Europaudvalget 2005-06
EUU Alm.del Bilag 136
Offentligt
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COMMISSION OF THE EUROPEAN COMMUNITIES
Brussels, xxx
ANNEX to COM(2006) yyy final
ANNEX TO THE
COMMUNICATION FROM THE COMMISSION TO THE SPRING EUROPEAN
COUNCIL
TIME TO MOVE UP A GEAR
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TABLE OF CONTENTS
Introduction ................................................................................................................................ 4
Part I Macroeconomic part ......................................................................................................... 5
1.
2.
2.1.
2.2.
3.
4.
4.1.
4.2.
5.
6.
Summary and conclusions............................................................................................ 5
Macroeconomic developments in the EU .................................................................... 5
Macroeconomic conditions .......................................................................................... 5
Budgetary policy developments ................................................................................... 6
Path towards achieving the main Lisbon objectives .................................................... 8
Macroeconomic policy challenges ............................................................................... 9
Challenges from a EU-wide perspective ...................................................................... 9
Challenges identified by the Member States .............................................................. 10
Assessment of Member States’ strategies in response to macroeconomic policy
challenges ................................................................................................................... 12
Promoting coherent macroeconomic, structural and employment policies ............... 13
Part II Microeconomic part ...................................................................................................... 15
1.
2.
2.1.
2.2.
2.3.
2.4.
2.5.
3.
3.1.
3.2.
3.3.
3.4.
3.5.
Summary and conclusions.......................................................................................... 15
Knowledge and innovation — engines of sustainable growth ................................... 16
Research ..................................................................................................................... 16
Innovation .................................................................................................................. 18
Information society .................................................................................................... 19
Industry ...................................................................................................................... 20
Sustainable use of resources....................................................................................... 22
Making Europe a more attractive place to invest and work ....................................... 23
Internal Market ........................................................................................................... 23
Competitive markets .................................................................................................. 24
Business environment and better regulation .............................................................. 25
Entrepreneurship and SMEs ....................................................................................... 27
European infrastructure .............................................................................................. 28
Part III Draft Joint Employment Report 2005/2006 ................................................................. 30
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More and Better Jobs : Delivering the Priorities of the European Employment Strategy ....... 30
1.
2.
3.
3.1.
3.2.
3.3.
Summary and conclusions.......................................................................................... 30
Achieving the objectives ............................................................................................ 32
Implementing the priorities for action........................................................................ 35
Attract and retain more people in employment, increase labour supply and modernise
social protection systems............................................................................................ 35
Improve the adaptability of workers and enterprises ................................................. 38
Increase investment in human capital through better education and skills ................ 40
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Introduction
This annex complements the communication from the Commission to the 2006 Spring
European Council “Time to move up a gear” presented after the renewal of the Lisbon
Strategy. It draws on the Commission’s assessment of the national reform programmes (NRP)
drafted by Member States on the basis of the new integrated guidelines for growth and jobs
endorsed by the European Council in June 2005
1
. It also takes into account action taken at the
European level, particularly, in the framework of the Community Lisbon programme
2
.
While the key findings of the Commission’s analysis are presented in the communication
“Time to move up a gear”, this annex, an integral part of the communication, provides a more
detailed picture within the three broad strands of the integrated guidelines: macroeconomic,
microeconomic and employment. The latter section constitutes at the same time the draft joint
employment report 2005/2006 of the Commission, in accordance with article 128 of the
Treaty. A more detailed assessment of the individual national reform programmes can be
found in Part II of the communication “Time to move up a gear” containing country chapters
as well as a chapter on the euro area.
1
2
Brussels European Council, Presidency Conclusions, point 10
(http://ue.eu.int/ueDocs/cms_Data/docs/pressData/en/ec/85349.pdf).
Common Actions for Growth and Employment: The Community Lisbon Programme, COM(2005) 330
of 20.7.2005.
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Part I
Macroeconomic part
1.
S
UMMARY AND CONCLUSIONS
This part of the Annex assesses the progress made towards achieving the Lisbon
growth and job objectives, and it evaluates the macroeconomic policy strategies of
the Member States as set out in their National Reform Programmes (NRPs).
During the first five years of the Lisbon strategy over 6.5 million new jobs were
created in the Union. Nevertheless, the 70% Lisbon employment rate target is not
expected to be reached by 2010. Labour productivity growth in the EU has been
below that of the US, which explains why – in spite of the substantial number of new
jobs created – EU GDP per capita has failed to catch up with that of the US.
The EU economy has started to recover following the global downturn at the
beginning of the decade. In spite of this, the average EU budget deficit is expected to
remain at 2.7% of GDP up until 2007.
An investigation of the NRPs shows that budgetary discipline stands out as the most
important macroeconomic challenge identified by Member States. It is typically
formulated in terms of public finance sustainability, including pension, health and
labour market reforms as well as short-term budgetary consolidation as tools to
ensure the long-term sustainability of public finances in an ageing society. 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 express the intention to improve the quality of public finances
by increasing the efficiency of the public administration and by setting aside public
resources for strengthening infrastructure, human capital and R&D investment.
However, few NRPs are explicit about the budgetary implications of proposed
measures.
Over the coming decades, ageing populations in Europe will put increasing pressure
on public finances. Member States appear to recognise that a thorough overhaul of
retirement and pension systems is an essential prerequisite for ensuring public
finance sustainability. However, in most countries the measures already taken or
envisaged are insufficient to negate to the effects of ageing populations.
The majority of Member States have put forward NRPs which show broad coherence
between macroeconomic, microeconomic and employment policies, even if
synergies between policy actions in different domains could be further developed.
2.
2.1.
M
ACROECONOMIC DEVELOPMENTS IN THE
EU
Macroeconomic conditions
EU growth performance since 2000
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Since the launch of the Lisbon strategy in 2000, the annual growth rate for the EU-15
has averaged 1.9% per year compared to 2.8% on average for the period 1995-2000.
In comparison, the US grew at a rate of 2.7% between 2000 and 2005. In per capita
terms, EU-15 growth (1.4%) has been only slightly below that in the US (1.7%).
Growth in the recently-acceded Member States has been considerably more dynamic
(around 4.6%), although their small economic weight means that this is not apparent
in the 1.9% growth rate observed in the EU as a whole.
The pattern of EU growth reflects a combination of cyclical and structural factors,
which led to a sluggish and protracted recovery following the global downturn at the
beginning of the decade. The potential growth rate of the European economy is
currently estimated to be around 2.0%. GDP grew by 1.5% on average in the EU in
2005, encompassing a rebound of economic activity in the second half of the year.
Structural factors have become the main force behind the relative growth
performance of the euro-area countries: those with a strong/weak growth
performance in recent years have by and large maintained this position since the
1990s. On the other hand, growth differences linked to different positions in the
cycle have diminished in the last decade.
In 2005, GDP growth in the EU accelerated from a quarterly rate of 0.3% (q-o-q) in
the first quarter to 0.6% in the third quarter. This coincided with a similar
acceleration in final domestic demand. The contribution of private consumption to
domestic demand growth was subdued, since consumer confidence remained weak.
This is mainly due to pessimism about employment prospects and a limited rise in
the purchasing power of households. On the other hand, the pick-up in investment in
the second and third quarters of 2005 reflected improvements in profits and corporate
balance-sheets. Net exports – supported by a healthy external environment and by a
depreciation of the nominal effective exchange rate of the euro – made a positive but
small contribution to GDP growth.
Growth prospects for 2006 and 2007
In line with the positive signals from business survey indicators, it is anticipated that
growth will be close to potential during 2006, at 2.1%, and will accelerate further, to
2.4%, in 2007. The recovery expected in 2006-2007 is underpinned by a further
strengthening of domestic demand. Investment, in particular, is projected to pick up
considerably, followed by a more gradual recovery of private consumption.
Labour market conditions are also set to improve, with an expected 6 million new
jobs in the EU in 2005-2007 resulting from the projected rise in economic growth. It
is also expected that the unemployment rate will diminish from 8.7% in 2005 to
8.1% in 2007.
2.2.
Budgetary policy developments
Budgetary positions
Since 2000, the situation in public finances in the euro area and the Union as a whole
has deteriorated, reflecting to a large extent the impact of the economic cycle. In
several Member States, part of the deterioration also stemmed from a discretionary
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loosening of fiscal policy. Despite a slight improvement in the budgetary position of
the euro area and the EU in 2004, budgetary consolidation did not advance any
further. Due to the lacklustre growth, net borrowing in 2005 is expected to increase
slightly to 2.9% of GDP in the euro area and 2.7% of GDP in the EU.
Excessive deficits
The Commission’s autumn 2005 economic forecasts project that the average EU
budget deficit will remain at 2.7% of GDP in 2006-2007. For the euro area, a
marginal decline in the general government deficit in 2006 and 2007 is anticipated,
in the context of a moderate economic recovery. However, current polices are
expected to be insufficient to bring the deficit below the 3% reference value by 2007
in any of the euro-area Member States currently under excessive deficit procedure
(DE, EL, FR, IT and PT).
Outside the euro area, the fiscal outlook across countries is relatively heterogeneous.
The budget deficit in three of the six non-euro-area countries currently under
excessive deficit procedure (CZ, HU and PL) is expected to stay above 3% of GDP.
The same is true for the UK. Cyprus, Malta and Slovakia, on the other hand, are
projected to correct their excessive deficits.
Debt ratios
The deterioration in budgetary positions since 2000 has led to an increase in gross
debt within both the euro area and the EU as a whole. Debt ratios in 2005 were well
above the 60% of GDP threshold in Belgium, Germany, Greece, France, Italy,
Austria, Portugal, Cyprus and Malta.
Budgetary impact of ageing populations
Over the coming decades, ageing populations in Europe will put increasing pressure
on public finances. The old-age dependency ratio, that is, the number of people aged
65 years and above relative to those in the 15 to 64 age group, is projected to double,
reaching 51% in 2050. This sharp increase is expected to result in a substantial
burden of public spending on age-related items, in particular on pensions, health care
and long-term care. The 2005 Council Opinions on the Stability and Convergence
Programmes identified serious risks to the long-term sustainability of public finances
in ten countries (BE, CZ, DE, EL, FR, IT, CY, HU, MT and SI). Seven countries
(DK, IE, LU, AT, FI, SE and ES) appear to face relatively limited risks associated
with population ageing, while the remaining EU Member States are somewhere in
between.
Quality of public finances
While the current EU economic policy framework considers budgetary discipline and
fiscal sustainability to be essential elements of a sound and growth-supportive
economic environment, the quality of public finances has gradually been gaining
importance in the policy debate. An investigation of the composition of public
expenditures in the Member States shows that many of the countries that benefited
from large decreases in interest payments since the late 1990s used this room for
manoeuvre to raise government consumption and current transfers, rather than
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consolidating their public finances. Other Member States, however, have managed to
reallocate public resources more effectively towards longer-term targets such as
knowledge and innovation, while maintaining fiscal discipline. Denmark and
Sweden, for example, have been able to redirect public spending by introducing
national expenditure rules and performance budgeting schemes within a medium-
term framework.
3.
P
ATH TOWARDS ACHIEVING THE MAIN
L
ISBON OBJECTIVES
Change in GDP per capita
Considering the enlarged EU of 25 Member States, GDP per capita stands at around
65% of the US level with no significant improvement since the launch of the Lisbon
strategy. In the first half of the decade, it has not been possible to complement the
relatively positive developments in terms of employment creation with the required
acceleration of productivity growth (see graph 1).
