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Europaudvalget 2005-06
EUU Alm.del Bilag 136
Offentligt

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels,

COM(2006) yyy final

COMMUNICATION FROM THE COMMISSION TO THE SPRING EUROPEAN

COUNCIL

TIME TO MOVE UP A GEAR

The new partnership for growth and jobs

PART 1

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IME TO MOVE UP A GEAR

THE NEW PARTNERSHIP FOR GROWTH AND JOBS

Last year saw a decisive shift in the European Union, with a new momentum agreed for

growth and jobs. In 2005, the logic that our common challenges need common responses was

recognised as never before. The renewed Lisbon strategy showed how a European growth and

jobs strategy could be, and must be, more than the sum of its parts. The meeting of European

leaders at Hampton Court made clear that Europe is indispensable in the search for solutions

to global problems. There was full support for the European Commission’s analysis of the

challenges ahead, and for an ambitious framework for tackling them. All agreed that the

potential of the enlarged Europe could not be taken for granted – action is needed to exploit

that potential to the full and to secure sustainable development into the future.

This emerging consensus has again been shown in the national reform programmes prepared

by every Member State. They add up to a promising start for the new approach. Now the

momentum needs to be stepped up and the national programmes put into action.

What are the most urgent steps needed? We need more research and development, with more

efficiency and better coordination. We need to work together on a European scale to ensure

that research is translated into innovative products and services, which feeds into growth and

jobs. For our companies, particularly small and medium-sized companies, to compete

successfully on an increasingly competitive global market, they must be able to draw strength

from a European-wide home market. A market free of barriers and red tape, where rules are

predictable and where dynamic companies can prosper.

We need more people in work to finance pensions and health care as populations get older.

We need a lifecycle approach to work. Young people need help starting their working lives.

Parents need affordable childcare and a decent work-life balance. And we cannot afford to

have people drop out of the labour market when they are in their fifties.

We have been reminded in recent times, in various ways, of the importance of energy to our

economies. We cannot afford to waste it. We need to get more of it from renewable, non-

polluting sources. And we need security of supply at affordable prices. Competition can help

here too. But Europe also needs to speak with one voice in ensuring supply from beyond its

borders.

So we know what we are aiming for, and we know how to get there. But now for the difficult

part: turning good intentions into action. Reform needs to be the guiding principle for national

as well as European economic policy. It is vital that Member State and EU measures

complement each other to create a powerful growth and jobs engine. This is our common

responsibility, and the job is not finished until every worker, every business, every consumer

can enjoy the benefits of reform.

The first year of the strategy has offered real hope that progress towards economic reform is

under way, that Europe is on the move. If we can redouble our energies and make reform our

top priority, the renewed Lisbon strategy will be seen as a genuine turning point towards

growth and jobs in Europe. It is up to us all to make that happen.

It is time to move up a gear.

J-M BARROSO

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EXECUTIVE SUMMARY

The Lisbon strategy has entered a new phase. Last year saw a fresh start, and a step change

in how Lisbon works. The spotlight is now on delivering results. By submitting national

reform programmes, Member States have accepted a new responsibility, setting out detailed

commitments for action. At the same time, the Community Lisbon Programme specifies

what has to be done at EU level to complement national, regional and local efforts.

The national reform programmes add up to a good basis for driving the reform agenda

forward. The case for prioritising growth and employment is compelling, with a wide

consensus about the key challenges we face. In parallel, EU-level action is on track and will

receive new impetus once EU spending plans for 2007-2013 are finalised. So the instruments

are in place; the national programmes have kept up the momentum; now political will is

needed to translate commitments into real results for growth and jobs. It is time to move up a

gear.

National programmes must now be implemented based on a real national consensus. This

will not come overnight. We must explain better to our citizens why our growth and jobs

strategy is the route to prosperity and social justice in the long term.

The programmes must be strengthened so that reform covers all the key policy areas for

growth and jobs in all Member States. As the meeting of European leaders in Hampton Court

has shown, there are key areas where Europe could make a difference, where implementing

bold decisions will give a new impetus to reform:



A decisive leap in investment for research and innovation will realise Europe’s

potential to offer the goods and services citizens will want. This needs more public

investment, with existing spending shifted to research and innovation and with better

coordination between Member States. Just as importantly, the environment must be

right to carry research through to innovation and to spur growth: the fruits of research

excellence must not be squandered by unnecessary barriers to commercial use or by

tying the hands of the universities.

Unlocking Europe’s business potential means creating a business climate that

encourages businesses to start and to grow. Europe must have the confidence to let

entrepreneurs flourish by clearing the way for new businesses. Governments must be

ready to help smooth the path for businesses at every stage of their development, with

less red tape to help SMEs develop at home and cross-border, as well as positive action

to ease access to the finance they need.

An ageing population means that European society must be ready to help more people

to work, to work longer, and work in a way that uses their talents to best effect. That

means employment policies that help people to find jobs at every stage of their working

lives and remove barriers for those who wish to work. People need the right skills at the

right time, they need help in facing change and finding new openings, and they need to

be able to fit the demands of work into the rest of their lives.

A secure, affordable energy supply is a crucial springboard for growth. But energy is a

finite resource to be shepherded with care. A European energy policy is needed to offer

a real internal market, to maximise the benefits of energy efficiency and renewables,



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and to safeguard supply inside EU borders and beyond.

National experience shows what is possible, and what needs to be done. Member States

should exploit this potential and do more to draw lessons from their partners.

Alongside full delivery of the national programmes, the next steps should centre on key

actions to maintain the momentum:



The Commission calls upon the European Council to commit themselves to a series of

precise, time-limited actions across all these areas: on research and education spending,

on the ease of starting and running a business, on helping the jobless to find work, on

childcare, on an integrated energy policy in Europe. Citizens, workers, entrepreneurs must

feel that public policy is designed to help what they are trying to achieve, not to hold them

back.



Efforts to build a real national consensus behind the programmes should be stepped up.

The EU institutions and the Member States should ensure that a dedicated communication

strategy should be established involving all national, regional and local stakeholders.

There should also be a special role for the social partners.

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TABLE OF CONTENTS

Time to move up a gear: the new partnership for growth and jobs ............................................ 2

Part I – Time to move up a gear ............................................................................................. 6

b2.1.

b2.2.

Europe on the move: working together for more growth and jobs .............................. 6

Making it happen: the policy response......................................................................... 8

The Community Lisbon programme ............................................................................ 8

The national reform programmes ................................................................................. 9

bb2.2.1.

Evaluation of the different policy areas ..................................................................... 10

bb2.2.2.

Overall conclusions .................................................................................................... 13

b3.1.

b3.2.

b3.3.

b3.4.

b4.1.

b4.2.

b4.3.

Moving up a gear: four actions for more growth and jobs ......................................... 14

Investing more in knowledge and innovation ............................................................ 15

Unlocking the business potential, particularly of SMEs ............................................ 17

Responding to globalisation and ageing .................................................................... 18

Moving towards an efficient and integrated EU energy policy ................................. 20

Follow-up after the 2006 Spring European Council .................................................. 23

Implementation and monitoring of national reform programmes: ............................. 23

Delivery of Community action................................................................................... 24

Mobilising all players behind a common agenda ....................................................... 24

Appendix – List of illustrative examples of Member States’ policies

and measures in support of the growth and job objectives, particularly in the four priority

areas identified in section 3 ...................................................................................................... 25

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Part I – Time to move up a gear

UROPE ON THE MOVE

WORKING TOGETHER FOR MORE GROWTH AND JOBS

We live in a fast-changing and interdependent world. This provides us with many

opportunities but we also face many challenges if we are to secure a prosperous and fair

society. Above all, if we are to address the core task of creating more growth and jobs, public

policy at every level needs to factor in modern realities like globalisation and the ageing of

our population. This is the only way to successfully modernise our economies and safeguard

and promote Europe’s values at home and abroad. And delivering results can restore a sense

of confidence in our ability to meet citizens’ expectations.

