Reflections on the Lisbon Strategy for Growth and Jobs beyond 2010

Denmark’s Non-paper

1. Introduction

1.1. Denmark welcomes the Commission’s invitation from the meeting of National LisbonCoordinators on 5 December 2008 asking Member States to contribute to the reflections onthe future of the Lisbon Strategy for Growth and Jobs in the post 2010-period. As a result,Denmark has prepared a non-paper with inputs from the so-called Lisbon CoordinationCommittee involving all concerned stakeholders at national, regional and local level. Denmarkalso welcomes the Commission’s own non-paper on the Lisbon Strategy after 2010 and theapproach opting for ‘an evolution rather than a revolution’. The past ten years of experienceand lessons learned should be part of a future Lisbon strategy but the Commission’s invitationalso represents

an appropriate occasion to assess the functioning of the present strategy

and intensify efforts put in areas that have undergone significant changes since 2000.

Following the Commission’s invitation, Member States have started reflecting on theircontributions to the Lisbon strategy post 2010 while also concentrating on the numerouschallenges of the current financial and economic situation. One of these challenges has beento ensure that the immediate short-term measures taken to respond to the situation happenwithin the framework of the Stability and Growth Pact and correspond with the medium- tolong-term goals laid down in the Lisbon strategy. The European response to the financialcrisis builds on

co-ordinated action and shared objectives while at the same time

acknowledging Member States’ interdependent economies and various starting

positions.

This approach is also characteristic of the Lisbon strategy thus underlining theimportance of EU commitment to a common strategy as well as co-ordinated act wheneveraction is called for.The fact that the Lisbon strategy has succeeded in promoting the reform agenda in Europe(e.g. higher rate of employment) is a result of nearly a decade of persistent political effort. TheLisbon strategy was launched in 2000 with a view to achieving the ten-year goal for the Unionto ‘become the most competitive and dynamic knowledge-based economy in the world,capable of sustainable growth with more and better jobs and greater social cohesion’. Tenyears after the results remain mixed. The strategy still points forward with

efforts to be

intensified, objectives to be prioritised and focus to be increased in order to

consolidate the achievements to date and pursue the implementation of necessary

structural reforms.

There continues to be a great need for structural reforms in Europe andimplementing Lisbon reforms should remain a key priority after 2010 to ensure that EU willbe capable of reaping the benefits of globalisation.1.2. In Denmark’s view, there is a need to reflect on how to make the successor to the Lisbonstrategy more effective. The Lisbon strategy post 2010 needs to be clear in its focus andambitious in its target setting. Increased focus on structural reforms will raise the ambition ofthe overall strategy. The overall goal should be to ensure long-term economic growth whichwill help job-creation and diminish social problems.1

At the height of the recent economic boom in 2007, the budget balance in EU27 was -0.9 pct.of GDP. As a result of the current downturn, the budget balance is expected to worsen to -4.8pct. by 2010. Those numbers indicate that Europe risks falling into a debt crisis in the longerrun. It is therefore essential that the new strategy ensures consistency between focusing onlong term growth and the need to tackle the problem of

structural budget deficits.

To deal with the current structural problems and to reach the goal of long-term growth it iscrucial to make reform that spur a stable economic development and regained confidence infinancial markets. Ensuring a high level of employment including labour market and pensionreform; strengthening the area of knowledge and innovation; combating climate change andensuring energy supply are amongst other essential challenges in the years to come. They all callfor an ambitious strategy beyond 2010 based on at least five strategic directions described in thefollowing.

2. Five strategic directions for a Lisbon strategy post 2010

In most challenges lies also opportunity. The overall driver in the Lisbon strategy post 2010should be to turn these challenges into opportunities through common efforts. The Lisbonstrategy’s current four priority areas provide an appropriate framework to address thesechallenges but call for further efforts. Denmark would like to see joint EU and nationalactions develop around five strategic directions i) Deepening the internal market; ii)Enhancing knowledge and innovation; iii) Making growth green; iv) A strengthened externaldimension; v) Reinforced governance structure and implementation.