Graph 1:
European Union performance 1999-2004 (US=100)
(4)
100
80
60
40
64,2
20
0
GDP per capita
Employment rate (1)
Hours worked per worker (2) (3)
Hourly labour productivity (3)
86,3
64,6
90,6
80,7
81,5
92,1
87,5
1999
2004
1) Calculated - Employment rate = 100 * (GDP per capita / Labour productivity per person employed)
2) Calculated - Hours worked per worker =100 * (Labour productivity per person employed / Hourly labour productivity)
3) EU15 values for Hours worked per worker and Hourly labour productivity
4) 2004: forecasts
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Labour productivity growth
The Commission’s analysis indicates that the deteriorating labour productivity
performance can be attributed to lower investment per employee and a slowdown in
the rate of technological progress. More recently, however, EU labour productivity
growth appears to be accelerating. This may be due to the upturn in the business
cycle but it is also likely to be attributable to more structural factors such as the
delayed impact of investments in ICT and possibly outsourcing, which has been
shown to provide a productivity boost if the outsourced activities are well integrated
in international networks (as is the case in the German motor vehicle industry, for
example). Productivity increases, combined with wage moderation, should help to
maintain the EU’s competitive position in an increasingly integrated world economy.
Job creation and the effects of ageing populations
Despite some progress in job creation (see draft Joint Employment Report), the
Lisbon employment targets will be difficult to reach. During the first five years of the
Lisbon strategy, over 6.5 million new jobs were created in the Union, bringing the
employment rate up from 61.9% in 1999 to 63.3% in 2004. Recent work by the
Economic Policy Committee and the European Commission (see graph 2) projects a
further rise in the overall employment rate to 67% in 2010, with the 70% Lisbon
employment rate target being reached in 2020. Meeting the Lisbon employment
target, albeit with a delay, will cushion the economic effects of ageing. However,
after 2017, total employment will start to contract as a result of the decline of the
working age population. This means that, all things being equal, the contribution of
employment to growth will turn significantly negative and that Europe’s economic
growth will increasingly depend on productivity increases in the longer run.
Graph 2:
Projected (annual average) potential growth rates in the EU15 and
EU10 and their determinants (employment/productivity)
5
EU15
5
5
EU10
5
4
4
4
4
Growth rate (in %)
2
2
Growth rate (in %)
3
3
3
3
2
2
1
1
1
1
0
0
0
0
-1
2004-10
2011-30
2031-50
-1
-1
2004-10
2011-30
2031-50
-1
Labour productivity growth
GDP growth
Series14
Series16
Employment growth
GDP per capita growth
Series15
Labour productivity growth
GDP growth
Employment growth
GDP per capita growth
Source: EPC and European Commission (2005), “The 2005 EPC projections of age-related expenditure (2004-2050) for the EU25 Member States:
underlying assumptions and projection methodologies” in European Economy Reports and Studies, No. 4, Brussels
(http://europa.eu.int/comm/economy_finance/publications/european_economy/reportsandstudies0405_en.htm)
4.
4.1.
M
ACROECONOMIC POLICY CHALLENGES
Challenges from a EU-wide perspective
Macroeconomic policy challenges
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Europe faces the twin challenges of raising the level of potential growth and of fully
realising its growth potential through well-balanced economic expansion. Sound
macroeconomic policies are essential to meet these challenges. They are vital for
establishing framework conditions that will promote adequate levels of savings and
investment, together with a stronger focus of the latter on knowledge and innovation.
Securing a sound budgetary position will allow full and symmetric operation of the
automatic budgetary stabilisers over the cycle with a view to stabilising output
around a higher and sustainable growth trend. On the other hand, structural reforms
may widen the room for manoeuvre for macroeconomic policy-makers. Better
functioning product and labour markets, for example, will help limit inflationary
pressures in the event of a positive demand shock. This illustrates the importance of
developing a coherent overall strategy, which takes full account of the
interrelationships between macroeconomic, microeconomic and employment policies
(see Section 5).
Budgetary policy challenges
The weakening of policies aimed at budgetary consolidation is an issue for concern,
because it will limit the margin for manoeuvre at times when the economy requires a
true stimulus. Moreover, the deterioration of budgetary positions has led to an
increase in debt levels, which is not good news from a longer-term perspective,
especially in the light of Europe’s ageing population. With the projected increase of
age-related expenditures, such as health, social security and pensions, it will be
increasingly challenging for the Member States to safeguard the long-term
sustainability of public finances, while ensuring the social adequacy of social
protection systems. Finally, meeting the needs for increased spending on education
and research within a tighter budgetary environment requires a greater effort to
improve the overall quality of public spending.
4.2.
Challenges identified by the Member States
Most Member States identify the stimulation of (potential) economic growth as an
overarching challenge. The other challenges, including the more specific
macroeconomic challenges, are seen as tools for achieving this single challenge.
Broadly speaking, there is a convergence of views between Member States and the
Commission on the macroeconomic challenges identified.
Macroeconomic policy challenges
All but three National Reform Programmes have identified macroeconomic policy
challenges. Two of the three exceptions, namely, Netherlands and Sweden, outline in
their Programmes broad strategies that appear adequate to maintain the current
overall satisfactory macroeconomic stance. Italy’s Programme, by contrast, makes
reference to other government policy documents, notably the annual Economic and
Financial Planning Document, which typically provides the basis for the update of
the Stability and Convergence Programme and which, according to the Italian
authorities, should be seen as an integral part of the National Reform Programme.
The macroeconomic policy challenges identified in the Programmes are broadly in
line with those highlighted by the Commission in its contributions to multilateral
surveillance.
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Budgetary policy challenges
According to the Programmes, by far the most important macroeconomic challenge
facing the EU Member States concerns the achievement and/or maintenance of
budgetary discipline, the latter being typically formulated in terms of public finance
sustainability. Only three countries (EL, ES and LV) have identified short-term
budgetary consolidation as a separate challenge, and this despite the fact that no less
than eleven countries (not including ES and LV) are currently in a situation of
excessive deficit. The related challenge of improving the quality of public finances,
which is mostly formulated in terms of increasing the efficiency of the public
administration, is considered to be important in seven Programmes.
The identification of fiscal discipline as the key national macroeconomic policy
priority reflects widespread recognition of its advantages in terms of maintaining
macroeconomic stability and promoting long-term growth, as well as creating the
capacity to respond to future fiscal policy challenges, such as those stemming from
population ageing. This recognition is strongly embodied in the EMU policy
framework, where fiscal rules are seen as necessary to ensure the smooth co-
existence of a common monetary policy geared to price stability with the
maintenance of fiscal policy in the hands of national governments.
External balances and inflation convergence
Challenges identified in the Programmes, other than those related to public finances,
are more difficult to categorise. The external account deficit is explicitly recognised
as a challenge – in the context of the broader goal of securing a stable
macroeconomic environment – only in one case (EE), although in the view of the
Commission other countries (LV, LT, PT) may face challenges on this front. In
taking a relatively sanguine view of external imbalances, national authorities
presumably reason that current account deficits are the result of investment and
saving decisions by rational economic agents and, hence, are consistent with
economic fundamentals and likely to have a welfare and growth-enhancing effect,
for example by supporting an economic catching-up process. By otherwise
emphasising the challenge of fiscal discipline, the national authorities may still
recognise that budgetary policy has a role to play in addressing external imbalances,
through its impact on savings and, more generally, on the confidence of investors.
Inflation convergence is considered a challenge in a number of countries (LV, LT,
SI) in connection with their plans to join the euro area.
Interestingly, neither external imbalances nor inflation divergence seem to be
considered as significant challenges by any country in the euro area, with the
exception of Ireland, which recognises moderating inflation as part of a broader
challenge of maintaining macroeconomic stability. However, it may also betray an
excessively benign view of the eventual unwinding of external imbalances in these
countries.
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5.
OF
M
EMBER
S
TATES
’
MACROECONOMIC POLICY CHALLENGES
A
SSESSMENT
STRATEGIES
IN
RESPONSE
TO
By and large, the priorities identified in the National Reform Programmes are in line
with the principles underlying the recent revision of the Stability and Growth Pact,
one aspect of which is the increasing weight assigned to considerations of durability
of the correction of fiscal imbalances and long-term sustainability of public finances.
The key Treaty provisions on fiscal discipline and their detailed implementation by
the Stability and Growth Pact are explicitly indicated in a number of Programmes as
providing the framework for the conduct of fiscal policy.
Fiscal consolidation strategies
The fiscal consolidation strategies highlighted in the Programmes are typically
expenditure-based (the German Programme is an exception in this respect) and
embedded in the broader structural reform plan. Measures to achieve short-term
budgetary consolidation are insufficiently explicit in several countries, including FR,
IT and PT. Another potential weakness of the Programmes is that the budgetary
implications of the actions envisaged in other policy areas, such as employment and
social policies, are seldom spelled out.
Only the German Programme envisages increases in taxation, although
improvements in revenue collection are explicitly mentioned in some other cases. By
contrast, tax cuts are envisaged by several Programmes; in some cases, notably
Hungary, even in the presence of significant budgetary imbalances. Measures include
tax incentives for enterprises to invest more in R&D and training, the introduction of
new energy and/or environmental taxes and measures to reduce the tax burden on
labour. While many specific measures seem appropriate, a more systematic approach
to reviewing the impact of tax systems on growth and jobs often seems to be missing.
Budgetary consequences of an ageing population
In response to the projected increase in age-related public expenditure, further
pension and/or health care reforms figure prominently in the public finance agenda
of several Member States. In fact, about half of the Programmes highlight reform
measures in these two areas. Coping with the budgetary consequences of ageing is
seen as a key challenge also in countries such as DK, IE, LU and FI, which from a
cross-country perspective are generally seen to carry a low risk in terms of public
finance sustainability. Although not necessarily involving changes in the pension or
health care system, the policy responses to ageing in these countries take into
account the need to increase the efficiency of public services as well as, in some
cases, to guard against the possible erosion of tax bases.
At the opposite end of the spectrum, EL, PT and, among the recently-acceded
Member States, CZ - where the need for a thorough overhaul of the pension system
has been highlighted as a pre-requisite for ensuring public finance sustainability -
generally recognise the need for such a reform. Nevertheless, the comprehensiveness
and the concreteness of the measures envisaged remain somewhat limited.
Countries where the projected increase in age-related public expenditure is contained
by already-enacted pension reforms may, nevertheless, find themselves at serious
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risk through failure to achieve a lasting correction of the present budgetary
imbalances, especially if these are coupled with relatively high debt levels. This is
the case for most of the countries currently subject to the excessive deficit procedure,
including IT and FR and, among the recently-acceded Member States, HU and PL. In
general, the need to consolidate quickly is recognised in these cases, although there is
a notable lack of clarity in the measures envisaged in the case of Hungary, while
Italy, as already noted, does not directly address macroeconomic policy issues,
including fiscal consolidation, in its Programme.
Quality of public finances
Concerning policies for improving the quality of public finances, Programmes
typically refer to national strategies for strengthening infrastructure, human capital
and R&D investment. In addition, some Programmes single out across-the-board
improvements in public sector productivity, inter alia, through administrative reform,
as an objective on its own. The quality of public finances seems more likely to be
recognised as a challenge in its own right by countries experiencing better-than-
average growth performance (for example, IE, FI, UK and, among the recently-
acceded Member States, EE).
6.
P
ROMOTING
POLICIES
COHERENT MACROECONOMIC
,
STRUCTURAL AND EMPLOYMENT
In addition to Member States putting in place macroeconomic policies that can
provide conditions conducive to job creation and growth, alongside structural
reforms more directly aimed at raising productivity and employment, it is important
for the overall reform strategy to be coherent, with reforms in one area supporting
those in another. For example, labour market reforms such as those which increase
incentives to work through changes in the tax and benefit system can increase the
adaptability of the EU economy, particularly in the light of increasing globalisation,
and thus allow a more supportive role for macroeconomic policies. Similarly,
without policies to safeguard macroeconomic stability, the lower cost and price
pressures from structural reforms will not translate into permanently lower prices.
The National Reform Programmes also provide the opportunity for Member States to
consider the most advantageous way of sequencing reforms. Liberalising product
markets early on in the reform process, for example, may help to spur labour market
reform, given that in a more competitive product market there will be less excess
profit to distribute between employers and workers, thus increasing the incentives for
labour market reform.