At the Spring European Council in March 2005, EU leaders put

growth and jobs

at the top of

Europe’s political priorities. The

renewed Lisbon Strategy

meant a fresh commitment by all

to mobilise behind a positive reform agenda. At its origin was a recognition that success

depends on a comprehensive approach, bringing the maximum of levers to bear and touching

every corner of every Member State in Europe.

This commitment was given further weight by agreement on the integrated guidelines for

growth and jobs

, which provide a clear roadmap for the design of national reforms, and by

the informal meeting at Hampton Court in October. At Hampton Court, EU leaders analysed

how European values can underpin modernisation in our economies and societies and help us

to tackle key challenges in a distinctively European way. And at the end of last year, the

agreement in the European Council on the financial perspectives meant another step forward:

once finalised with the European Parliament, this will open the way to new investment to

modernise the European economy.

So there is a common vision and a strong consensus about what needs to be done -

supported at the highest level.

Europe needs to bring the full range of policies and

instruments into play: it cannot afford to pick and choose only the politically convenient

options. Sound macro-economic policies are an essential requirement for realising its growth

potential. Europe also needs a climate which lets Europeans’ creativity flow by offering a

more attractive place to invest, innovate and work. Freeing business from unnecessary red

tape and outdated bureaucratic controls encourages new businesses, sparks expansion in

existing businesses, and creates new jobs. Greater and more efficient private and public

investment is the catalyst for the knowledge economy, galvanising the fruits of research and

the high skills which promote social inclusion and higher earning power over a longer,

healthier working life. Promoting eco-innovation and spreading environmental technologies

brings sustainability as well as growth. Modernising our labour markets and our social

protection systems mean more people in work, greater adaptability to change, higher

productivity and a more sustainable and fairer economic growth. And further opening up

world trade by reaching a successful WTO agreement by the end of 2006 will create new

opportunities and boost competitiveness both inside and outside the Union. All these goals

must be achieved respecting the imperatives of sustainable development.

OJ L 205 (06.08.2005)

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The first step to

translate this ambition into action

has been to set up the tools to deliver the

job. This needs a partnership approach, with the right measures taken at the right level.



Member States have drawn up country-by-country national reform programmes on the

common basis of the integrated guidelines. These are the key tool to drive implementation

of the Lisbon Strategy: they offer a checklist of national commitments and benchmarks to

monitor progress in the months and years ahead.



The Council, the European Parliament and the Commission are working together on the

actions needed at Community level to make the growth and jobs agenda work: The

Community Lisbon programme

, which was welcomed by the European Council in

December 2005, has started to deliver on a substantial number of important proposals to

complement initiatives taken by Member States.

In many areas, the centre of gravity for action lies at

Member State level

(or regional or

local) – such as for employment and labour market policies where the role of the social

partners is also crucial. But the fact that actions are applied locally, regionally or nationally

does not mean that they do not have Europe-wide consequences: with the inter-dependence of

the single market, even the best performing economies suffer from the shortcomings of others.

At the same time, the common challenges faced mean that responses can be shared. All too

rarely do governments look to their partners for ideas and solutions. Every country can point

to examples of good ideas and good experience. The national reform programmes provide a

store of knowledge and experience to be shared and spread: exploiting this treasure trove of

best practice to the full is the best way to draw value added from the Lisbon Strategy. As a

first step, this Report proposes a set of key steps as a common programme for national action.

In addition, there are also goals which cannot be delivered by Member States acting alone but

where results require action at

Community level.

The success of many national initiatives

will depend on supporting national efforts through Community action and Community

investment making Europe the right place to live and work. The European Commission is

committed to driving this agenda forward.

This partnership must now be taken into a new phase.

The tools are in place. The policy

consensus is there. If the Lisbon Strategy is to make the difference, the focus must now shift

to implementation.

*******

This Communication to the Spring European Council sets out where we stand on the road to

creating a new dynamism for growth and jobs in Europe:



Part I evaluates the process of drawing up the reform programmes and highlights a limited

number of key initiatives for agreement at the European Council. An illustrative list of

examples of national initiatives and measures is attached which shows how a fruitful

exchange of national experiences can bring real mutual benefit.

COM (2005) 535 final

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

Part II is a detailed assessment of the national reform programmes, pointing out their

strengths as well as areas where they need review and updating by Member States. It also

contains an assessment of the euro area.



A more detailed analysis of the macro-, micro-economic and employment aspects of the

national reform programmes can be found in annex I. As far as the employment part is

concerned, this also serves as the basis for the Joint Employment Report.

AKING IT HAPPEN

THE POLICY RESPONSE

The two main instruments to implement the new Lisbon strategy are the Community Lisbon

programme, setting out what should be best done at Community level, and the 25 national

reform programmes: each Member State’s policy response to the key challenges they have

identified. These instruments must work in tandem to have the best effect.

2.1.

The Community Lisbon programme

In the six months since its adoption, significant progress has been made on the

Community Lisbon programme.

The Commission has already adopted two thirds of the

actions foreseen. However, legislative proposals will only produce practical effects once

adopted by Council and Parliament. In addition, many of the financing actions depend on the

finalisation and implementation of the financial perspectives 2007-2013.

The Community Lisbon programme includes a number of important initiatives to tackle the

decisive cross-border impact of research and innovation and the fragmentation of European

research efforts: namely the 7

framework programme for research, technological

development and demonstration and the competitiveness and innovation framework

programme. The Commission has also set out concrete initiatives to improve the research and

innovation environment in Europe in its Communication “More research and innovation for

Europe: a common approach

”. The 7

framework programme introduces a new model of

research support – joint technology initiatives – in the form of public-private partnerships to

back promising new research and to give European industry a head start in areas ranging from

hydrogen and fuel cells, aeronautics and air transport, to innovative medicines, and nano-

electronics. Galileo, the satellite navigation initiative and the development of integrated rail

and air traffic management systems are other key examples of cutting-edge industrial projects

which have a strong European dimension.

Reforming the Community’s state-aid policy framework for R&D, as planned, will facilitate

public-private partnerships and should leverage more private R&D investment. The

programme also includes actions aimed at stimulating eco-innovation and the take-up of

environmental technologies. The framework may be extended to cover new provisions to

support innovation, especially for small and medium-sized enterprises. In addition, state

support to young and innovative companies should be facilitated, not only through direct

financial support but also through easier access to risk capital funding. As an additional

important step in the delivery of the Community Lisbon programme, the Commission has

launched a new, more integrated industrial policy to improve the framework conditions for

manufacturing industries. These industries employ more than 34 million people, accounting

for more than 80% of EU private sector R&D expenditure.

COM (2005) 488 final

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A number of actions in the Community Lisbon programme aim at making Europe a more

attractive place to invest and work. These include initiatives to make the internal market for

services a reality, steps to drive forward regulatory reform, improve the tax and customs

environment for economic activity, and promoting market access and more competitive

markets, particularly in energy and financial services where the Commission has launched

inquiries.

Legislation has been proposed to create a “single payment area” in the EU, to make cross-

border payments as easy and affordable as domestic payments. This alone could save the EU

economy between €50 and €100 bn per year. Other notable initiatives include improving

access to venture capital, particularly for SMEs. New Community funding, for example in the

form of guarantees and risk capital investments, will become available through the

competitiveness and innovation programme. This programme will also help bring to market

innovative solutions to improve energy supply (in particular for renewables) as well as

demand (through energy efficiency measures). In addition, the Commission has put forward

ambitious measures to help the creation of more and better jobs through the removal of

obstacles to mobility, a common approach to economic migration and efforts to deal with the

social consequences of economic restructuring.

Community institutions and Member States have a shared responsibility for the quality of the

regulatory environment. The Commission has stepped up its efforts to improve the quality of

Community legislation. The impact of these actions will of course be much greater if they are

matched by a determined effort by Member States to improve the quality of their national

rules and reduce the administrative costs they impose on citizens and businesses.

2.2.

The national reform programmes

Nearly one year into the new Lisbon Strategy for growth and jobs, the partnership is off to a

promising start. Responsibilities for action are clearly defined. All Member States have drawn

up a national reform programme on the basis of a single set of integrated policy guidelines.