2.1. Deepening the internal market.

First of all, the Lisbon goals can only be met if theinternal market for people, goods, services, and capital functions efficiently. A well-integratedinternal market should be put back at the centre of the Lisbon strategy to boost growth, jobsand competitiveness in Europe. In many areas where measures have already been taken, thereis still a need to improve enforcement of internal market rules and cooperation betweenpublic authorities – both national and international – and to increase the level of informationand coordination.Due to current economic changes, the rise of unemployment has become a short-term toppriority for EU and its Member States. However, the challenges of an ageing population and ashrinking labour force remain, and it is necessary to maintain focus on the long-term

issue of

increasing the flexibility of the labour market.

This is highly relevant as a means to curb thestructural deficits and ensure long-term growth. EU should continue to work on removinginternal barriers in order to ensure the effective mobility of workers, which is an important wayto meet the present and future demands for labour. This should happen without prejudice toensure that the risks of irregular migration are prevented within the framework of themodalities of the policies for the entry and residence of third-country nationals or, whereappropriate, other policies, including the modalities of the framework for freedom ofmovement. EU needs to be prepared to make full use of its potential when the state of themarket changes again.Furthermore, success in this area will be most important for

securing social inclusion and

cohesion

that are prerequisites for growth and jobs. The economic crisis only stresses the2

importance of committing to the sustainability of Europe’s social system originally at the coreof the Lisbon strategy. The labour market structures should continuously be improvedthrough the development of the model of flexicurity.The Single Market review from 2007 putting consumers and SMEs at the centre of policy willhelp create the appropriate conditions to unlock business potential and relaunch the Europeaneconomy. Particular efforts will be needed to continue the implementation of the SmallBusiness Act for Europe. Successful and timely implementation lays the basis for futuregrowth of SMEs and Europe in general. Strengthening the competitiveness of EU’s economyalso requires continued focus on

better regulation, simplification as well as reduction of

unnecessary administrative burdens

mainly for SMEs.

2.2. Enhancing knowledge and innovation.

In order to compete globally and to pursue thegoals of the Lisbon strategy, Europe must be able to produce, retain and attract highlyqualified labour. Denmark therefore stresses the importance of continued emphasis on therealisation of

the internal market for knowledge – the fifth freedom – as one of the key

conditions for a competitive European research area.

Creating a knowledge-based economy can only be done if we significantly strengthen ourfocus on the effectiveness of innovation, including non-technological user-centred and openinnovation. Addressing the challenges of the knowledge society requires that research,education and innovation are regarded as three integrated elements. This calls for

further

attention and exploration of policy challenges and opportunities of Europe’s so-called

knowledge triangle.

The economic downturn leads to a slowdown in the investments in Information andCommunication Technology. Consequently, the private as well as the public sectors in Europewill not be able to harvest the full productivity and efficiency gains of the ICT revolution. Withthe highest expenditure on R&D in Europe, the ICT sector remains crucial to the innovationcapacity. Targeted investment in intelligent ICT-based solutions will in addition play a key rolein solving other important societal challenges such as climate change, environmental risks, anddemographic changes.

2.3. Making growth green.

Energy and climate change as well as sustainable growth shouldcontinuously be part of the Lisbon priorities. The current challenges of combating climatechange and ensuring energy supply while ensuring high growth rates require investments in newknowledge and technologies, promotion of energy-efficiency and a change into a sustainablelow-carbon and resource efficient economy. The early adoption of Europe’s climate and energypackage along with the ambition to take responsibility in ensuring a new global climateagreement in Copenhagen 2009 proves the EU’s ability to set an example for the rest of theworld to follow. The EU as a ‘first mover’ will in return create new opportunities in terms ofgreen growth and jobs.The crisis is an opportunity for the EU to make growth more sustainable. We should continueto develop our growth strategy within an environmentally sustainable framework and ensureresource efficiency, greener products and environmental friendly technology to assure thatcurrent growth does not happen on the expense of coming generations. Danish experience3

demonstrate that high economic growth can be maintained without increasing energyconsumption through an active and persistent energy policy aiming at energy efficiency,renewable energy, and technological development.