Coherence of the National Reform Programmes
The majority of Member States have put forward National Reform Programmes
which show broad coherence between macroeconomic, microeconomic and
employment policies. Only a small minority of Programmes appear to be the result of
a departmental rather than a strategic approach (HU and, to a lesser extent, IT). Most
National Reform Programmes also avoid having a large number of macroeconomic
priorities, allowing the focus to be on key structural challenges (PT, SI and FI being
notable exceptions). In some cases (notably EE and, to a lesser extent, ES and LV),
the Programmes make cross-references between the different policy areas and
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elaborate upon the synergies resulting from such policy links. However, for the
majority of Member States, this is an area in which National Reform Programmes
could be further developed. Future National Reform Programmes could also provide
more indication of how consideration has been given to the appropriate sequencing
of reforms.
Budgetary implications of reform measures proposed
A number of Member States have presented reform measures which will, at least in
the short term, increase public expenditure. The budgetary implications of such
measures need to be considered in the light of their impact on macroeconomic
policy. While some National Reform Programmes provide information on the
budgetary implications of reform proposals (e.g. CY, MT, LV), this information is
missing from most Programmes. Moreover, it is not always clear how high public
investment can be reconciled with budgetary consolidation (e.g. in the case of BE).
Similarly, information on the intended use and expected growth and employment
impact of structural and cohesion funds is often missing. While a small number of
countries (LV, NL and FI) are relatively explicit regarding their planned use of
structural funds, the majority of countries (particularly EE, ES, IE, IT, LT, PT, SI,
SK and UK) provide less detail.
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Part II
Microeconomic part
1.
S
UMMARY AND CONCLUSIONS
This part of the Annex assesses the microeconomic policy reforms reported by
Member States in their National Reform Programmes (NRPs) and links them to the
action at Community level.
The main themes of the microeconomic part of the revised Lisbon strategy –
knowledge and innovation, and making Europe a more attractive place to invest and
work in – are clearly reflected in the NRPs. Microeconomic reforms take the largest
share in the reform efforts in the Member States; most of the key challenges
identified in the Member States’ programmes fall into the microeconomic area. For
example, all Member States address research and innovation policies as one of their
key priorities. Most Member States also identify the business environment,
entrepreneurship, sustainable development and selected competition issues among
the key challenges to be tackled.
While the choice of priorities is in general appropriate to the current situation in the
Member States, competition issues will require further attention. Often the beneficial
effect of competition for European citizens is not sufficiently anchored in the NRPs.
In particular, ensuring competition in services – especially professional and financial
services – and in network industries is often not addressed to the extent that the
situation on those markets would require. Liberalisation of the energy markets is
advancing but will take a long time to complete, especially for gas. Postal and
railway services are often not considered priorities.
In the field of research and innovation, the main challenge for the Member States is
to put in place the right framework conditions, instruments and incentives. While the
commitments taken on by Member States imply significant progress towards the
R&D target, it remains unlikely that the 3% objective for total R&D spending will be
reached by 2010. Further action by Member States will be needed, such as defining
national R&D targets to bring the Union closer to the 3% objective and building
better coordinated innovation strategies aiming at entrepreneurial innovation.
The goal of promoting a stronger entrepreneurial culture and creating a supportive
environment for SMEs is being pursued by increased R&D investment, intensified
competition and better regulation. A proactive strategy to foster entrepreneurial
mindsets through education is still missing in most countries.
While the large potential benefits for consumers and entrepreneurs from extending
and deepening the Internal Market are recognised, particularly in the areas of
services and network industries and in Member States with weak transposition and
implementation records at present, few Member States have put forward specific
action to reduce the transposition backlog or to improve enforcement. Substantial
positive potential could also be unlocked in the area of public procurement.
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Expansion and improvement of European infrastructure should contribute to
improving the business environment and enhancing competition. Most NRPs focus
on transport and ICT (e.g. broadband availability) infrastructure; cross-border links
are addressed less frequently. Many Member States are taking measures to use ICT
to modernise public services.
Most Member States seek to exploit the synergies between economic growth and
environmental protection; measures to support environmental technologies as well as
energy efficiency and renewable energy or the introduction of environmental tax
reform, for instance, can yield both economic and environmental benefits.
The integrated microeconomic guidelines constitute an interdependent set of goals to
strengthen the European knowledge economy. The gains from progress on one
objective depend on progress on the others. 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 competitive situation on the markets. During
the implementation phase, attention needs to be paid to the synergies between
extending and deepening the Internal Market, greater competition, enhancing
infrastructure, and the business environment.
The governance reforms introduced in the revised Lisbon strategy included a
streamlining of existing reporting requirements. The March 2005 European Council
concluded that the reports on the follow-up to the Lisbon strategy sent to the
Commission by Member States each year, including the application of the open
method of coordination, would be combined in a single document. Subsequently, the
Commission invited the Member States to cover in their NRPs the measures taken to
implement four processes: the European Charter for Small Enterprises; the
Environmental Technologies Action Plan; eEurope/i2010; and the 3% investment in
R&D Action Plan. Such reporting would replace separate reports on each of the four
processes. Four Member States (CZ, EE, FI, MT) have presented such information in
a separate annex to the NRP, while others often provide relevant information in the
main text of the programme. The degree of detail in reporting varies across the
NRPs.
The following sections give more detail on the reform measures, following the
structure of the microeconomic guidelines. While the emphasis is on overall trends,
individual measures are frequently singled out as interesting examples.
2.
2.1.
K
NOWLEDGE AND INNOVATION
—
ENGINES OF SUSTAINABLE GROWTH
Research
Relatively low levels of private R&D investment in the EU are an impediment to
knowledge accumulation and long-run growth. In 2004 the EU spent 1.9% of its
GDP on R&D, of which 55% was financed by business. Twelve Member States
reported explicit R&D spending targets for 2010 in their NRPs, and six Member
States provided sub-targets or targets for a different year. Seven Member States
provided no target at all. Assuming that all the R&D expenditure targets which 18
Member States provided in their NRPs were met, R&D expenditure in these 18
Member States would increase significantly to an approximate average of 2.6% of
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GDP in 2010
3
. Despite the expected increase, the EU-25 would however remain
substantially below the 3% target in 2010.
Graph 3:
4,5
Gross domestic expenditure on R&D (GERD) as % of GDP**
Situation 2004 (ES, IT, LU, PT, UK 2003)
4,0
Target 2010 (CY 2008, IE 2013, UK 2014) (*)
3,5
3,0
2,5
2,0
1,5
1,0
0,5
0,0
BE
CZ
DK
DE
EE
GR
ES
FR
IE
IT
CY
LV
LT
LU
HU
MT
NL
AT
PL
PT
SI
SK
FI
SE
UK
(*) DK>3% - IE as % of GNP - NL aim at a 'top 5' position
EU-
25
Source: Eurostat, Structural Indicators, Innovation & Research - OECD
**: The Irish target is 2.5% of GNP (not GDP)
Increasing the leverage effect of public R&D investment on private R&D investment
is key to increase private R&D investment. Several Member States (ES, LV, AT, FI)
have taken specific action to increase public expenditure on R&D. In order to make
public R&D expenditure more effective, a number of Member States (SK, ES, FR)
plan to introduce systems for monitoring and evaluating public R&D. About half of
the Member States already use fiscal measures to leverage private R&D and several
others are considering such measures. Spain is planning to introduce a scheme that
would reduce wage taxes for firms which invest in R&D, similar to the scheme in the
Netherlands. Hungary has decided to simplify its tax allowance scheme for R&D. In
France the “Crédit d’Impôt de Recherche” tax break is set to triple in volume by
2010.
Developing and strengthening centres of excellence in educational and research
institutions, promoting public-private partnerships and improving cooperation and
transfer of knowledge between public research institutes and private enterprises are
keys to competitiveness in all Member States. Several Member States plan to reform
or improve the mechanisms for transferring knowledge. Germany intends to
introduce a “grace period” to allow researchers to publish their research results
without losing the possibility to patent them. Spain will include knowledge transfer
aspects in the career appraisal and incentive structures for public research staff and
will transform large public research organisations into public agencies to increase
their autonomy.
3
The R&D intensity for 2010 was calculated on the basis of the estimated GDP weightings for 2007 for
Member States having presented targets for 2010. Targets were not available for FR, IT, HU, MT, NL,
PL and SK.
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Most Member States see a need to ensure a sufficient supply of qualified researchers.
In Spain the Torres Quevedo programme aims at quadrupling the number of PhD
holders taken on by enterprises, by co-financing contracts. In Denmark the industrial
PhD programme has proved to be successful in placing researchers in enterprises and
will be stepped up. Estonia aims to increase R&D staff in enterprises by more than
50% between 2003 and 2008.
In conclusion, Member States have generally presented a well-founded analysis of
the strengths and weaknesses of their R&D systems and put forward a variety of
measures to address them. Overall the NRPs reflect a greater awareness of the need
to have a coherent policy mix to support R&D. However, a stronger commitment
from those Member States that have set no R&D spending target for 2010 combined
with a determined emphasis on implementation and mutual learning by all Member
States would lead to a quantum leap in R&D. The Commission believes that there is
a real opportunity for a break-through in this area.
2.2.
Innovation
A far-reaching reform of Europe’s innovation system is needed. The innovation gap
between the European Union and its main competitors, the United States and Japan,
persists, mainly in the number of patent applications, the share of the population with
tertiary education and ICT investment
4
. Big differences remain between the new
Member States and leading countries with world-class innovation systems such as
Sweden, Finland or Germany.
A majority of Member States have identified innovation as a key priority in their
NRPs. Most Member States address the strategic importance of innovation poles,
networks and incubators bringing together universities, research institutions and
enterprises at regional and local level in order to bridge the technology gap between
regions. Action is mainly focusing on high-tech sectors, while other sectors which
might also hold considerable innovation potential often seem neglected.
France has identified 67 promising “Pôles de compétitivité” which will receive
strong public support. A recent law in Greece established “regional innovation
poles”, with the aim of promoting regional development by creating centres of
technological skill and excellence in peripheral areas. Italy is aiming at further
developing, consolidating and linking the 24 existing technological districts. Ireland
is working on developing applied research centres in universities and has established
new incubation and innovation centres.
Measures to encourage cross-border knowledge transfer are included in a small
number of NRPs. For example, in Sweden the “Visanu” initiative is aiming at
increasing international awareness of the competitiveness of regions and attracting
foreign investors. Very few Member States present plans to use public procurement
to promote innovation; Portugal, for instance, plans to allocate 20% of large public
contracts to R&D and innovation projects.
4
The
2005
European
Innovation
Scoreboard
http://www.trendchart.org/scoreboards/scoreboard2005/index.cfm
is
available
at
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Several Member States are seeking to improve access to finance by reforming the
rules on venture capital and foreign direct investment or by establishing funds to this
effect. Member States are generally focusing on start-up companies, while paying
less attention to financing conditions for more mature innovative enterprises. For
example, Spain has established a risk-capital fund for seed and start-up capital and
has expanded the participative loans scheme for innovative and high-tech companies.
Sweden’s
“Innovation
bridge” initiative establishes a regional structure providing
seed capital at seven university locations for commercialising research results. In
Hungary a reform of the law should increase the availability of venture capital, while
Lithuania is planning to set up an Innovation Foundation aimed at specifying
measures to promote private capital investment.
Italy is addressing shortcomings in the area of intellectual property rights (IPR)
through a set of measures aimed at improving companies’ patenting capabilities and
protection, e.g. reduction of patenting costs. In Germany the patent exploitation
agencies will be further developed and expanded. In Belgium the federal
government, the European Patent Office, the Patlib-centres, research centres and
universities are collaborating 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, of their importance.
In conclusion, Member States have generally presented a coherent analysis of the
strengths and weaknesses of their innovation system. Many of the measures proposed
in the NRPs would, however, need to be strengthened in order to make a substantial
contribution to bolstering national innovation systems. Several Member States would
in particular benefit from a better coordinated national innovation strategy that builds
on identified strengths and improves entrepreneurial innovation.
2.3.
Information society
Production and use of ICT have a significant impact on productivity growth of
modern economies. However, the share of the ICT industry in the economy as a
whole is smaller in the EU than, for example, in the United States. Europe is also
lagging behind several of its competitors in terms of investment in ICT and in ICT
R&D.