These national reform programmes are the main tools to implement the new Lisbon Strategy,

to translate the integrated policy guidelines into reform owned by Member States and which

Member States are responsible for delivering. The fact that all Member States have done so,

often under tight deadlines, has been an important first test.

In line with the new partnership approach, and to facilitate co-operation and public visibility,

all Member States have appointed national Lisbon co-ordinators. Meanwhile, many Member

States have used the opportunity of drafting national reform programmes to streamline

internal co-ordination between different government departments. For its part, the

Commission has maintained close contacts with the national authorities responsible for the

preparation of the national reform programmes, helping where it can to make national policy

development work well.

The Commission has carefully assessed each national reform programme, taking into account

work carried out by the Economic Policy and the Employment Committees

. A detailed

Economic Policy Committee: Report on the Lisbon National Reform Programmes 2005,

ECFIN/EPC(2005)REP/55392, available under:

http://europa.eu.int/comm/economy_finance/epc/documents/2005/nationalreports/nrp_report_en.pdf. The

Employment Committee’s so-called Cambridge review country examinations of the employment sections of

the national reform programmes are available at:

http://europa.eu.int/comm/employment_social/employment_strategy/emco_en.htm.

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assessment of each national programme, pointing out particular strengths as well as a number

of issues which can be further developed and strengthened, can be found in Part II. The

Commission encourages Member States to take up the points highlighted in its conclusions. It

will give particular attention to these aspects in its follow up discussions with Member States

and its monitoring of the implementation of the national reform programmes throughout 2006.

In the interest of consolidation and stability of the process, the Commission proposes to

maintain the integrated guidelines on the basis of which the national programmes have been

drawn up. In addition, the Commission has decided not to propose formal, country-specific

recommendations in response to the national reform programmes. This is the first year of the

partnership: national reform programmes need some time to be fully integrated into national

policies and structures. The Commission attaches high priority to forging a strong relationship

of trust and co-operation with Member States, based on ownership of the programmes by

Member States themselves. However, the Commission will not refrain from using the

instruments at its disposal, including proposing country-specific recommendations, when it

considers that this contributes to the smooth implementation of the Lisbon Strategy.

In spite of the tight time schedule, most Member States have made a real effort to involve

national parliaments, stakeholders, and representatives from regional and local authorities in

the formulation of their national programme. As the Lisbon strategy is a medium to long-term

agenda requiring implementation on the ground, the sustained involvement of parliaments,

local governments, social partners and civil society is essential. In fact, public acceptance

depends on citizens and businesses recognising that reform is needed and will help improve

their lives; an ownership that can only come from having a role in shaping reform, either

directly or through representative organisations. A lot remains to be done to convince people

that reforms will contribute to greater, shared prosperity and to involve them in the process.

This will require a major effort from both Member States and the EU institutions.

2.2.1.

Evaluation of the different policy areas

The integrated guidelines set out three main policy areas for action: the macro-economic, the

micro-economic, and the employment dimensions. Conclusions can be drawn from the

national reform programmes in these three areas.

The macro-economic dimension



Budgetary discipline stands out as the most important macroeconomic challenge identified

by Member States. It is typically formulated in terms of public finance sustainability -

pension, health and labour market reforms as well as short-term budgetary consolidation

are tools to ensure the long-term sustainability of public finances in an ageing society. The

related challenge of improving the quality of public finances tends to be addressed by

measures aimed at increasing the efficiency of the public administration. Some new

Member States have identified the introduction of the euro as a key policy challenge

requiring budgetary consolidation and the convergence of inflation rates to euro area

levels. Other factors mentioned by some Member States include the external account and

price stability.



To balance public finances, Member States tend to prefer spending cuts to increased taxes,

though the source of the cuts is often unclear. However, the specific measures to achieve

short-term budgetary consolidation are not spelled out in enough detail in several

countries, particularly within the euro area. Most Member States clearly have the intention

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to improve the quality of public finances by setting aside public resources for

strengthening infrastructure, human capital and R&D investment. However, few national

reform programmes are explicit about the budgetary implications of proposed measures.



Member States participating in the euro have presented rather comprehensive and mostly

forward looking national programmes to ensure the sustainability of public finances, to

boost labour productivity through R&D, innovation and attractive business environment,

and to increase employment and participation rates. Measures are mainly aimed to raising

the effective pension retirement age, increasing labour supply and cutting red tape. These

programmes are broadly supported by the Commission. However, measures should also

aim to improve budgetary positions faster, to support labour market adjustments, to create

more competitive and integrated markets for services, and to complete a better functioning

internal market.



Over the coming decades, ageing populations in Europe will put increasing pressure on

public finances. Member States recognise that modernising public and private retirement

and pension systems is an essential prerequisite for ensuring public finance sustainability,

while responding to social concerns and economic changes. However, in most countries,

the measures already taken or envisaged appear to be piecemeal or insufficient.



It is important that the overall reform strategy is coherent, with reforms in one area

supporting those in another. In this respect, some Member States make a link between

sustainable public finance and reduced unemployment (lower unemployment benefit costs;

higher tax revenues resulting from a better use of labour). Such an integrated approach

strengthens the coherence between the different parts of the national reform programmes.

The micro-economic dimension



The need to build a knowledge economy and to improve Europe’s attractiveness as a

location to do business and invest is generally well reflected in the national reform

programmes. Research and innovation policies are key priorities for all Member States.

Many Member States highlight actions to strengthen the industrial base, in particular

through the promotion of clusters. These clusters combine universities, research institutes,

small and large enterprises which through their close co-operation and interaction have a

positive impact on innovation and knowledge transfer. This, in turn, generates considerable

benefits for the economy as a whole. Member States recognise that facilitating access to

finance is an important issue, even though they take different approaches to achieve this.

Most Member States also highlight the business environment and entrepreneurship, the

sustainable use of resources (including renewables and energy efficiency), transport

connections and logistics among the main issues to be tackled.



If R&D spending targets are met in the eighteen countries that have set them (in some

cases, partially), R&D expenditure is estimated to go up to around 2.6% by 2010. Spending

as a share of GDP has been more or less stagnant since 2001 at around 1.9% for the EU. In

the medium to long term a further strengthening of national R&D and innovation systems

will be necessary in most Member States. In addition, whilst all Member States appreciate

the importance of the spread and effective use of information and communication

technologies and environmental technologies, the link between the identified challenges

and the measures proposed to address them is not always clear.

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

The national reform programmes contain many examples of interesting policy initiatives

across a range of policy areas. For example, most Member States are looking to exploit the

synergies between economic growth and environmental protection (by investing in

alternative sources of energy, by promoting energy efficiency, and by promoting eco-

innovation and protecting natural assets). Most national programmes also focus on the

importance of modern transport infrastructure and of information and communication

technologies (e.g. broadband availability). These are examples of precisely the kind of

investments that Member States should seek to promote with the help of the resources of

cohesion and rural development policies.



The functioning of the internal market and the need to enhance competition and market

access in general deserved greater attention. Only a few Member States mention concrete

actions, for example, to ensure full implementation of Community directives, where

greater efforts need to be made, for example on the effective opening of energy markets, to

improve access to public procurement contracts or to ensure effective competition in

services.



Regarding SMEs, most programmes do not go far enough to foster a more positive attitude

towards entrepreneurship and to encourage more people to start their own business. There

is an important role here for education, for making it easier to transfer existing businesses,

and for reducing the stigma of failure. Additional measures regarding access to finance or

related targeted measures to improve investment should also be considered.



Better regulation is crucial to creating a more competitive business environment and

removing obstacles to innovation and change. Nearly all Member States address parts of

this agenda, but in many cases, a more integrated approach is necessary. Action at

Community level is necessary, but will not in itself be sufficient. Much of the rule-making

affecting business, for example in taxation, social security or regional planning, is done at

national (or local) level. There are also important differences in the way Community

directives are implemented by Member States, which may give rise to administrative costs

which the Community measure itself does not require. To see a real difference in the

business environment, a culture change in the way decisions are prepared and taken will be

needed.