2.4. A strengthened external dimension.

With an integrated internal market, Europe mustalso activate its external policies and ties with non-EU markets to be able to compete in a stillmore challenging and global environment. Open trade between EU and the rest of the world isfundamental to boost jobs, growth and competitiveness in Europe as well as abroad.

EU

should reflect on ways to strengthen the external dimension of the Lisbon strategy after

2010 in a way that both strengthens market access for businesses and protects social

and environmental standards.

To meet this end, Europe should promote its norms andstandards internationally including ILO standards. In order to ensure coherence andconsistency of policy, the external dimension should focus on common standards in bothbilateral and multilateral trade agreements.The current economic downturn may, to some people, question the actual benefits ofglobalisation. However, the current crisis has proven that enhanced economic and financialdialogue between EU and its major economic partners as well as effective coordination ofpolicies is severely needed. Furthermore, by working together the EU stands a better chance ofincreasing its weight outside the European Union. Protectionism should be avoided at any levelas it would only deepen the crisis further.

2.5. Reinforced governance structure and implementation.

The revised governancestructure of the Lisbon strategy carried out in 2005, following the Kok report, introducedseveral new instruments such as the Integrated Guidelines, National Reform Programs andregular adoption of country specific recommendations as well as points to watch. There is nodoubt that these instruments have improved substantially the governance process byenhancing member states’ commitment, responsibility and dialogue with the EuropeanCommission. The Open Method of Coordination is another important tool that has allowedMember States to share best practice and learn from each other.Europe, however, still has difficulties delivering on the Lisbon strategy. A successor to thestrategy may therefore need to involve complementary methods and adjustments of thecurrent governance structure that would further improve member states’ ability to deliverresults as well as respond to an enlarged and more diversified EU. The current crisis is also anopportunity for national governments to consider new policy instruments that will fosterMember States’ cooperation to support growth and employment. It will also be important toensure greater coherence between EU economic policy frameworks, in particular the Stabilityand Growth Pact and the proper functioning of the internal market.A successor to the Lisbon strategy should have a reinforced governance structure thatpromotes reform implementation more effectively. The strategy needs to reflect on thediscrepancy between what the strategy is expected to deliver and the instruments at itsdisposal. Denmark proposes to consider the following elements:

The three-year cycle has proven to be adequate and should be maintained. Memberstates’ reporting in the second and third year of the cycle could be simplified in orderto keep the governance structure as streamlined as possible.In addition to aggregate EU targets (average age of retirement, level of research andtertiary education, level of administrative burdens etc.), a

more differentiated and

flexible approach

could be considered inviting Member States to set their ownnational targets in accordance with national situations and leaving them to decide howthey will contribute to the EU-level target. Reflecting the increased heterogeneity ofthe EU, this dynamic would possibly create a more ambitious and realistic targetsetting as well as strengthen national ownership. The approach could initially be testedon selected areas and indicators.Input targets should be avoided. Member States should, when possible, be assessed on

output-orientated, quantitative indicators

(e.g. number of newly qualifiedacademics and not the amount of money invested in universities). Furthermore, moreprecise impact-analysis of targets and of available cost-efficient measures to reach thetargets should be made in order to strengthen the implementation of the strategy.More openness towards the idea of

ranking

individual member states on relevantindicators should be pursued and possibly include comparisons with influent non-EUcountries.

Reallocation of the EU budget

to better fit the strategy. This includes, among otherthings, greater focus on innovation and knowledge. This could also imply furthertargeting the spending of Structural Funds in accordance with Lisbon priorities.

Finally, in order to improve the visibility and concrete understanding of the Lisbon strategy,

political visibility of the Lisbon strategy post 2010 should be enhanced at all levels in

order to ensure an efficient implementation of national reform programmes.

TheEuropean Council already holds an important role when renewing the strategy every third yearand assessing it every year. National ownership and commitment to the strategy could beexpected to increase if for example the National Reform Programme is presented to nationalparliaments and discussed in relevant parliamentary committees. Furthermore, all relevantstakeholders including organisations, social partners, NGO’s, local governments shouldconsistently be involved.**