ICT issues are declared as challenges in many NRPs (most prominently by CY, EE,
ES, FI, PT). The main tools proposed to achieve the goals of the NRP are legislation
and public funding. Other instruments, such as creation of new institutional
frameworks, cooperation networks between ICT players or promotion of
standardisation efforts, are also considered. NRPs most commonly address the issues
of e-government, broadband and e-skills/e-literacy. Uptake by firms and households,
implementation of the electronic communications regulatory framework and network
security are addressed in around half of the NRPs. Most do not address promotion of
the ICT industry, except as far as the regulatory framework is concerned.
Many NRPs present e-government as a way to cut red tape, reorganise the public
administration and improve its efficiency (CZ, DK, LT, LV, PL, SI, ES, IE, EE, PT,
FR, SK, MT). A number of countries have made facilitation of companies’ access to
government services a priority (NL, FI, FR, CY, EE, LV). Other measures put
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forward include: communication with society; e-procurement; e-signature; e-health;
and the introduction of innovative electronic means of identification.
Finland is one of the leading countries in terms of availability of online public
services. Nonetheless, a major reorganisation of the public administration’s
information management system is envisaged. The use of government online services
will be stimulated through investment in identification methods. Meanwhile,
electronic ID cards and PIN codes issued by banks may be used to access public
services. Requirements for e-administration are taken into account in the Act on
Electronic Signature and the Act on Electronic Services. Promotion of electronic
public procurement facilitates electronic exchanges of information with businesses.
In health care, progress is being made with the introduction of electronic patient
records.
Issues of broadband coverage and take up have been addressed by all NRPs.
Competition is considered the primary driver of broadband developments. However,
in the less developed areas of the Union, public support is used to accelerate
deployment. Significant broadband programmes have been put forward in several
NRPs (AT, IE, EE, FI, FR, HU, IT, LU, LT, PT, SI, ES). France for example is
aiming at making broadband available to 80% of households in every municipality
by 2007. Small municipalities will be equipped with at least two public internet
access points. The main industrial areas will benefit from affordable high-speed
offers (around 100 MBps). The objectives will be achieved through upgrades of the
existing infrastructure by commercial operators, while local authorities may
stimulate broadband roll-out in under-served areas from national and structural
funds. Deployment will be further stimulated by support to emerging broadband
technologies.
e-literacy and e-skills programmes are proposed in many NRPs to improve human
capital (AT, BE, CY CZ, IT, LT, LU, SK, IE, EL, EE, ES, UK, FR, PT, PL). The
topical issues in this area include the introduction of ICT knowledge into school
curricula, provision of on-line libraries and on-line knowledge resources, and
addressing the digital divide, in particular between better and less educated and
between urban and rural residents.
In conclusion, all NRPs are addressing ICT, and in some of them ICTs play a
prominent role. The main areas for action are e-government, broadband and digital
literacy. Many NRPs refer to the EU i2010 framework, therefore recognising
common objectives.
2.4.
Industry
European industrial performance varies from high growth sectors such as ICT and
automobiles to negative growth sectors such as textiles, clothing and footwear
5
.
Competitiveness is hampered by Europe’s relatively low specialisation in high
technology sectors. The share of high-tech industries in manufacturing value-added
5
Implementing the Community Lisbon Programme: A policy framework to strengthen EU
manufacturing - towards a more integrated approach for industrial policy, SEC(2005) 1215 of
5.10.2005.
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in EU-25 in 2002 was 16.0%, whereas it stood at 23.3% in the US
6
.In the context of
mounting competition from countries such as China, there is a need to look carefully
at sectoral competitiveness.
A large number of Member States (FR, IE, LT, LV, MT, NL, PT, SL, SK, SE)
propose to monitor the competitiveness of sectors and to promote high value-added
sectors. Technology policy measures include the promotion of technological
upgrading in SMEs (AT, CY), support to European industrial research projects (FI,
NL) or promotion of private-public partnerships. Most NRPs stress the need to
support clusters (in particular BE, FR, FI, LT).
To reap the benefits of internationalisation, many Member States propose measures
to support exports (AT, BE, EE, EL, ES, FR, LT, PT, SL, SK) or to attract foreign
direct investment (FDI) (BE, CY, ES, HU, IE, LT, LV, MA, PT, SL). Cyprus plans
to set up an agency to promote the country as an industrial base and to attract FDI.
Spain and Portugal presented programmes to support the internationalisation of
businesses.
Many Member States display regional specialisation in sectors at risk of being hit by
international competition. This is the case, for example, with the southern European
countries with their strong specialisation in fashion industries (textile, clothing,
footwear, leather, furniture). Six Member States (CY, EL, HU, IE, LT and PT)
explicitly mention the need to foster structural changes. The Portuguese NRP
proposes a programme to accelerate the industrial transition and restructuring
processes. New Member States are generally aiming at reorienting their economies
towards high value-added activities.
In conclusion, many NRPs address ways to strengthen the industrial base. The
approaches range from horizontal policies to sectoral measures. Many NRPs propose
measures to foster the internationalisation of business, but measures to facilitate
structural change are seldom discussed.
One promising development in many Member States is the formation of clusters and
innovation polesaimed at furthering innovation, strengthening the industrial fabric
and facilitating the setting-up and subsequent growth of SMEs. Cluster development
therefore brings together several important strands of the microeconomic guidelines.
Public support for such clusters is justified since they typically generate significantly
wider benefits for society, through technology spill-overs, the opening of new
markets, and the possibility to upgrade the value chain and to improve the way the
market works. However, the approach taken varies considerably across Member
States and thereby hampers the potential exploitation of synergies that are so crucial
for clusters. This makes the case for a cluster policy at the European level, aiming at
complementing and supporting national and regional clusters policies and the
development of trans-national cooperation.
6
Report on European Technology Platforms and Joint Technology Initiatives: Fostering public-private
R&D partnerships to boost Europe’s industrial competitiveness, SEC(2005) 800 of 10.6.2005.
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2.5.
Sustainable use of resources
The EU economy consumes a relatively high level of resources: its material intensity
is slightly better than that of the US, but twice as high as Japan’s. The integrated
guidelines invite Member States to encourage the sustainable use of resources and
strengthen the synergies between environmental protection and growth. Growth
should be decoupled from environmental degradation and as far as possible
environment policy should be designed in a way that supports growth and job
creation.
Environmental sustainability is addressed in all NRPs and many Member States have
chosen to include environmental sustainability issues among their key priorities or
key challenges.
All of the NRPs address the promotion of renewable energy sources.Wind energy
seems to have the greatest support, but several Member States are also increasing the
promotion of biofuels (AT, CY, DE, ES, IE, LV, LT, MT, SE). Measures to promote
energy saving and energy efficiency in buildings are included in several
programmes, with varying levels of detail.
The vast majority of the Member States (AT, BE, CY, CZ, DE, DK, ES, FI, FR, GR,
IE, IT, LV, LT, LU, MT, NL, PT, SK, SI, SE, UK) refer to climate change or the
Kyoto protocol and have either already started implementing climate change
programmes or plan to do so. Measures that are being considered to contribute to
combating climate change include: promotion of climate-friendly technologies (e.g.
AT), environmental taxes on cars (e.g. SE, CY, FR) use of biofuels and capture of
methane from waste disposal and treatment (e.g. MT, LV).
The majority of Member States have highlighted the importance of strengthening the
synergies between environmental protection and growth, as environmental
investments can generate jobs, reduce resource dependence and also increase
competitiveness, provided they are cost-effective. Most Member States (AT, CY,
CZ, DE, DK, EE, FI, GR, LU, NL, PT, SK, SI, ES, SE, UK) report that they have
taken or will take steps towards internalising external environmental costs via
economic instruments – notably in the area of transport and energy taxation. Some
plan to achieve the Lisbon goals by shifting the tax burden away from labour towards
resource use and pollution (e.g. EE, SI, CZ).
Environmental technologies play an important role in e.g. Austria, where support
will be given to improve the market conditions for environmental technologies via
green public procurement and an export initiative geared to SMEs in particular. In
the Czech Republic environmental technologies are supported through environment-
friendly public contracts. Malta will develop green criteria for inclusion in public
purchasing procedures. Cyprus proposes greening the public procurement process by
making energy performance one of the selection criteria.
Two thirds of the Member States (BE, CY, DK, EE, FR, GR, IE, LV, LT, LU, MT,
NL, PT, SK, SI, SE, UK) refer to biodiversity or nature protection in their NRPs.
Some of them consider biodiversity a particularly crucial resource due to the
important economic contribution from nature tourism, notably in Cyprus, Malta,
Slovenia and the three Baltic countries.
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In conclusion, the issues of resource pressures and global problems like climate
change and biodiversity loss are recognised by most Member States which attach
high importance to protecting the environment in their NRPs. Most Member States
want to foster growth and at the same time preserve a high-quality environment. This
is leading them to try to harness the synergies between the economy and the
environment, notably through measures to stimulate the development and uptake of
eco-innovations (e.g. research and the Environmental Technologies Action Plan) and
by advancing the use of economic instruments.
3.
3.1.
M
AKING
E
UROPE A MORE ATTRACTIVE PLACE TO INVEST AND WORK
Internal Market
Internal Market policy is by nature a Community responsibility. Correct
transposition, implementation and enforcement of Community law in all related
policy areas is, however, the responsibility of individual Member States. In 2005 the
transposition record of Member States improved considerably. The average
transposition backlog stood at 1.9 percent in 2005 compared to 7.1 percent in 2004.
This significant improvement is due in good part to the accession of the ten new
Member States. Further progress has been made since the re-launch of the Lisbon
strategy.
Many NRPs recognise the importance of a competitive marketplace and while many
Member States concede that their national goods, services and energy markets are
not yet fully competitive, only a few have identified extending and deepening the
Internal Market as a key challenge at national level.
Although many NRPs mention the importance of transposition of Internal Market
legislation, they only rarely suggest concrete operational improvements. Improving
the transposition record is particularly important for those Member States which are
lagging behind. The Latvian and Irish NRPs are good examples of how to speed up
the transposition of Internal Market Directives. The Latvian NRP combines a
political commitment to improving implementation of EU law with firm targets and a
timetable for transposition of the Internal Market Directives. The Irish NRP provides
detailed information on how the internal mechanisms and procedures for monitoring
the transposition of Directives have been reviewed and strengthened.
Most Member States recognise the importance of the completion of the Internal
Market in services. Measures such as the simplification of the regulatory
environment and the increased use of information technology also contribute to this
aim. To further integrate the financial services markets, the implementation and
enforcement of the related Directives are addressed as key issues in the Financial
Services Policy paper for 2005-2010.
Liberalisation of the railways has been driven largely by European initiatives and
developments differ widely across Member States. Not all the Member States have
transposed the railway
acquis
that aims at opening and technically de-fragmenting
rail markets. NRPs rarely refer to opening the rail market even though a common
European rail market, especially in freight, would contribute to a smoother flow of
goods in intra-Community and international trade. It will also be important to press
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ahead with reforms in the postal sector, in preparation for the further opening of the
market targeted for 2009 in the Directive; a small number of NRPs address the
liberalisation of this sector.
Few NRPs take up the issue of public procurement rules. Any action envisaged in
that area tends to be limited and can be regarded only as first steps. The deadline for
implementation of the legislative package on public procurement is 31 January
2006.In conclusion, considerable progress has been made in 2005 and since the
relaunch of the Lisbon strategy both on the transposition record of Member States
and on several legislative proposals. However, the potential benefits consumers and
entrepreneurs could reap from additional improvements in operation of the market
remain very large, particularly in the areas of services and network industries and in
those Member States with a weak transposition and/or implementation record. Many
NRPs recognise this positive potential and concede that markets are not yet fully
competitive.
3.2.