A comprehensive and co-ordinated implementation of the different microeconomic

policies will generate much greater benefits than the sum of the individual policies put

together. For instance, the gains from increased investment in R&D will be higher when

new technologies are swiftly adopted by the market, which in turn depends on the degree

of competition in product and service markets.

The employment dimension



All programmes attach high importance to attracting and retaining more people in

employment. This is vital to address the impact of ageing on the labour supply and the

sustainability of public finances. Seventeen Member States now plan their measures with

the help of national employment rate targets. Particular efforts are made or foreseen to

improve the employment situation of women. Other measures are developed to help older

workers, to support the integration of young and disadvantaged people into the labour

market and to modernise social protection systems. These efforts are broadly in line with

commitments taken in the framework of the Community objectives for social protection

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and social inclusion. However, the effectiveness and sustainability of these is hampered by

a tendency towards piecemeal policies. The chances of ensuring effective delivery would

be enhanced if they were based on lifecycle approaches to facilitate swifter employment

transitions throughout a career.



The importance of further measures to improve the adaptability of workers and enterprises

is largely neglected. Increasing the responsiveness of European labour markets is crucial to

promoting economic activity and higher productivity. However, the current balance

between flexibility and security in many Member States has given rise to increasingly

segmented labour markets. Greater attention should be given to establishing conditions of

'flexicurity'. This consists of a combination of sufficiently flexible work contracts coupled

with effective and active labour market policies to support switches from one job to

another, a reliable and responsive lifelong learning system, and adequate social protection.

The potential for progress through links between the tax and benefits systems is a good

example where Member States can look to their partners for inspiration. More attention

should also be given to the active involvement of the social partners.



Member States acknowledge the crucial importance of developing the skills needed in

knowledge-based economies and the need to invest in human capital through better

education and skills. However, the policy response concentrates more on qualitative

reforms in education systems, better access to and transparency of qualifications, rather

than on stepping up investment and achieving a real breakthrough.

2.2.2.

Overall conclusions

The national programmes are a good basis for driving the reform agenda forward even

though not all are of equal quality.

There is a large convergence of views on the diagnosis

and on which key challenges need to be addressed as a matter of priority: for example,

sustainability of public finances, labour supply, R&D and innovation, the business

environment and environmental sustainability.

The main conclusions that can be drawn at this early stage are:



Recognising that Member States start from different positions, there are important

differences between the programmes. For example, the approach to targets varies widely:

some Member States have gone a long way towards integrating Community and national

targets and have set clear, often quantitative, targets and timetables which can serve to

measure progress. Other programmes, however, are less complete at this stage and could

benefit from studying approaches adopted by other Member States facing similar

challenges. Whilst some programmes clearly describe the content and form of policy

measures taken or proposed, in others this information is often lacking. Targets and

timetables as well as further details on the budgetary aspects of envisaged reforms are also

often missing. This will make it more difficult to deliver.



The integration between the three dimensions (macro-, micro- and employment) can be

strengthened. The national reform programmes are vital tools to develop a coherent

approach, but some programmes have achieved this more than others. Gains from action in

one area often depend on progress made in another. For example, the returns on extra

investment in R&D will be much greater if the necessary conditions are in place to convert

it into growth: conditions such as competitive markets, an appropriate regulatory

framework, and a highly skilled work force.

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

Whilst competition and removing obstacles to market access, particularly in services, is

identified as a challenge for around half of the Member States, only a few national reform

programmes actually tackle this challenge effectively. Competitive markets are a pre-

requisite to achieving the Lisbon objectives. In addition, many Member States have set

national targets for R&D investment and employment, but some have not, despite the

decisions of the European Council.



A large number of Member States also need to ensure that Community cohesion and rural

development spending is targeted towards supporting the Lisbon Strategy in general.

Indeed, it should be programmed to give direct backing to the national reform

programmes. In addition, stronger efforts are needed to develop coordination mechanisms

between those responsible for the national reform programmes and those preparing the

structural funds programmes for 2007-2013. These links must be established quickly as the

preparation of these programmes intensifies, beginning with the adoption of national

cohesion policy strategies (the so-called “national strategic reference frameworks”).



Last but not least, with only a few exceptions, public ownership of the Lisbon growth and

jobs strategy falls short. Media coverage has also been fairly limited. We cannot yet say,

therefore, that broad sections of the population have been made aware, let alone taken

ownership, of the strategy. This points to the need for a dedicated communication strategy,

making full use of economic analysis and showing how action will bring real benefits for

individual citizens. Similarly, social partners, who have an important role to play both as

participants in the process and as message multipliers, should become more actively

involved in the governance process.

OVING UP A GEAR

FOUR ACTIONS FOR MORE GROWTH AND JOBS

The Commission urges Member States to implement their

national reform programmes in

full and on time.

However, the process of producing and evaluating the national reform

programmes has highlighted gaps to be filled and synergies to be exploited. In many cases,

gaps can be tackled by Member States improving their national programmes, drawing

inspiration from their partners’ experiences. In a number of cases, several Member States

have developed successful responses to particular challenges which, if implemented by all

Member States, could yield major benefits for the Union as a whole. There are also challenges

which cannot be addressed at Member State level alone, and where genuine success depends

on co-ordinated action at both European and national level:



The national reform programmes show that many Member States expect to increase their

R&D spending,

but that we will fall short of the overall EU target of 3% of GDP. Every

Member State needs to make a contribution if this target is to be reached. Well-functioning

markets, increased spending, better targeting of spending and effective dovetailing of

national and Community budgets are all needed. Increased R&D spending will also need to

go hand in hand with improving our knowledge infrastructure, promoting educational and

research excellence, strengthening our innovation systems and ensuring that internal

market policies fully contribute to converting research and innovation into value.



Many national reform programmes pay limited attention to

improving market access and

competition.

National rules and practices, as well as self-regulation, can often fragment

the market and hinder competition. Member States need to do more to identify ways to

remove such rules and restrictions in their programmes. The Community also has

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important responsibilities for effective and fair competition (for example, by taking

vigorous action against price-fixing and market sharing cartels which raise input costs for

business and harm the consumer) and to achieve a real EU-wide internal market. On the

other hand, many national programmes highlight actions to make it easier to set up and run

a business, promote a more entrepreneurial culture and create a more supportive

environment for SMEs.



Over the coming decades, Europe will be confronted with the implications of an

ageing

population.

National programmes recognise that a thorough overhaul of retirement and

pension systems is necessary to ensure increased employment and sustainable public

finances. However, in most Member States, the measures already taken or foreseen are not

up to the scale of the challenge. Urgent action is needed to facilitate entry of young people

into the labour market, in line with the Youth Pact, achieve a better work-life balance for

families and make it more attractive for older workers to remain employed. Moreover, the

adaptability of labour markets will become an increasing challenge. Globalisation also

brings new challenges for the EU. It reinforces the need for greater labour market

adaptability but it also offers us new opportunities as a result of increased openness of third

countries’ markets.



Many programmes underline the importance of energy. Europe needs

a truly integrated

energy policy

which promotes growth, provides greater security of supply and which

contributes to greater efficiency and environmental sustainability. Whilst important

progress has been made in opening domestic markets, there is as yet no European-wide

energy market. Energy is a global issue; only a European response will meet our needs.

On this basis, the Commission has identified

4 priority actions

which require a strong

impetus from the highest political level and which should be implemented quickly – no later

than the end of 2007. In this way, the Spring European Council in 2008 can launch the second

cycle of the growth and jobs strategy on a firm foundation.

The four actions follow an integrated approach – they span different policy areas, several of

which were discussed at the Hampton Court meeting, and which are intimately linked.

Separately, they will make an important contribution to growth and jobs and to making

Europe fit for the future. Acting on all of them together, as part of the new partnership

between the Community and Member States, will create a forceful dynamo effect, moving the

European engine for growth and jobs into higher gear.

3.1.

