sustainability of social systems

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| 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)](#ntr13-C_2006088EN.01007601-E0013). What is important here is to ensure that social security, on which many people quite rightly rely, is maintained. |

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| 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)](#ntr14-C_2006088EN.01007601-E0014). 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 desirable (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 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-rearing.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. |

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| 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 perspective, 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)](#ntr15-C_2006088EN.01007601-E0015). |

Reducing unemployment, mobilising workers

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| 3.3 | The Committee underscores the necessity stated by the Commission to continually increase employment rates particularly in the large economies and to continually increase the supply of workers. In order to ensure the long-term sustainability of the European economy, combating mass unemployment must be given top priority. |

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| 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 opportunities 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. |

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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 employment situations, 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. |

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| 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)](#ntr16-C_2006088EN.01007601-E0016). If the transition periods are to be maintained, this needs to be justified with weighty and objective arguments. |

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| 3.3.4 | Since unemployment among people with no or little vocational training is far higher 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 opportunities of the individuals concerned and increase the production capacity of businesses. Training is an important factor in 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. |

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| 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 qualification 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)](#ntr17-C_2006088EN.01007601-E0017). |

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| 3.4 | The Committee considers the high tax and social security burden on labour to be a serious problem area. |

4.   Microeconomic reform to strengthen the potential for growth

The EU internal market

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| 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 implementing the Lisbon Strategy lie primarily in an insufficiently integrated internal market. |

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| 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 not have a significant effect on improving national labour markets. Nonetheless, further development of the internal market with the aim of creating a truly level playing field in the internal market in services could make a significant contribution. |

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| 4.1.2 | The Committee takes the view that it would be a mistake to believe that the maximum level of market integration 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. |

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| 4.1.3 | The Committee also supports 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. |

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| 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. In this context, the Committee is sympathetic to complaints about an excessively rapid and costly round of harmonisation. |

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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

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| 4.2 | The Committee welcomes the goals set by the Commission for freeing up trade. A slimmed-down, modern administration 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, more seriously as a guiding principle. In this context, the Committee gives its full support to the Commission's statements 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 participants. |

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| 4.2.1 | Increased competition will also be a driving force for 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)](#ntr18-C_2006088EN.01007601-E0018). |

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| 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 pressure on public budgets. |

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| 4.2.3 | In the areas of regulation, deregulation and market liberalisation, it is important to balance the interests of consumer protection and the environment and social policy goals carefully with the opportunities for the whole economy to grow. Future legislative and regulatory activity should, more than has been the case hitherto, be subject to legislative impact assessment[(19)](#ntr19-C_2006088EN.01007601-E0019). |

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| 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 administration structures. The Committee therefore repeats its call for the creation of a specific statute for SMEs[(20)](#ntr20-C_2006088EN.01007601-E0020). |

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| 4.2.5 | The Committee also sees significant opportunities in 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

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| 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 education 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. |

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| 4.3.1 | The EESC has already expressed a view on the connection between cultural exchanges and young people in the context of an action programme on lifelong learning[(21)](#ntr21-C_2006088EN.01007601-E0021). 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 knowledge. |

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| 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 is implemented rapidly. 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' ambition and commitment[(22)](#ntr22-C_2006088EN.01007601-E0022). |

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| 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

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| 4.4 | The expected reduction and ageing of the European population will mean that more and more technological innovation is needed in order to secure the future prosperity of pan-European society. However, the Commission has established and correctly pointed out that the efforts to increase innovation in the EU have so far been inadequate[(23)](#ntr23-C_2006088EN.01007601-E0023). |

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| 4.4.1 | To boost innovative activity at EU level, the Committee regards it as essential to remove the obstacles which impede its spread across borders. Besides the unsatisfactory 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. |

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| 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. |

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| 4.4.3 | State support for innovation should be used more efficiently 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. |

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| 4.4.4 | The rules for state aid measures should be more transparent 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. |

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| 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

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| 4.5 | As the Committee pointed out in an earlier opinion, special attention should be paid to encouraging entrepreneurship[(24)](#ntr24-C_2006088EN.01007601-E0024). SMEs in particular have a special potential for innovation. 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)](#ntr25-C_2006088EN.01007601-E0025). |

Brussels, 15 February 2006.

The President

of the European Economic and Social Committee

Anne-Marie SIGMUND

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