Competitive markets
The open global economy offers opportunities for stimulating growth and
competitiveness in the EU economies. Competition policy is crucial in ensuring a
level playing field for firms in the EU and can be instrumental in creating the
conditions for firms to compete effectively. A regulatory framework that facilitates
market entry is an effective tool for enhancing competition and can bring dynamic
efficiency gains by improving incentives for innovation. Implementation of the
measures already agreed to open up network industries to competition should help
ensure lower prices and greater choice. Increased competition in the services sector
in general would also have the same effect.
A majority of the Member States have acknowledged the need to do more in the area
of competition and, to varying degrees, proposed measures to address these issues.
Around half the NRPs envisage strengthening the powers of national competition
authorities and several NRPs provide for selective screening of markets and
regulation by competition and regulatory authorities. For example, Estonia proposes
implementation of a pro-active competition policy through sector analysis and
raising awareness of competition law.
Implementation of the Community legislation on liberalisation of network industries
varies significantly across Member States. Though most NRPs note the importance
of opening the electricity and gas markets, often presenting the on-going national
measures, progress is still generally relatively slow, especially for gas. Among the
NRPs from the Member States, Slovakia plans to identify barriers preventing the
opening of the power supply market and measures to remove them. Detailed
measures to improve competition in financial services will also be identified.
At Community level, the first market enquiry launched under the Community’s
Lisbon programme confirmed a number of serious malfunctions in the Internal
Market for electricity and gas. The initial findings confirm long-standing concerns
about competition on electricity and gas markets: market concentration, vertical
foreclosure, lack of market integration, lack of transparency and price issues. An
inquiry concerning financial services is also under way.
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A competitive telecommunication sector is a major factor in enhancing
competitiveness and fostering adoption of ICT. Nevertheless, competition on and
liberalisation of the telecommunications markets are not covered well by many of the
NRPs.
Most NRPs make no mention of reform and promotion of competition in
professional services, although in many Member States these are highly regulated,
including price regulation, bans on advertising or restrictions on business structure
and inter-professional cooperation. The UK will implement recommendations to
promote competition made in a review of the regulatory framework for legal
services.
Member States have largely re-oriented or intend to re-orient their State aid measures
towards horizontal objectives (particularly aid for R&D, innovation, SMEs,
environmental purposes and energy saving) and some Member States have reduced
sectoral aid. Some Member States intend to focus State aid on areas where market
failures exist and intend to conduct ex ante and ex post evaluations and monitoring.
Nonetheless, the trend in the total amount of aid granted over the past five years has
been static
7
. Though a large majority of Member States still envisage measures
favouring horizontal objectives, most NRPs included no concrete proposals aimed at
reducing the overall volume of State aid.
Cyprus proposes an interim evaluation of all existing State aid schemes by the
implementing authorities and an ex ante evaluation for all proposed State aid
measures to identify whether there is a market failure in the area to be supported.
Finland envisages a review and assessment of government subsidy policy as a whole
aiming at reducing the overall volume of subsidies and at ensuring that aid does not
distort competition.
In conclusion, while several Member States include competition as a challenge to be
addressed, more urgent and concrete action is needed, in particular to remove
barriers hindering competition and to open up services and network industries to
competition.
3.3.
Business environment and better regulation
Better regulation plays an important role in achieving the Lisbon objectives and
creating a more competitive business environment, as it leads to better quality
legislation, creates greater incentives for business, cuts unnecessary costs and
removes obstacles to adaptability and innovation. However, action at EU level alone
is not sufficient, as a large proportion of the administrative costs arise because of the
way in which EU law is implemented by the Member States and national legislation
is drafted. Better regulation does not disrupt the decision-making process in Member
States but changes the culture and conditions under which decisions are made.
All countries acknowledge the role of better regulation in improving the business
environment and reducing the administrative costs borne by businesses. The majority
of Member States consider the business environment to be a key priority.
7
State Aid Scoreboard, COM(2005) 624 of 9.12.2005.
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Eight Member States (DK, DE, EL, HU, IE, NL, SE, UK) have provided information
on a systematic approach to better regulation but only two others (FI, LT) have
indicated any such plans for the future. Most of the Member States with a strategy
for better regulation have an institutional body to implement it..
Six Member States (AT, DK, IE, NL, PL, UK) already require impact assessments
and another five Member States (BE, CZ, EE, DE, SI) presented plans to introduce
obligatory impact assessments. Only four Member States (AT, DK, FI, SK) explicitly
acknowledge a need for a fully integrated assessment of the economic, social and
environmental impacts. Little information was provided on the institutional
arrangements for operating an impact assessment system.
Twelve Member States (AT, BE, CY, DK, FR, DE, LT, LU, NL, PT, SI, UK) have
created, or expressed an intent to create, institutional structures to manage or to
support analysis of the administrative costs, while ten (CZ, EE, DK, FR, IT, DE, HU,
PL, NL, UK) intend to base their system on the standard cost model and one (LU) is
considering the EU standard cost model. Five countries (CZ, DK, NL, SE, UK)
specified quantitative targets for reducing administrative costs (e.g. 20 or 25% by
2010). The legislation indicated as primary targets for this exercise already exists but
the focus has shifted towards legislation in preparation. Some of the efforts identified
to support this exercise relate to e-government, one-stop shops and central
registration offices, all of which should simplify registration and administrative
procedures for businesses.
Eight Member States (AT, EE, DE, IT, PL, SI, ES, UK) are planning to launch
simplification programmes, in addition to the four Member States (DK, IE, LU, SE)
which have already done so. They are targeting on legislation on tax, reporting, fiscal
measures, setting up business, insolvency, labour and consumer protection.
Only the United Kingdom currently imposes obligatory consultation of stakeholders
but four Member States (DK, DE, IE, IT) are planning new moves in this area.
In parallel to these efforts at Member State level, significant progress in the area of
better regulation was also made at Community level during 2005: the guidelines for
impact assessments
8
were revised, a common methodology for assessing
administrative costs
9
was agreed, pending legislation was screened
10
and a strategy
for simplification of the regulatory environment
11
was launched.
In conclusion, given the varying degrees to which better regulation is already
implemented in the Member States, the Commission identifies three stages of
progress. The first one is characterised by developing better regulation awareness,
strategy and tools. At this stage it is essential to raise better regulation awareness, put
8
9
10
11
Impact Assessment Guidelines, SEC(2005) 791 of 15.6.2005.
Communication from the Commission on an EU common methodology for assessing administrative
costs imposed by legislation, COM(2005) 518 of 21.10.2005.
Communication from the Commission to the Council and the European Parliament – Outcome of the
screening of legislative proposals pending before the Legislator, COM(2005) 462 of 27.9.2005.
Communication of the Commission to the European Parliament, the Council, the European Economic
and Social Committee and the Committee of the Regions – Implementing the Community Lisbon
programme: a strategy for the simplification of the regulatory environment, COM(2005) 535 of
25.10.2005.
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in place tools for stakeholder consultation, and to develop an integrated better
regulation strategy and institutional structure.
The second stage includes those Member States which are advanced in using some
better regulation tools, however with scattered and an insufficiently coordinated
approach. Key challenges are the implementation of the announced strategy and
focus on all integral better regulation tools: integrated assessment of economic (incl.
administrative costs), social and environmental impacts, consultation and
simplification.
The most advanced stage has full better regulation awareness and an integrated better
regulation system, so for those countries the challenge is to stay focused. This will
require monitoring progress, evaluating the results of existing programmes together
with stakeholders, exchanging best practices with other Member States as well as
launching new initiatives when and where this might be appropriate.
3.4.
Entrepreneurship and SMEs
Small and medium-sized enterprises are a key source of growth and jobs, a breeding
ground for business ideas and a powerful driver for entrepreneurship and innovation.
Yet the EU is not fully harnessing its entrepreneurial potential and not enough people
want to become entrepreneurs. More than half of the Member States have recognised
SME and entrepreneurship policies as a priority in their NRPs.
Entrepreneurial mindsets can be fostered through education. Several Member States
have already included (AT, ES, FI, IE, PL, UK), or plan to include (EE, MT, PT,
SK), entrepreneurship as an objective of secondary school curricula. Other Member
States are planning to adopt supportive measures in this field (LT, SE). For example,
as of September 2005 the United Kingdom is providing five days of enterprise
teaching to all pupils aged 14 to 16. Estonia is planning to introduce business studies
into the general and secondary vocational education curricula and to develop
complementary entrepreneurship training. Lithuania will organise campaigns to
promote entrepreneurship and publicise examples of successful businesses in order to
promote the image of entrepreneurship among the general public.
Little is said in the NRPs about measures to address the stigma of failure. One
interesting example, however, is Spain where the new national curricula will teach
students at all levels not only about the business environment, but also about the
value of entrepreneurship and business failure.
Several Member States are gearing their efforts to providing funds to innovative
companies (CZ, IE, LU, MT, NL, SE). One good example of this form of activity is
the new KAPITAL programme in the Czech Republic which includes both private
and State funds. Such private-public partnerships can efficiently stimulate further
private-sector interests to invest. The introduction of venture capital instruments is
the most common financial measure, with one third of the Member States planning to
launch initiatives (DK, EE, GR, IE, LT, LV, LU, SI, SE). A number of countries are
also setting up loan guarantees (CY, GR, LT, LV, MT).
Several Member States are simplifying their tax systems or reducing their corporate
tax rate (ES, FI, FR, GR, HU, SI, UK). Some are also introducing tax relief for SMEs
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(DK, MT, UK). For example, Denmark plans to introduce tax relief for growth
entrepreneurs. It would start when the entrepreneur generates profits for the first time
and be granted for three years.
A number of Member States are improving their business support services (AT, FI,
IE, IT, LT, MT, SK). For example, Italy has introduced the “manual of e-
government” and guidelines for on-line public services. SMEs, especially the
smallest ones, will benefit from this reform. The improvements include a big
reduction in the number of paper certificates, increased use of e-mails since they will
have legal force, standardisation and increased availability of databases and
electronic archives, and improvement of the services offered by one-stop shops. The
situation with regard to improving business support for SMEs varies, with some
countries taking measures actively and others not addressing the issue at all.
Some Member States plan to take measures to facilitate business start-ups (BE, CZ,
ES, GR). By contrast, few measures are in the pipeline to help the transfer of
businesses (SE). Approximately one third of the NRPs include plans to reform the
national insolvency legislation (CY, EL, HU, IT, LT, LU, LV, PL, SI, SK). For
instance Luxembourg and the Netherlands are in the process of analysing how
substantially to improve their bankruptcy laws. Several Member States have recently
reviewed their bankruptcy legislation, amongst other things to promote the continuity
rather than liquidation of viable enterprises and to speed up proceedings.
In conclusion, all the NRPs address entrepreneurship and SMEs, although the
emphasis of the measures varies significantly between countries. Issues that, in
general, have received little attention in most NRPs include women entrepreneurship,
transfer of businesses and the stigma of failure.
3.5.
European infrastructure
Completion of the trans-European transport network is indispensable for creating a
sustainable transport system in Europe. Of particular importance are the trans-border
projects, both for transport and energy networks. New physical infrastructure is often
a pre-condition for achieving effective competition in network industries. For
example, electricity interconnection capacity remains lower than needed for efficient
integration of electricity markets.
Infrastructure is addressed in around 20 NRPs. In half of them (CZ, EL, ES, IE, IT,
CY, LT, HU, AT) infrastructure building is ranked as a first priority. The reasons
given are primarily to improve economic integration – within the Single Market, but
also globally – and, in second place, to enhance productivity growth by modernising
the physical business environment. Building integrated logistic platforms, improving
public transport and the regional and intermodal balance, and tackling congestion are
other objectives taken into consideration.
Modernising and upgrading transport infrastructure (roads, railways, airports,
seaports and canals) comes first in the NRPs which address the infrastructure
guideline. Member States usually specify the projects they consider as a priority, in
some cases also giving details of the financial envelopes (DK, LV, LT, NL, AT,
UK). The
TEN corridors
are well integrated in national planning and are addressed
explicitly in 15 NRPs. Among the priority projects identified at EU level, the
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Brenner tunnel, the Paris-Brussels-Cologne-Amsterdam-London high-speed rail link,
Rail Baltica, the Fehmarn belt railway and motorways of the sea are mentioned in the
NRPs.