Investing more in knowledge and innovation

In view of the importance of R&D for future growth and in providing solutions for many of

the problems confronting our society today, it is a cause for serious concern that the EU is

unlikely to meet its target of boosting research spending to 3% of GDP by 2010 (of which two

thirds is by the private sector and one third by the public sector).

The Commission is mindful of the need for Member States to control public spending, but

believes there is considerable scope for improving the quality of public expenditure by

shifting resources, notably state aid, to more productive use and by closer co-ordination

between Member States to avoid costly duplication of efforts. The effectiveness of public

sector support for R&D can also be improved, for example through a wider and better use of

fiscal incentives (e.g. tax credits or vouchers), which many Member States have included in

their national programmes. The European Council’s decision to earmark Lisbon-related

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cohesion spending shows how priorities like research can be mainstreamed across a range of

policies.

The biggest contribution, however, should come from the private sector. To get industry to

invest more in R&D in Europe, it is essential to gear internal market policies more towards

fostering the knowledge economy and to boosting market dynamism for research-intensive

and innovative goods and services. This will require improving market access conditions,

facilitating access to external sources of financing (venture capital, loans, risk-sharing

instruments) and integrating financial markets, using public procurement more as leverage to

promote innovative private-sector solutions, enhancing the development of researchers’

careers, including by removing obstacles to their mobility (across border and across sectors)

and putting in place a modern and affordable industrial and intellectual property rights regime

which strikes the right balance between protecting the right holder and ensuring that ideas can

circulate in a dynamic information society. More effective methods to agree standards for

high technology products, which are interoperable and reflect the interests of European

business, are also needed. Competition policy is another powerful tool to enhance

interoperability and stimulate innovation

Whilst investing more in knowledge and innovation is necessary, it is not in itself sufficient to

secure Europe’s economic future. Ultimately, the contribution to growth and jobs comes from

the outcomes of R&D through innovation, i.e. attractive products and services that people

from all over the world will want to buy. The quality of our innovation systems therefore

requires particular attention

. This may include exploring the potential of clusters as

innovative poles for growth and jobs, in particular the formation and cooperation of trans-

national clusters within the EU. The Hampton Court meeting also called for urgent action to

promote excellence in both research and education, particularly world-class universities with

adequate funding streams and closer links with business.

Action 1: Investing more in knowledge and innovation



Member States should make a stronger commitment to R&D and innovation. By the

Spring European Council, Member States should all set an R&D expenditure target for

2010 so that the European Council can set a credible R&D expenditure target for the

Union as a whole. This can be done within the framework of the European Council’s

previous calls for less and better targeted aid, by redirecting public expenditure

towards R&D; for example, by doubling the share of state aid allocated to this area to

25% (from 12% at present). This could be used, for example, to step up the provision

of targeted fiscal incentives to the private sector in accordance with orientations which

the Commission will provide. In addition, spending a significantly greater share of EU

structural funds on R&D, innovation and ICT (e.g. infrastructure and applications to

speed up the roll-out of broadband) can foster competitiveness, regional cohesion and

benefit SMEs in particular

.As regards private R&D investment, more attractive

conditions for technology-intensive markets should be created. This includes a better

All these aspects are highlighted in the report drawn up by a group of authoritative experts established

after the Hampton Court meeting under the chairmanship of former Finnish Prime Minister Esko Aho,

which argues, inter alia, for the establishment of a pact for R&D.

National reform programmes highlight a variety of promising initiatives. In addition, the latest

Commission innovation scoreboard (http://www.trendchart.org/) highlights that many Member States

face still important challenges which need to be taken into account when programmes are updated

5.9% of the overall envelope of the European regional development fund and the European social fund

are at present spent on R&D and innovation support

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use of public procurement, innovation-friendly regulation and standards based on an

early identification of needs. Member States and the Commission should launch

initiatives to create European-wide lead markets in key technology sectors

, drawing

on the work of European technology platforms.



The EU needs to step up its investment in higher education

(the EU currently spends

only 1.28% of GDP compared to 3.25% in the USA: the gap is mainly a result of

greater private funding). By the end of 2007, universities should be allowed and

encouraged to seek complementary private sources of funding; legal and other barriers

to public-private partnerships between universities and businesses should be removed;

all technical universities should have a technology transfer office; and a European

Institute for Technology should be set up. Proficiency in maths and science will need

to be stepped up to enhance people’s ability to innovate; Member States should

provide for compulsory teaching of two foreign languages in their national education

systems. The aim should be for the EU to devote at least 2% of GDP to higher

education by 2010.

3.2.

Unlocking the business potential, particularly of SMEs

Compared with other successful regions in the world, Europe’s markets, in particular in

services, remain badly fragmented. This carries a serious price tag in the form of lower levels

of innovation and lagging productivity growth

. Far too often, poor or late implementation of

Community directives denies our companies the benefits of easy access to a large internal

market. This can only weaken them in the face of international competition. If some Member

States fail to act, they tilt the playing field and end up harming the interests of all.

One of the most frequently used examples of where entrepreneurship in the EU is stifled, is

the difficulty in setting up a business, as well as wide variations in the costs of running a

business in different parts of the EU. It takes no more than 5 days to start a business in some

Member State compared to 60 days in others. The administrative cost of starting a business

can be nothing in some Member States, whereas in others it can be many thousands of euros.

Long and complicated procedures and red tape not only discourage people from going into

business, but also reflect a negative attitude towards entrepreneurship in general.

The Commission has identified a number of commitments which will help unlock the full

potential of Europe’s considerable capabilities, particularly in the services sector. These

measures, taken together with the swift finalisation of the directive on services and enhanced

administrative co-operation between Member States, would help to create a new business and

employment dynamic in the EU.

Action 2: Unlocking the business potential, particularly of SMEs

These include in particular

e-health,

pharmaceuticals, transport and logistics, environment, digital

content and energy and security.

See Commission Communication “Mobilising the brainpower of Europe: enabling universities to make

their full contribution to the Lisbon strategy (SEC 2005 518 of 20.04.2005)

See, for example, the Conference Board’s annual analysis of global productivity trends: “As US

productivity slows, emerging economies grow rapidly, but Europe falls further behind” by Van Ark et

al., Executive action series, January 2006. The report highlights that whereas EU-15 productivity

growth slowed from 1.4% in 2004 to 0.5% in 2005, the EU’s new Member States increased the labour

productivity growth rate from 4.1% in 2004 to 6.2% in 2005.

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

It should become much easier to set up and run a business in all Member States. By

the end of 2007, every Member State should have set up a one-stop shop to assist

would-be entrepreneurs and to enable businesses to fulfil administrative requirements

all in one place – where possible electronically – and under short deadlines. The

average time taken to set up a business should be reduced by half

, with the ultimate

objective of being able to do this within one week anywhere in the EU. Start-up fees

should be as low as possible, and recruitment of a first employee should not involve

more than one public administration contact point. Every student should have access

to entrepreneurship training, which should become part of national school curricula in

all Member States. Furthermore, Member States should facilitate cross-border

activities of SMEs by implementing the home state taxation pilot projects. The

Council should swiftly adopt the Commission’s proposals for a VAT one-stop shop

and for a modernised customs environment to simplify procedures. To facilitate access

to finance, particularly for SMEs, the financial instruments at Community level will be

further developed under the competitiveness and innovation framework programme.

Member States should make full use of possibilities offered under the structural funds,

notably the future funding scheme for joint European resources for micro- to medium

enterprises (JEREMIE).



In order to cut red tape and simplify administrative procedures, by the end of 2007, all

Member States should adopt and implement a methodology for measuring

administrative costs (for national rules and regulations). For its part, the Commission

will launch a major exercise to measure the administrative cost arising from

Community rules (or the way in which they have been implemented) in specific policy

areas as part of the ongoing work on legislative simplification, with a special emphasis

on SMEs. It will identify what share of these costs flows directly from the Community

rules and what share can be attributed to their implementation by Member States. The

Commission will, on this basis, come forward with proposals for reducing these

administrative costs where appropriate. By the end of 2007, the Commission will

remove the obligation to notify certain categories of smaller state aid, which should

ease administrative burdens, particularly for SMEs.