Some also pay particular attention to energy infrastructure, especially international
link-ups (EL, ES, IE, LV, LT, PO, SE). The Nordic electricity network and its
southward links, the Iberian network and the Republic of Ireland-Northern Ireland
network are all mentioned by the relevant Member States.
ICT infrastructure is addressed by all NRPs as far as broadband availability is
concerned (see section 2.3).
Public-private partnerships (PPPs) in the context of transport infrastructure are
addressed by EL, ES, FR, LV, NL, PO and the UK. Depending on specific national
conditions, issues considered in this context include privatisation, introduction to the
stock market, redesign of PPP contracts or introduction of new legislation governing
PPPs.
Finally, some Member States address infrastructure pricing in their NRPs. The
Netherlands is exploring shifting taxation from vehicle ownership to road use by
introducing bottleneck and kilometre levies, Portugal, Belgium, Cyprus, Sweden, and
France plan to internalise environmental and infrastructure costs in vehicle taxation
and Sweden will experiment with a congestion charge for Stockholm. Infrastructure
pricing is also mentioned in the Hungarian and Irish NRPs as an issue for future
consideration.
In conclusion, transport infrastructure modernisation, upgrading and cross-border
connections for transport and energy feature prominently in many NRPs. They are
considered key priorities in a significant number of Member States. Priorities linked
to the TEN corridors are well embedded in most NRPs. However, not all the agreed
priority projects are addressed. The preferred modes vary significantly between
countries, from a clear focus on road in many new Member States to a more balanced
approach linking different modes of transport. Public-private partnerships for
infrastructure development and infrastructure pricing systems that take into account
investment and external costs are discussed in a limited number of NRPs.
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Part III
Draft Joint Employment Report 2005/2006
More and Better Jobs : Delivering the Priorities of the
European Employment Strategy
1.
S
UMMARY AND CONCLUSIONS
Reform pays off. This is the lesson learnt from the structural changes Member
States have pursued since the mid-1990s and their positive impact on a wide
range of labour market characteristics. Reform has helped raise the employment
content of growth, provide more employment-friendly wage developments, and
lower structural rates of unemployment. However, for the EU as a whole, the
scope and the depth of reform has lacked ambition and conviction. Structural
progress remains insufficient to fuel more economic and employment growth
and a more rapid movement towards the EU employment rate targets
12
.
The refocused Lisbon strategy concentrates on this deficiency, in the knowledge
that the challenges confronting the EU economy and society will magnify.
Demographic ageing is altering the composition of the labour force and will
reduce labour supply and ultimately employment. Accelerating economic
change caused by globalisation will continue to upset existing balances. The EU
and the Member States have the capacity to adjust to this changing environment.
The Lisbon Strategy provides the EU with the framework for successfully
making this adjustment.
The European Employment Strategy (EES), the employment pillar of the Lisbon
Strategy, is based around three objectives: full employment, productivity and
quality at work, and social and territorial cohesion. As part of the Guidelines for
Growth and Jobs, the Employment Guidelines provide the policy framework to
focus action. They highlight three priorities: attracting and retaining more people
in employment, increasing labour supply and modernising social protection
systems; improving the adaptability of workers and enterprises; and increasing
investment in human capital through better education and skills. A
comprehensive approach requires building upon the interaction of measures
under these priorities. Improving the governance of employment policies is also
an integral part of the guidelines.
12
The employment rate targets are outlined in table 2. For a review of the latest employment trends
and structural changes in the EU labour markets, see European Commission,
Employment in
Europe 2005.
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Although well-designed employment policies are essential to boost employment
and productivity growth, they cannot succeed alone. Sound macro-economic
policies and efficient reforms to foster entrepreneurship, research and
innovation, and the functioning of goods and services markets are critical for
recovering from weak economic growth and raising employment and
productivity. The integrated nature of the Lisbon strategy provides the basis for
a policy mix that corresponds to the specific challenges of each Member State
and for setting in motion a wide partnership for reform.
The analysis of the employment aspects of the National Reform Programmes
(NRPs) leads to the conclusion that Member States give most prominence to
attracting and retaining more people in employment. The determination to
increase employment rates is welcome, as is the fact that a majority of Member
States now plan measures with the help of national employment rate targets.
However, the effectiveness and sustainability of the policies to deliver this goal
is impeded by piecemeal actions, targeting a limited number of specific groups.
This should be complemented by a lifecycle approach, including gender
mainstreaming, with a view to facilitating employment and career transitions.
The theme of more investment in human capital to improve employment and
productivity growth receives widespread attention, although efforts to improve
the efficiency of investment receive less attention. To reach the breakthrough
required to meet the economy's human capital needs, policies need to overcome
the fragmented nature of the measures. Implementing lifelong learning,
embracing education, training and adult learning, particularly for the low-skilled,
demands a coherent policy linked to the economic and social situation of each
Member State. The structure and sources of financial investments need to be
reviewed, with a special focus on the incentives governing investment in lifelong
learning.
The NRPs neglect the importance of further measures to increase the
adaptability of workers and enterprises. The current balance between flexibility
and security in many Member States has led to increasingly segmented labour
markets, with the risk of augmenting the precariousness of jobs, damaging
sustainable integration in employment and limiting human capital accumulation.
This neglects the interaction with policies to raise productivity and ensure labour
market inclusiveness. Greater attention should therefore be given to establishing
efficient conditions of 'flexicurity'. Sufficiently flexible work contracts, coupled
with effective active labour market policies to support labour market transitions,
a reliable and responsive lifelong learning system, and modern social security
systems combining the provision of adequate income support with the need to
facilitate labour market mobility are necessary ingredients. More attention
should be given to the active involvement of the social partners, who have a
significant responsibility in this domain.
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The NRPs provide evidence that Member States are committed to reform,
notably since they have singled out key challenges and priorities. Whereas the
overall direction is appropriate, there is reason for concern that the gap between
ambition and realisation cannot be bridged with the actions announced. For
instance, whereas there is evidence that government ownership of the strategy at
national level is well articulated, there is less indication that the agenda is shared
widely across society and is firmly built on social partnerships for reform.
Combined with the vagueness about national local and regional administrative
capacity and budgetary allocations, including the use of the European structural
funds, this gives cause for vigilance. The country-specific challenges outlined in
the country chapters of the Commission's communication focus on those areas
where individual Member States need to step up efforts
13
.
2.
A
CHIEVING THE OBJECTIVES
Member States' policies should foster full employment, quality and productivity
at work and social and territorial cohesion. These objectives, together with good
governance, frame the EES. In the NRPs, most attention is devoted to increasing
employment. Few Member States pay attention to improved productivity and
quality at work, or social and territorial cohesion, and in particular the synergies
between these objectives and increasing employment rates.
Full employment
Sluggish economic growth has held back labour market performance over recent
years, and explains much of the slow progress towards the Lisbon and
Stockholm employment objectives. Employment growth was limited in 2004 at
0.6%, slightly up from the last year's level (0.3%). As a result, the employment
rate for the EU increased to 63.3%. Unemployment remained unchanged
compared to 2003 (9.0% - provisional figure 2005 8.7%), although long-term
unemployment increased to 4.1%. The rise in the employment rate was again
driven by women (0.7 of a percentage point) and older people (0.8 of a pp).
13
See the country-specific chapters of the communication.
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Table 1:
Overall employment rates
Pace of progress
since 1997
Rates
in 2004 (%)
> 70
65-70
< 65
Low
Close to average
DK, SE, UK, NL
CY, DE, PT, FI, SI
BE, EL, HU, FR, LU,
LV
High
AT
CZ, EE, LT,
MT, PL, SK
IE
ES, IT
Explanation: Pace of progress is defined as the percentage point change in the employment rate
between 1997 and 2004:
a) Low progress: the employment rate increased below the EU25 average minus half of the (un-
weighted) standard deviation
b) Close to average: the employment rate increased inside a band of one standard deviation
centred on the EU25 average
c) High progress: the employment rate increased above the EU25 average plus half of the (un-
weighted) standard deviation
The employment rate of women continued to rise, reaching 55.7% in 2004. The
employment gender gap further narrowed to 15.2 percentage points in 2004
(down from 17.6 in 2000). However, the progress has been slower in full-time
equivalents (21.7 pp in 2004 compared to 23.3pp in 2001).
Older people have seen employment rates rise markedly since 2000, with an
accumulated increase of 4.4 pp to a rate of 41.0%, accounting for the majority of
the increase in employment. In contrast, half of the Member States have seen the
labour market situation for the young deteriorate. At 18.7%, youth
unemployment is about twice the overall rate. This needs to be addressed
through policies to ensure that young people receive a good start to their labour
market participation, and throughout the lifecycle.
Despite some progress over the years, the overall employment rate remains 7 pp
or some 20 million jobs below the 2010 target, and whilst female and older
people's employment rates have risen more rapidly, they still remain 4 and 9 pp
below their respective 2010 targets. An increasing number of Member States
have set out their ambition through employment rate targets. 18 Member States
have set national targets on employment rate, 15 for women and 11 for older
workers
14
.
Quality and productivity at work
Since the mid-1990s, there has been a relative decline in productivity growth
compared with the US. Average labour productivity growth (in terms of GDP
per person employed) was 1.9% in 2004, an improvement on the previous three
14
See tables 2 and 3 for a complete list of employment targets set by Member States.
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years, but not a significant improvement on the sluggish performance since the
mid-90s. This still compares unfavourably with the US (3.3%) and Japan
(2.5%). The disparity is less marked looking at productivity growth in terms of
GDP per hour worked, with EU growth at 2.5% in 2004, similar to growth in
Japan, although the gap with respect to the US has been growing .
Progress in terms of increased quality at work remains mixed
15
. Participation in
lifelong learning has risen, as have youth education levels. Nevertheless, further
progress is essential in other elements of quality at work, especially both the
transitions from temporary to permanent jobs and out of low-paid jobs and
labour market segmentation. Few Member States pay attention to the synergies
between improved quality and productivity at work and to developing increasing
employment.
Social and territorial cohesion
After several years of decline, long-term unemployment again increased slightly
in 2004 and the job prospects of vulnerable groups have deteriorated. The NRPs
place emphasis on the provision of employment opportunities as the best
solution for developing inclusive labour markets. Although such an approach is
essential, this should be complemented by policies promoting access to quality
employment, training, health care and housing, and an income enabling full
participation in society.
Regional employment and unemployment disparities remain widespread, with
very high rates of unemployment in many regions. Regions with low levels of
employment also tend to be the ones with lower productivity levels. Rises in
labour productivity in regions with low overall levels of productivity have not
yet been followed by substantial increases in employment.
Governance of employment policies
The drafting of the NRPs marks a new departure for employment policies,
building on the experience of the EES since its launch in 1997. The NRPs take
over previous national action plans for employment, which helped structure and
develop national employment policies. In the majority of cases, the priorities
outlined by the Member States are in line with the EU country-specific
Employment Recommendations adopted in 2004.
The timing and novelty of the process partly constrained the consultation
process in 2005. The involvement of national parliaments was very limited. Few
played a role in the approval procedure. This should improve with fewer timing
constraints. Social partners were consulted to a varying degree by almost all
Member States, but the NRPs generally remain government documents. In
15
For details of the 10 dimensions of quality at work see: Improving quality in work: a review of
recent progress, COM (2003) 728 of 26.11.2003.
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Member States where tripartite bodies exist, these have not always been closely
involved and the preparation of the NRPs did not sufficiently include social
partnership commitments. Again, this should improve in the next phases.
Implementation structures are referred to by Member States in their NRPs, but
there is much less detail on the precise delivery and monitoring mechanisms that
need to be put in place at national, regional and local level.
The guidelines call for reforms to be backed by adequate financial means and
effective use of public funds, with transparent information about the expected
outputs and timetables of the main measures. There is too little information in
the programmes to illustrate whether this is the case. The role of the European
Social Fund (ESF) is often highlighted but reporting is uneven.
3.
I
MPLEMENTING THE PRIORITIES FOR ACTION
In order to achieve EU employment objectives and targets, the Employment
Guidelines are built around three priorities for action. The NRPs give
prominence to attracting and retaining more people in employment and more
and better investment in human capital. They tend to neglect the importance of
further measures to increase the adaptability of workers and enterprises.
Employment policy often appears fragmented and unbalanced in this area. More
attention should be given to establishing conditions of 'flexicurity', by combining
sufficiently flexible work contracts with effective policies to support labour
market transitions, lifelong learning for all, and adequate social insurance.
3.1.
Attract and retain more people in employment, increase labour supply and
modernise social protection systems
Promote a lifecycle approach to work
Member States generally do not explicitly develop an integrated lifecycle
approach (LV, NL and the UK do). Many pay attention to most of its
components but not in a systematic manner. The emphasis is on young
jobseekers and on closing down exit routes for older workers. Policies to support
female employment and bring about gender equality are somewhat
underdeveloped.
Most Member States pay considerable attention to young people, although the
approach tends to be piecemeal. A majority include measures for building
employment pathways combining work/apprenticeship with education and
training. Many aim to increase apprenticeships, but with little emphasis on
increasing offers of employment. Greater integration of policies on education,
training, mobility, employment and social inclusion, with specific targets and
objectives, would lead to effective strategies for young people. Member States
respond to the ambition to offer a new start to every young jobseeker within 6
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months by presenting measures to offer individual action plans containing
support such as career consultancy, vocational (re)training, job search assistance
and apprenticeships.
The European Youth Pact
The Heads of State and Government at the European Council of March 2005
adopted the European Youth Pact as one of the instruments to achieve the
Lisbon objectives of growth and jobs. The Youth Pact aims to improve the
education, training, mobility, employment and social inclusion of young
people, and to facilitate the reconciliation of working life and family life. The
response to the Youth Pact in most Member States has been encouraging,
although its full potential remains to be realised. A number refer explicitly to
it (AT, BE, DE, ES, FI, FR, IE, NL, PT, SI, SE, UK), although not always in
depth, and several have integrated measures consistent with the Pact without
giving it visibility. As foreseen by the European Council, involvement of
youth organisations should be strengthened – only SE has consulted young
people in preparing the NRP.
Most Member States recognise the need to raise the employment rates of older
workers but measures are often ad hoc. Wide-ranging initiatives aim at
reviewing incentives to discourage early retirement, creating more flexible
pathways to retirement, and increasing retirement age. The EU objective to raise
the effective average exit age by five years by 2010 (now 61.0 compared to 59.9
in 2001), will not be met unless policies are implemented with greater urgency.
Only seven Member States set explicit targets in this area. Pension reform
continues in many Member States, in an effort to lengthen working lives, but
this should be better accompanied by measures to ensure job opportunities for
older workers. Measures to fight unemployment of older workers and improve
their position within companies are not widespread.
The potential contribution of women to raising employment rates is not strongly
emphasised. Measures concentrate on improving the availability and
affordability of care for children and other dependants. Seven Member States set
targets for extra care places. However, the Barcelona childcare targets are far
from being reached. Reconciliation of work and private life are often considered
to be a women's issue, and the need to strengthen the role of men in care and
parental leave is not stressed. Commitments to closing employment and
unemployment gender gaps are rare. The issue of gender pay gaps is discussed
more widely, but only a few propose concrete actions (DK, FR, NL, and SE).
Others are in the stage of drafting possible steps or general commitments to
reinforce equal pay legislation and reduce labour market segmentation.
Most Member States are putting efforts into modernising social protection
systems, reinforcing the incentives to take up a job and remain in work longer,
as well as offering personalised support to those furthest away from the labour
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market. Many Member States are faced with the substitution effect between
benefit schemes used as exit routes, placing emphasis on reducing the
particularly high numbers of people who are inactive for reasons of ill-health or
disability, where often eligibility criteria are less stringent for older workers (FI,
NL, PL, SE, and UK are facing particular sustainability challenges in this
context). A small number of Member States (DE, NL, PT, UK) undertake a
systematic reassessment of several branches of social protection systems to
tackle this substitution effect.
Synergies with EU Social inclusion and protection objectives
There is broad consistency between the NRPs and Member State
commitments at EU level in terms of social policies through the open method
of coordination for social inclusion, pensions and health. The NRPs recognise
that the exclusion of people and groups from participation in society and the
labour market is a waste of resources which should be addressed for economic
and social justice reasons. Pension reforms aimed at strengthening
sustainability are improving the incentives for working longer. The adequacy
of pensions now depends on opening labour markets for older people and
fighting segmentation. Some NRPs (especially in new Member States) stress
the importance of health issues as a precondition for raising the quantity and
quality of labour.
Ensure inclusive labour markets, enhance work attractiveness, and make work
pay for job-seekers, including disadvantaged people, and the inactive
The effectiveness of Member States' efforts to increase work incentives in social
protection systems will depend on their ability to help people find employment
through active labour market policies. Policies to strengthen work incentives in
tax-benefit systems include reductions in taxes or social contributions for (low-
paid) work, in-work benefits, benefit levels, and eligibility criteria and their
enforcement. Most Member States adopt the EU target that every unemployed
person is offered a new start in the form of e.g. training, work practice, or a job
before reaching 6 months (young people) or 12 months (adults) of
unemployment. However, only eight Member States are close to meeting it. The
target that 25% of long-term unemployed should participate in active measures
is met by eleven Member States, although the NRPs generally do not set targets.
Member States' plans to improve efforts to support the inclusion of those furthest
away from the labour market focus on the young and jobseekers with
disabilities. Other groups such as non-EU nationals or minorities often receive
insufficient attention. Combating inactivity, encouraging active participation,
and greater promotion of policies to increase job retention rates are essential, in
view of the number of working-age people who become disabled and do not
return to work.
Improve the matching of labour market needs
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Several countries are making important organisational changes in their public
employment services (PES) to meet demands for labour market integration.
Closer cooperation or a merger between the PES, social security authorities, and
unemployment benefit organisations is ongoing in several countries (BE, CZ,
DE, DK, EE, FI, FR, NL, UK), aiming to improve work with people furthest
away from the labour market. Cooperation between public and private
employment services is developing (CZ, ES, FR, NL). Early identification of
jobseekers' labour market opportunities is an established practice in a number of
countries (DK, FI, MT, NL, SE, SK, UK) and being developed in others (EE,
HU). Most Member States have already joined the EURES vacancies platform to
ensure that job seekers are able to consult PES job vacancies throughout the EU.
Member States rarely address the contribution occupational and geographic
mobility, better management of economic migration and better anticipation of
skill needs can make to the functioning of the labour market.
3.2.
Improve the adaptability of workers and enterprises
The policy components of this priority received less attention in the response
from Member States, despite being a major issue for a number. This is worrying
given the increasingly segmented nature of labour markets. Measures to improve
the functioning of the labour market, better anticipate restructuring and deliver
employment-friendly labour costs are often vague. The core of adaptability lies
in finding the right combination of flexibility and security to reduce labour
market segmentation. Many Member States approach this priority by
emphasising flexibility for the employer.
Promote flexibility combined with employment security and reduce labour
market segmentation, having due regard to the role of social partners
Many Member States, including some large ones, give little attention to steps to
address labour market segmentation. Although essential for employment, as well
as productivity and quality at work, the modernisation of labour law and
improvements in work organisation, including working time issues and working
conditions, are rarely mentioned. The promotion of non-standard forms of
employment is rarely elaborated upon despite varied use of flexible forms of
contracts across Member States. A number illustrate specific measures to amend
employment legislation (making labour contracts more flexible in DE, EE, FR,
NL). Self-employment is also seen as a way to cope with restructuring needs
(AT, SK, LV). Sweden and the Netherlands undertake efforts to increase total
hours worked.
Health and safety at work is an important aspect of this priority (with DK, EE,
ES, FR setting targets to reduce accidents at work). However, it is insufficiently
covered in many Member States. Only a few pay attention to tackling
undeclared work (AT, EE, HU, MT, LV, LT SE, SK). The extent of the
problems is not recognised by most Member States.
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Although the issue of relocation is often highlighted, creating the right
conditions for positive anticipation and management of economic restructuring
is not sufficiently seen as a priority (it is discussed by BE, LT, PT and SI).
Portugal and Slovakia tackle the issue with incentives for self-employment and
reform of labour relations. Slovakia is also targeting measures at those at risk of
large-scale layoffs by introducing a special guarantee fund. . Beyond managing
sectoral and/or company-level restructuring, a more favourable business
environment is obviously crucial to sustain economic development in the longer
run.
A Globalisation Adjustment Fund:
The success of the Lisbon strategy
depends on confidence in Europe's ability to achieve prosperity and solidarity.
A European shock absorber, taking the form of a Globalisation Adjustment
Fund, responding to sudden redundancies shall offer an additional EU level
mechanism to help affected workers adjust to the consequences of
restructuring through one-off, time-limited individualised support, covering
training, relocation and outplacement services.
The concept of 'flexicurity' is a response to the needs of both employers and
workers in a rapidly changing labour market aimed at providing adequate
bridges during periods of labour market transition. In some countries, conditions
for a good combination of flexibility and security exist, notably in Denmark and
the Netherlands. The Danish approach provides actors with a maximum of
freedom to shape their employment relationship in combination with good
access to unemployment benefits and measures supporting employability. The
Dutch approach relies on the availability of different contractual forms,
balancing rights and obligations for each individual contract form, while
providing for active measures for the unemployed.
Each Member State starts from a different position. Four ingredients are
essential in achieving a good balance between flexibility and security without
increasing the risk of labour market segmentation.
Firstly, the availability of contractual arrangements, providing adequate
flexibility for both workers and employers to shape the relationship according to
their needs. A proliferation of different forms of contracts should be avoided and
sufficient homogeneity between these forms of contracts preserved to facilitate
transitions between them.
Secondly, active labour market policies should effectively support transitions
between jobs, as well as from unemployment and inactivity to jobs (e.g. AT's
Arbeitstiftungen
serve as transition agencies to support job-to-job placement in
cases of threatened mass dismissal; in Sweden social partners actively negotiate
off-the-job placement). This highlights the importance of achieving the
activation targets of the Employment Guidelines (see 3.1 above).
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Thirdly, credible lifelong learning systems should enable workers to remain
employable throughout their career (see 3.3 below).
Fourthly, modern social security systems should be in place to ensure that all
workers are adequately supported during absences from the labour market and to
facilitate labour market mobility and transition.
Moving from any initial situation towards such a balanced framework requires
broad partnerships and consensus.
Ensure employment-friendly labour cost developments and wage setting
mechanisms
The importance of labour costs for job creation is given little attention in the
NRPs. The EU has witnessed moderate wage developments, with real unit
labour costs declining in most Member States as well as for the EU25 and the
euro area. Wage moderation is seen as a priority for some (e.g. NL). In line with
social partner agreements (BE, NL), the commitment to wage moderation is
often combined with changes in social protection arrangements. It is to be noted
that the contribution of wage developments to job creation is seldom addressed
as such, rather being dealt with in the macro sections (BE, EE, DE) or under the
'wage moderation' theme (AT, ES, NL). The need to review wage-bargaining
systems is hardly addressed.
More emphasis is given to reducing the (high) tax burden on low-wage earners
by focusing on income taxation or employers' social contributions in order to
achieve an overall reduction in the tax wedge (BE, CZ, EE, FI, LT, LV, PL and
SK). Measures to reduce non-wage labour costs would support the recent trend
of wage moderation. A declining trend is noticeable in some Member States
with a high tax wedge (AT, BE, DE, DK, FR), but not in some other Member
States where an increase is observed in 2004 (IT, PL, LV, SE). The idea of
targeting reductions of non-wage labour-costs at specific labour market groups
(e.g. subsidies for the employment of older workers in FI) is gaining
prominence, but evaluation of the impact of past measures is often lacking. A
coherent approach to reducing labour costs should take account of the need to
consolidate public finances and include the wider considerations of minimum
wage provisions and a review of the impact of the tax system on employment.