3.3.

Responding to globalisation and ageing

Europe’s population is getting older. The fertility rates remain below the natural replacement

rate. The life expectancy of Europeans continues to increase. Net inward migration is likely to

continue. These demographic changes have important economic consequences. Less people

will be of working age in the next decades. Currently, for every elderly citizen four people are

at work, but by 2050 the ratio will be 2 to 1. Europe’s workforce will start to shrink from

roughly 300 million people today, to approximately 250 million by 2050. A smaller

workforce will act as a brake on potential growth, reducing it from 2-2.5% today to just

1.25% in forty years time. The costs of an ageing population (pensions, health care) will

swell; and the sustainability of current social welfare systems will come under severe strain.

Government budget positions should be improved urgently and debt set on a steady

downward trajectory. Pension and healthcare systems should ensure sustainability as well as

access and adequacy.

The present average is 29 calendar days.

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Against this background, we need more people to work and for people to work longer. We

also need faster increases in labour productivity. Higher labour productivity and increased

employment must go hand in hand. This will happen if people are able to obtain the skills

required to introduce and apply new technologies, and if they have a greater opportunity to

combine family life, work, education and care for dependents, in a balanced way. The

evidence from Member States shows that there is a double dividend to gain – in terms of

higher birth rates and female labour market participation – if gender policies, proper childcare

facilities, appropriate fiscal incentives and work organisation are in place. More flexibility

and individual responsibility for one’s own life cycle is not only important for people with

children. Older people will also benefit from flexible working arrangements that allow them

to combine part-time work with part-time retirement. Older workers participate too little in

vocational training. If they upgrade their skills, it will be more rewarding to keep working;

both for the worker and the company. Likewise far more can be done to facilitate the

transition of young people moving from school to work. There is a clear advantage for young

people to obtain work experience as an apprentice or trainee during the school/university

period. Young people who have just left school should be able to obtain a job as soon as

possible. If no immediate job is available, additional training and/or internships should be an

alternative.

Globalisation and demographic ageing call for an urgent improvement in the adaptability of

workers and enterprises, their capacity to anticipate, trigger and absorb change and

restructuring, and to thrive in highly competitive markets. In many Member States, however,

dual labour markets do not properly allow for this. This limits innovation and technological

change, constrains life-long learning and restricts individual life-style choices. More open and

responsive labour markets should be combined with policies to help workers to remain

employed and to progress in work. This is the best way to achieve labour market flexibility

and employment security in a lifecycle perspective. In all of this, there should be a strong

emphasis on social justice, not reform for its own sake or simply to cut costs.

Action 3: Responding to globalisation and ageing



Member States should secure the sustainability of their public finances by improving

government budget positions and steadily reducing current debt ratios. Member States

should, as part of their reforms to public pension systems, enhance financial incentives for

older worker to remain active, seek a closer link between pension entitlements and life

expectancy at retirement, through, for example, adaptation of statutory retirement ages,

whilst curtailing recourse to early retirement schemes. Disability schemes, together with

health care and long-term care systems, should be reviewed to include incentives to make

more effective use of scarce resources.



Member States, should aim to increase entry into the labour market for young people,

achieve a better work-life balance for families, and make it more attractive for older

workers to stay employed for longer:

– by the end of 2007, every young person who has left school and is unemployed,

should be offered a job, apprenticeship, additional training or other employability

measure within 6 months. This period should be shortened to no more than 100

days by 2010. Financial or other incentives should be offered to make it more

attractive for companies, particularly SMEs, to give students and the young

unemployed experience in the workplace;

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– the availability of quality childcare should be increased in line with Member

States’ own national targets. Policies aimed at enhancing gender equality as well

as further measures to promote family friendly policies should be implemented.

The Commission is currently consulting social partners on better ways to

reconcile family and professional life;

– active ageing strategies should be implemented which include financial incentives

for prolonging working lives; gradual retirement and use of part-time work, and

improving quality at work. Targeted incentives should be put in place to ensure

that the number of workers over the age of 45 participating in training rises much

faster than that for the overall workforce.



Member States should seek convergence of views on the balance between flexibility and

employment security (‘flexicurity’).The Commission will present a report with a view to

facilitating agreement, by the end of 2007, on a set of common principles, comprising the

following elements:

– modern labour laws allowing for sufficiently flexible work arrangements and

reducing labour market segmentation and undeclared work, should enable people

to optimise their working patterns throughout their life. The Commission will

consult social partners and other stakeholders on this particular subject in the

course of this year;

– reliable and responsive lifelong learning systems and active labour market policies

should help people to cope with rapid change, unemployment spells and

transitions to new jobs; financial and other incentives should be reviewed to

achieve a breakthrough. Member States should deliver on their commitment to

establish comprehensive life-long learning strategies by the end of 2006. The

European Social Fund and the new Globalisation Adjustment Fund should

strongly support these enhanced efforts. The Commission will work with Member

States to devote a higher share of structural fund spending to education and

training;

– modern social security systems should combine the need to facilitate labour

market mobility with the provision of adequate income support. The Council

should reach agreement on the Commission's proposal on the portability of

supplementary pension rights. Member States should consider accelerating the

removal of all restrictions on the mobility of workers within the EU.

To achieve these objectives, Member States will work closely with social partners. The

Commission proposes to hold an extraordinary Social Summit which should be devoted to

identifying concrete steps to make progress in all of the above fields

3.4.

Moving towards an efficient and integrated EU energy policy

Energy is vital for growth and jobs. Global demand for energy is up. At the same time supply

of energy remains tight. Market prices for oil and gas have been rising. The main challenge

facing Europe’s energy system is to ensure that energy is available at competitive prices. We

need to safeguard security of supply and develop autonomous sources so as to avoid

interruptions and price shocks with damaging economic effects. A competitive and integrated

Community energy market will provide us with the most efficient and sustainable base for

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diversification and security of supply. Production and consumption of energy has to take full

account of environmental considerations. Europe will become even more dependent on

external suppliers and will need to import most of its oil and gas in the future. We need a

coherent, single voice in our dialogue with major energy suppliers and in international energy

discussions.

There are important gains to be made from saving energy. Energy efficiency cuts costs, makes

our goods and services more competitive and contributes to a cleaner environment.

Investments in energy-efficient equipment and services will help European industries to

maintain and increase their global lead. This drive for energy efficiency should go hand in

hand with diversification of energy sources. Europe should consider all sources of energy,

giving special attention to renewable energy sources, including the development of clean

indigenous sources. Lower emissions from our energy sources will reduce air pollution and

help our fight against climate change. Again, Europe’s enterprises will be rewarded by the

market for early investments in this field.

Measures to realise these objectives should be implemented without delay. A partnership

between the Member States and the European Union is needed for an integrated approach

towards energy. An integrated European energy policy can make a crucial contribution to

securing Europe’s future energy supply in a sustainable way, hence the call from the Heads of

State and Government meeting at Hampton Court to move swiftly into this direction.

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Action 4: Moving towards an efficient and integrated EU energy policy



Strengthening and deepening the internal energy market

promotes

competitiveness and security of supply. Measures that are required include:

– timely implementation and more effective regulation of the energy markets in

order to achieve full and effective market opening by 1

July 2007, as the

European Council has agreed;

– promoting more competition on the electricity and gas markets, taking

account of the Commission’s sector competition enquiry, in particular by

taking steps to address continued dominance of national incumbent operators;

insufficient market transparency; inadequate unbundling of network and

supply activities; and barriers to cross-border supply which prevents a truly

integrated EU energy market;

– More and better cooperation and integration between the grids and gas

pipeline systems of the Member States, so that from the customers’

viewpoint, there is only one European network. To this end, missing or

inadequate cross-border interconnection links should be identified and

completed. Financial assistance is available through EU financial instruments

to help Member States achieve the 10% inter-connection objective.



Exploiting the potential of renewable energy sources, such as bio-fuels and bio-

mass, and more efficient use of energy

can also help to increase security of supply in

Europe, whilst reducing greenhouse gas emissions, improving air quality, and

strengthening competitiveness. Member States’ efforts could be complemented by a

renewables technology push and demand pull policy

at European level.. An

appropriate regulatory framework should be put in place. Research and innovation for

indigenous energies, including renewable energies, bio-fuels and bio-mass, clean coal

and carbon sequestration and the treatment and disposal of nuclear waste, should be

stimulated. Similar priority needs to be given to research to develop new energy

efficient technologies. The development of a European framework of incentives to

promote renewables could significantly boost their use. The present patchwork of

differing national and regional systems creates artificial barriers between national

markets, holding back the potential of promising new technologies.



Developing a more

focused, coherent and integrated approach to ensuring the

security of energy supply

in Europe, including with respect to emergency

mechanisms, is also needed. The Community and Member States should speak with

one voice in international fora and with third countries supplying energy to the

Community.

The Commission will set out ideas on how these priorities can best be pursued at Member

State and Community level in a green paper to be published in the first quarter of this

year.

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OLLOW

UP AFTER THE

2006 S

PRING

UROPEAN

OUNCIL

It is important to maintain the momentum following the European Council, to bring our vision

of a stronger Europe with higher growth and more jobs to life. To this end, the following steps

are proposed over the coming months:

4.1.

Implementation and monitoring of national reform programmes:



Effective implementation of the national reform programmes and their contribution to

growth and jobs must now become the prime focus of attention. Over the coming months,

the Commission therefore intends to work closely with the Member States to help them

with their efforts and to monitor progress. Consultations with national (and regional)

parliaments, local authorities, social partners and other stakeholders will need to be

pursued, particularly where there has not been sufficient time during the preparation of the

programmes to receive input and engage in dialogue

. As Lisbon is a medium-term

agenda, such a dialogue and contacts will need to take place on a regular basis;



Another logical step will be for the Commission and Member States to discuss (both

collectively and bilaterally) how the national reform programmes can be strengthened and

developed, with due respect to national traditions, to take more account not only of the

Community dimension, but also of the impact of policy decisions by other Member States.

The Commission will organise this process. At the same time, the Commission will

continue to seek improvements in the way it contributes to the success of the partnership.

Member States which have not yet set targets with regard to future R&D spending and/or

the employment rate should do so before the 2006 Spring European Council;



Member States should ensure coherence between their national reform programmes and

the use they will make of cohesion and rural development funding under the new financial

perspectives. Member States should take into account the macro-economic impact of

transfers from the structural funds in the short term, particularly where these amount to

several percentage points of GDP. The Commission will work closely with Member States

as they draw up their national strategic reference frameworks to ensure that the new

generation of cohesion policy programmes reflects the priorities contained in the national

reform programmes and the 4 priority actions highlighted under section 3. They should put

in place appropriate mechanisms to provide the necessary coordination between both

processes at national and regional level. In the context of the new cohesion programmes,

the new Member States are encouraged to earmark the resources of the structural funds for

measures in pursuit of the Lisbon objectives, as is already agreed for EU-15

;



The national reform programmes contain a wealth of interesting policies on the basis of

which Member States should exchange experiences. The Commission will identify some

specific policy areas where the scope for mutual learning is particularly large and organise

meetings with Member States representatives to discuss specific policy ideas. Member

States should seek to apply the most promising policy ideas included in other national

reform programmes. The Commission and Member States should also ensure that EU open

UNICE and ETUC in a statement issued on 15.03.2005 welcomed the launch of the new Lisbon

Strategy, committing themselves actively to work in support of the growth and jobs agenda. They have

just agreed a work-programme for 2005-2008 in support of the strategy.

For the convergence objective, the earmarked resources should represent a minimum of 60% of the total

funding, whereas for the regional competitiveness objective it should be 75%.

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coordination in the areas of education and training, social protection and social inclusion

makes a strong contribution.

Member States are invited to take the elements above into account when drawing up their

annual reports later this year.

4.2.

Delivery of Community action



The Council, the European Parliament and the European Commission should finalise the

financial perspectives 2007-2013 and Council and European Parliament should adopt the

necessary legal instruments as quickly as possible to be in time to allow investment of the

growth and jobs agenda as from 1

January 2007;



The Community Institutions will need to bring swiftly into force the measures foreseen in

the Community Lisbon programme, and especially those which are required to implement

the decisions taken by the European Council with regard to the four key actions proposed

in the previous section. The Commission will work with Member States (including the

Lisbon national co-ordinators) to ensure that all necessary steps are taken for these four

actions to be fully implemented by the end of 2007. To this end, it will propose a roadmap

setting out the steps required and key dates for their completion. On the basis of the

Commission’s next assessment of the implementation by Member States of their national

programmes, the Commission will identify the necessary measures to complement

Member States’ efforts – and update the Community Lisbon programme accordingly.

As regards both the Community Lisbon programme and the national reform programmes, the

Commission will take stock of developments in its Report to the 2007 Spring European

Council.

4.3.

Mobilising all players behind a common agenda



Major communication efforts need to be made to increase awareness and ownership of the

national reform programmes and of the Community actions towards more growth and jobs,

by the Parliament, the Commission, European Economic and Social Committee, the

Committee of the Regions, Member States, regional and local actors, civil society and

social partners. As representative of the European citizens, the European Parliament has a

key role to play in this enhanced communication effort - which should be closely co-

ordinated with the national and regional debates on the future of Europe;



Social partners are invited to play an even greater role in the development and

implementation of the renewed Lisbon Strategy, particularly by making joint proposals on

how they can directly contribute to its success. The Commission proposes that the

Presidency of the Union holds an extraordinary Social Summit devoted to identifying

concrete steps to making progress in all of the actions proposed in this Communication and

in particular to deal with the impact of globalisation and demographic change on more and

better jobs.

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Appendix

List of illustrative examples of Member States’ policies and measures in support of the

growth and job objectives, particularly in the four priority areas identified in section 3

R&D and innovation

About half of the Member States use fiscal incentives to stimulate private R&D and several

other Member States intend to apply such measures as well. Spain is considering reducing

taxes for firms investing in R&D, as the Netherlands is doing already. Hungary will simplify

its tax allowance scheme and France will triple its tax credits for research by 2010.

Spain, Denmark and Estonia have specific programs aimed at increasing the number of

researchers in enterprises. Germany has launched an ‘Excellence Initiative’ to promote

excellent research at universities. This initiative aims at developing some of Germany's

universities into international top locations for scientific research.

Italy is developing centres of excellence for teaching and research, including the Euro-

Mediterranean university distance-learning system, and promoting mobility of teachers and

students throughout the Mediterranean region. Spain and Portugal have created a joint

research institute.

Slovakia, Spain and France plan to introduce monitoring and evaluation systems in order to

improve the effectiveness of public R&D spending.

In France, 'Pôles de Compétitivité' are being established as public private partnerships.

These 'Pôles' will support and coordinate a number of complementary policies for businesses

of which R&D is pivotal. A recent Slovenian cluster initiative has already yielded promising

results: 18 cluster offices facilitating cooperation between 350 companies and 40

education/research institutes were operational by 2004. In Lithuania, the government is

establishing an Institute of Technology assisting business in research, technological

development and innovation.

In Ireland, measures have been taken to promote commercialisation of public research results

by licensing it to the private sector or by helping researchers to bring their ideas to a

marketable stage and help them achieve commercial success.

Italy is addressing shortcomings in the area of intellectual property rights (IPR) through a set

of measures aimed at improving companies’ patenting capabilities and by reducing patenting

costs. In Germany, the patent exploitation agencies will be further developed and expanded.

In Belgium the federal government, the European Patent Office, research centres and

universities are cooperating in an initiative to support SMEs in using the IPR system. Latvia

has developed a public support programme to protect and enforce IPR and raise awareness

in the business community.