For a number of countries, reforms to reduce the tax burden on labour imply
substantial modification to the tax base, including the creation of alternative
sources of public revenues.
3.3.
Increase investment in human capital through better education and skills
This priority receives widespread attention, with Member States acknowledging
the crucial importance of developing the skills needed in knowledge-based
economies. The policy response to the objective of investing more in education
and training concentrates on qualitative reforms in education systems. Reforms
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to stimulate adult learning, particularly for the low-skilled, and to improve the
governance of the systems to ensure comprehensive lifelong learning strategies
are less visible. Replies to the call for better investment responsive to changing
needs are also less ambitious. The focus here is placed on improving quality
standards in education and training, better access and improving the definition
and transparency of qualifications. The majority of NRPs are shown to be
consistent with the implementation of the Education and Training 2010 work
programme. Clear objective-setting with respect to the EU targets and reference
to the use of European instruments in national policies can be found in few
NRPs.
Expand and improve investment in human capital
The three EU human capital targets set out in the Employment Guidelines have
been addressed by the majority of countries but with varying degrees of
ambition. Despite a decreasing trend in the average proportion of early school
leavers over recent years (2000: 17.7%, 2005: 14.9%) a major policy effort is
still essential to reduce early school leaving to 10% in line with the EU target
(especially in CY, ES, FR, IT, LU, MT, PT, and UK).
The EU average rate for completing upper secondary education has stagnated at
around 77% since 2000. Half of the Member States achieve the benchmark, a
further six are nestled around the EU average, while in seven countries (DE, ES,
IT, LU, MT, NL, PT) greater efforts are necessary to catch up.
The performance divide across countries in lifelong learning participation is
wider, illustrating the lack of a comprehensive approach in a number of
countries. The good performance of a few Member States (DK, FI, NL, SK, SI,
UK) significantly contributes to the average EU level of 10.8% in 2005 (2004:
10.3%). A slight upward trend can be noted in a majority of countries. However,
the culture of learning needs to be improved and the systems modernised in the
majority of countries if the EU is to achieve the 12.5% benchmark.
Some Member States have adopted targets and benchmarks linked to those at
EU level. However, more needs to be done to raise participation in lifelong
learning and the skill and competence levels of the population, especially among
the less-advantaged. Legislative measures have been introduced in some
countries, while others follow a strategy with legislative and non-legislative
components. Progress in establishing lifelong learning systems is noted in
countries which previously had little experience of lifelong learning. Ensuring a
truly comprehensive approach embracing education, training, adult learning
(particularly for the low-skilled) and the involvement of all stakeholders remains
a considerable challenge for many.
Education & Training 2010 work programme
The EU Education & Training 2010 Work Programme is a comprehensive
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agenda for Member States' cooperation in improving education and training
systems in Europe. It therefore supports the economic and social objectives of
the Lisbon Strategy, making a key contribution towards implementing the
integrated guidelines for jobs and growth, in particular those on human capital
development. There is a good deal of coherence between Member States
approaches reported under this work programme and in the NRPs. Member
States are making a range of in-depth reforms to support more effective
lifelong learning. However, the development of truly coherent and
comprehensive lifelong learning strategies by 2006 remains a challenge for
many countries.
Despite a commitment by Member States to improve investment in human
capital, there is little evidence of actual or planned increases in public and
private investment. Few provide information on levels of public spending or
touch upon increasing private investment. Budgetary information on specific
measures is rare. However, since 2000, an encouraging upward trend in public
expenditure on education (as a % of GDP) in the EU is notable. There is little
evidence of an increase in the contribution from the private sector or in
employer investment in continuing training. The role of the Structural Funds in
supporting national policy is highlighted in a number of NRPs, but specific
details are lacking. The financing of learning in terms of fair and transparent
sharing of costs and responsibilities between actors is addressed in few NRPs. A
number of countries focus on the quality and efficiency of investment in
education and training, which tends to be a major theme for reform.
The European Social Fund (ESF) and the European Employment
Strategy
The Structural Funds have a crucial role to play in supporting the delivery of
NRP priorities. It is fundamental to ensure that ESF support underpins the
implementation of reforms needed in the context of the EES. In defining the
national Strategic Reference Frameworks for the period 2007-13, Member
States and the Commission must give particular attention to the commitment
to increase EU support for investment in human capital, increasing labour
market adaptability, and support for improved administrative capacity,
especially under the convergence objective.
To increase investment in human capital, to achieve a significant breakthrough
in establishing a lifelong learning culture, and thus help deliver the EU
economic and social needs, it is necessary to review the incentives for
households, enterprises and public authorities to invest in people. More
emphasis needs to be placed on the importance of improving the efficiency of
investment in human capital in the public sector, particularly in the cohesion
countries.
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This investment can significantly influence overall economic performance via a
direct impact on overall output and productivity as a result of its size and
efficiency.
Adapt education and training systems in response to new competence
requirements
Many of the reforms outlined in the previous guideline also have implications
for this guideline. The responsiveness of training to changing economic and
labour market needs is acknowledged as an important aspect of modernising
education and training systems. It is reflected in curricula reforms and the
extension of vocational training opportunities. Progress is also noted in the
development of systems for the validation of non-formal and informal learning.
A stronger response would clearly go hand in hand with further development of
comprehensive lifelong learning strategies, including a strengthening of the
quality and attractiveness of vocational training and the modernisation of higher
education. Regarding the updating of skills of the workforce, policies focus
mainly on specific groups of the population (young people, women) and in
particular on active labour market measures for unemployed people and groups
underrepresented in the labour market.
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Table 2:
Country
EU targets
BE
Employment rate targets set by Member States for 2010
16
*
Employment rates:
Total
70%
70% as soon as
possible
Female workers
At least 60%
60% as soon
possible
Older workers
50%
50% as soon as
possible. Activity rate ↑
1.5 times faster than
EU15
53 %
47.5% (2008)
-
-
54.8% (2008)**
-
-
-
-
37%
-
-
50 %
-
50%
35%
40% working ≥ 12 hrs
a week 2007
-
-
50%
-
35% (2008)
-
-
as
CY
CZ
DK
DE
EE
EL
ES
FI
FR
HU
IE
IT
LT
LU
LV
MT
NL
AT
PL
PT
SE
SI
SK
UK
71 %
66.4% (2008)
50,000-60,000 extra
jobs
-
65.8% (2008); 67.2%
(2010)**
64.1 % **
66%
70% (2007); 75%
(2011)
-
63%
-
-
68.8 %
-
65% (2008); 67%
(2010)
57%
-
-
-
69% (2008); 70%
(2010)
80% (aged 20-64)
67% (2008)
Annual ↑ of 1-2 pp.
80 % (national
definition, no date)
63 %
57.6% (2008)
-
-
63.3%
(2008)65%
(2010)**
51%**
57%
-
-
57%
-
-
61 %
-
62%
41%
65% working ≥ 12
hrs a week
Align with overall
employment rate
-
63% (2008)
-
2008 - At least 2 pp
above EU15 average
-
-
*Targets are for 2010 unless mentioned otherwise**Presented as projections
16
For a full list of targets under the European Employment Strategy, see: Council Decision of 12
July 2005 on Guidelines for the employment policies of the Member States (2005/600/EC).
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Table 3: Other employment targets set by Member States for 2010*
Raising
exit age
EU
effective
Childcare
provision
Coverage:
33%
(children <3 yrs old)
and 90% (children 3
years -school age)
33% of < 3yr.olds;
13.000 extra places
in 2009
-
-
New start
Long
term
unemployed in
active measures
25%
participating in
an
active
measure
-
Early school
leavers
No
more
than 10%
Upper
secondary
education
At least 85%
of 22 yr olds to
complete
85%
Participation in life-
long learning
Participation rate of
12.5% of working age
population
12.5% of employees per
month and 50 % of
employees/year
--
Other targets
+5 yrs (from 59.9**
in 2001)
BE
CY
CZ
Min age for pre-
pension systems 58
to 60 in 2008
↑ retirement age to
63
-
Offer active support
after
6
months
(young) and 12
months (adults)
Personalised
pathway for all
within 6 months
-
-
Under 10%
-
-
-
-
-
25,000 more jobs for refugees and immigrants
2005: 50% of university students to end studies
with bachelor degree; 2006 50% adults basic IT
literacy
40% of an age group to start tertiary education;
2004-2007 per yr 30.000 new apprenticeship and
25.000 new traineeship places
Disabled ↑ to 30% in 2008
↑ until 2008 by 8% participation rate in
vocational training
Unemployment rate ↓7.3%
↑ public expend on education to 5% GDP
↓ youth unemployment to 18.6%; ↓ work
accidents by 15%
96% of those completing basic education to
move on to further education by 2008
500,000 apprenticeship places by 2010
employment rate for men: 69%
--
--
50,000 new jobs by 2008;↓ youth unemployment
by 15%; LTU by 3.5%; unemployment down to
8%; Unemployment rate in all regions below
135% of national average. 45% of pupils to
study under technological profile and VET
programmes (ISCED level 3)
--
DK
DE
↑ by 6 months
-
-
230,000 extra places
for < 3 yr olds.
-
EE
-
-
Offer new start for
<25 yrs old within 3
months
-
-
-
-
95% by 2015
-
-
35% in 2007
< 10%
2014
-
Halve
rate
-
-
-
-
-
9%
in
85%
10% by 2008
EL
ES
FI
FR
HU
IE
IT
LT
-
-
↑ by 3 years in the
long run
-
-
-
-
↑ to 64.5
-
-
-
-
-
13,000extra places
-
30% for < 3 yr.ols.;
90% for 3 - school
age
-
-
-
-
-
-
-
Meet EU target
-
-
↑ by 50% in
2008
-
-
-
-
25%
-
the
80%
-
-
-
-
-
No
-
12.5%
60 % by 2008
-
-
-
-
10%
LU
-
LV
-
X2 the number of
places by end of
2007
-
-
-
-
-
-
-
-
-
-
-
Labour productivity 53% of EU average; LTU
3.8%
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Raising
exit age
MT
NL
AT
PL
PT
-
-
-
-
-
effective
Childcare
provision
-
-
-
-
100% for 5 y.o.;
90% for 3-5 y.o.;
35% < 3y.o.
New start
LTU in active
measures
-
-
-
-
25%
Early school
leavers
35%
8%
-
-
Halve
rate
-
-
-
-
Meet EU target. For
unemployed <23 yrs
and not completed
yr 12 of schooling
this
is
brought
forward to 3months.
Upper
secondary
education
65%
85%
-
-
65%
Participation in life-
long learning
7%
20%
-
-
12.5%
Other targets
the
SE
SI
-
Gradual rise from 58
to 65
Raise by 9 months a
year to 62
-
-
-
-
young graduates to
be offered a first job
within 6 months
-
-
-
-
-
-
-
-
-
-
--
--
Further ↓ school drop-out rates; 4.200 new study
places at universities
Unemployment 14.6% in 2008
qualify 1 million through training & recognition of
qualifications; 25.000 young people in VET per
year by 2009; To raise n° of new graduates in
scientific and technological areas, to attain 12 per
1000 in the population with ages between 20 and
29; to raise n° of new doctorates in scientific and
technological areas, to attain 0,45 per 1000 in the
population with ages between 25 and 34 years.
Unemployment ↓ to 4%; Halve sick leave
50% of 25yr olds to have started Higher Education
Unemployment 5.5% in 2008
SK
UK
-
sufficient childcare
for 3-14 y.o.
-
-
-
↑ proportion
of 19yr olds
with upper
secondary by
5%
2004-
2008
-
90% by 2015
-
-
--
50% participation rate of 18-30yr old in Higher
Educ by 2010; improve basic skills of 2.25 Mio.
Adults in 2001-2010; reduce by 40% number of
workers with only basic skills by 2010
*If no target year mentioned: 2010. ** subsequently revised upwards to 60.3 year.
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