Improving the business environment and the functioning of markets

Latvia has made a strong political commitment to implement Community law backed up by

concrete targets and deadlines to ensure timely and correct transposition of internal market

directives. Ireland has strengthened its internal procedures for monitoring implementation of

Community directives. In order to avoid complicating legislation, several Member States

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actively discourage adding provisions when implementing Community directives (Austria, the

Netherlands). In order to avoid late implementation, some Member States have put in place

fast-track procedures (Italy, France).

Many Member States have made great strides in e-government, such as setting up one-stop

shops for business’ and citizens’ enquiries (Belgium, Estonia, Finland, France, Ireland, Italy,

Poland, Portugal). This cuts paperwork and considerably reduces response time. One can

start up a business in less than two weeks in Denmark, France, the Netherlands, Italy and

Finland. There is only one procedure to fulfil when hiring the first employee in Lithuania; two

in the case of the UK, Sweden and Ireland.

Many Member States (Austria, Belgium, Cyprus, Czech Republic, Denmark, Estonia, France,

Germany, Lithuania, Luxembourg, the Netherlands, Portugal, Slovenia, the UK) are carrying

out - or intend to carry out - analyses of the administrative costs imposed by legislation. A

significant number of them are using variants of the standard cost model initially developed

in the Netherlands and whose features have inspired key aspects of the EU common

methodology proposed by the Commission to the Council and the Member States in October

2005. Five countries (Czech Republic, Denmark, the Netherlands, Sweden and the UK) have

also set quantitative targets for reducing administrative costs (ranging from 20 to 25%

reductions by 2010).

Eight Member States (Austria, Estonia, Germany, Italy, Poland, Slovenia, Spain and the UK)

are planning to launch simplification programmes, in addition to the four Member States

(Denmark, Ireland, Luxembourg, Sweden) which have already done so. The focus is on

improving legislation on tax, audit and fiscal measures, setting up business, insolvency and

labour and consumer protection.

Many countries, including Ireland and the Netherlands have removed specific restrictions to

market access in liberal professions, financial services and energy markets. Slovakia is

identifying barriers preventing the opening of the power supply market and will define

measures for their elimination. It is also taking steps to improve competition in financial

services. The UK will implement measures promoting competition in legal services. Estonia

intends to implement a pro-active competition policy through sector analysis and awareness-

raising of competition law. Denmark is undertaking a screening of domestic rules to remove

obstacles to imports and investments into the country (“Task Force for the Internal Market” –

TIM).

Cyprus will evaluate all existing and new aid schemes to check whether they adequately

address market failures. Finland will review its subsidy policy with a view to reducing its

overall volume and ensuring that aid does not distort competition.

Slovakia has launched an initiative to set up a Central European Stock Exchange addressing

a lack of equity markets not only in Slovakia but also in neighbouring countries. Hungary and

the Czech Republic are invited to participate. The Slovakian domestic market is too small to

support a well functioning and liquid equity market; cooperation between several countries is

therefore necessary.

Portugal proposes several programmes to support the internationalisation of businesses. It is

also implementing a specific programme to accelerate industrial transition and restructuring.

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Lithuania plans to organise promotion campaigns around successful business examples in

order to promote the image of entrepreneurship amongst the general public. The UK is

providing five days of enterprise courses at schools to all pupils aged 14-16. Spain plans to

address the fear of stigma of failure by enabling students at all school levels to learn about

the value of entrepreneurship and business failure.

A number of countries have also taken interesting initiatives to strengthen access to capital

for SMEs; for example, the Czech KAPITAL programme, the Finnish PreSeed package and

the UK Enterprise Capital Funds. Denmark plans to introduce a tax relief for growth

entrepreneurs. The relief starts when the entrepreneur generates profits for the first time and

is granted for three years.

Employment, financial sustainability and demography

A number of Member States have improved the quality of their government finances, taking

into account their national priorities, with the view to raising the long-term potential of their

economies. For instance, Denmark, the UK, Ireland and Finland have significantly increased

government expenditure in education, with the view to increasing productivity and

employability of the labour force.

Several Member States have improved the financial sustainability of their pension schemes.

Belgium, Spain, France, Austria, Portugal and Finland have all strengthened the link between

contributions and benefits, for example through making the number of contribution years a

more important criteria regarding retirement than the age of the retiree, or by allowing early

or late retirement with corresponding changes in benefits.

A number of new Member States (Estonia, Latvia, Lithuania, Poland, Hungary and Slovakia)

have diversified the risk of pension systems by switching part of the statutory social security

pension into private funded schemes. Sweden, Italy, Latvia and Poland have set up schemes,

where pension benefits are directly linked to contributions paid during one’s working life and

also depend on life expectancy at retirement. France has decided to increase the required

contribution years for a full pension in line with increasing life expectancy. Germany has

introduced a sustainability factor in the indexation of its public pension scheme making

indexation depend on the ratio between the numbers of the employed and pensioners. Such

changes have improved the financial sustainability of pension schemes even if some

challenges remain in the face of ageing population.

Pension reform is an important factor explaining the large increase in the employment rates

amongst older workers since 2000 in some Member States. Finland, for example, has

significantly increased the employment rate for older workers (from 35% in 1995 to 50.9% in

2005) as a result of changes to the pensions system as well as targeted training, more

attention to older workers’ well-being in the workplace and targeted subsidies for low-paid

jobs.

The Irish Skill-nets programme makes it easy for companies to access flexible, innovative and

cost-effective training. The initiative has already helped to upgrade the skills of some 30.000

staff. Estonia is planning to reform vocational training and Luxembourg intends to set up a

system of recognition of non-formal learning.

Austria aims to fill 5000 vacancies which are currently hard to fill because the wage is too

low (in many cases because the jobs in question are part time). The new ‘Kombi-Lohn’,

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rewards both employer and worker if a vacancy is filled. Target groups are young people

unemployed for more than 6 months and older workers unemployed for more than one year.

The Netherlands has taken concrete measures to encourage workers to spread work, care and

education more evenly over the lifecycle. A new voluntary savings scheme will enable workers

to save a percentage of their wage to cover periods of leave, such as care leave, education or

other. Savings are fiscally supported.

Slovakia is seeking to improve the work/life balance of young families. Schools and pre-

schools will have longer opening hours. The state supports new day-care facilities for small

children, facilitates part-time work and has put in place individual support programs for

women returning to the labour market after maternity/parental leave.

In Greece, a new law reforms the national life long learning system. A committee will be co-

coordinating the national efforts, encouraging business oriented education, implementing best

practices and tackling exclusion.

Energy and environmental technologies

The Nordic countries have set up an integrated market for buying and selling electricity.

Additional connections between the Netherlands and Norway, between Finland and Estonia

and between Denmark and Sweden will facilitate trade and support power generation also

from alternative sources such as water and wind, reducing harmful emissions.

Austria, the Czech Republic, Cyprus, Malta and the UK are taking steps to use public

procurement as leverage to promote environmental technologies and energy efficiency.

Germany provides incentives to promote energy savings in buildings, and has launched a

major renovation programme. Cyprus has elaborated a concrete plan and timetable to

address environmentally-harmful subsidies in order to review, reform or abolish them.

Sweden aims to break the dependence on fossil fuels by 2020. To do so, Sweden will apply

green taxes, support wind power and a green electricity certificate. This certificate makes it

mandatory to buy a certain share of one’s electricity consumption from renewable sources.

Denmark and Sweden have already a high proportion of environmental taxes in their fiscal

panoply and intend to further develop them. Estonia this year launched an ambitious

environmental tax reform with the view to shift the tax burden of labour to consumption and

pollution and thereby promoting the sustainable use of natural resources.

Supportive national and regional policies for wind power in Germany, Spain and Denmark

are showing results. Germany has more than one third of world wind power capacity and

wind accounts for 6.5% of Spain’s electricity output. In Denmark, the wind power

manufacturing industry is a major commercial success. The sector has grown faster than any

other business sector and Danish turbines now dominate the world market. The industry

provides jobs for over 20,000 people in Denmark. The UK is negotiating with oil suppliers for

a higher share of bio fuels in gasoline.