EU’s Strategic Development by 21st Century: Lisbon and Europe 2020 Strategy

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Abstract

The EU Lisbon Strategy was launched in 2000 to create the “world’s most dynamic knowledge-based economy by 2010″. Despite the sublime rhetoric and accompanying ambition, progress towards the goals of the strategy has been reconstructed twice as it was seen as “unconvincing”. By the global financial problems and the new conjuncture created by the debt crisis in 2008, the European Commission developed the Europe 2020 Strategy in 2010, which is a more comprehensive and more complex version of the Lisbon Strategy. Both of these strategies could not perform as expected in implementation, therefore, when the results are evaluated as a whole, it can be seen that despite the progress of the EU in general, some regions lag behind or even retreated and that regions differ in some countries. However, the process that started with the Lisbon strategy is an exemplary process where its good and bad sides should be evaluated well and lessons should be learned.

Key Words: European Union, Lisbon Strategy, Europe 2020, growth, economic crisis.

Özet

Avrupa Birliği 2000 yılında, “2010 yılına kadar dünyanın en dinamik bilgiye dayalı ekonomisini” oluşturmak amacıyla Lizbon Stratejisini başlattı. Kullanılan kaliteli retorik ve ona eşlik eden büyük arzuya rağmen stratejinin hedeflerine yönelik yeterli ilerleme kat edilemediği için Lizbon stratejisi iki kere yeniden yapılandırıldı. Avrupa 2020 stratejisi ise, küresel finansal sorunlar ve 2008’deki borç krizinin yarattığı yeni konjonktür göze alınarak Avrupa Komisyonu tarafından, Lizbon Stratejisinin daha kapsamlı ve daha karmaşık bir versiyonu olarak geliştirdi. Bu stratejilerin her ikisinde de uygulama konusunda beklentinin altında bir performans gösterildiği gözlemlendi. Stratejilerin sonuçları bir bütün olarak değerlendirildiğinde AB’nin genel anlamda ilerleme gösterdiğini ancak bazı bölgelerin diğerlerine göre geri kaldığı ve bazı ülkelerin bölgelerinin de kendi içinde gelişmişlik açısından farklılık gösterdiği görülmektedir. Lizbon stratejisi ile AB’nin gelişme süreci, güçlü ve zayıf yanlarının iyi değerlendirilmesi ve ders çıkarılması gereken örnek bir süreçtir.

Anahtar Kelimeler: Avrupa Birliği, Lizbon Stratejisi, Avrupa 2020 Stratejisi, büyüme, ekonomik kriz. 

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Introduction

The Lisbon Strategy represents a pioneering and experimental process that has been reshaped and reused several times to provide adequate responses to the changing economic realities of today’s Europe. Inspired by Lisbon Strategy and largely affected by the unexpected economic crisis, the Europe 2020 strategy focused on EU economic governance in general, the social dimension of the envisaged reform efforts, and their wider continental and global relevance. The purpose of this article is to present a chronological analysis of the developments within the EU Lisbon Strategy and the main challenges in its implementation, as well as to examine the successes and failures of the Europe 2020 reforms as its successor in achieving the goals.

1. The Lisbon Strategy

In the 90s, the European Union realizes that it was lagging from the USA and Japan in certain areas such as economic growth, employment, labor productivity, R&D, education, and investments (Lundvall & Lorenz, 2012). Thereupon, the Lisbon Strategy was put forward at the European Council meeting in Lisbon in March 2000, which represented the main strategic framework for the development of the EU in the further decade. The main aim of the strategy was to find a solution to the stagnation of economic growth in the EU through the formulation of policy initiatives that would involve all member states. The established strategy was built on the idea that innovation and technological development are the engines of economic change, and it was realized that global competitiveness can be achieved by making a difference in R&D and information technologies (European Council, 2000). 

The Lisbon Strategy aimed to improve the EU economy and increase employment by approaching specific targets. These targets include things like creating an internal market for services, reducing administrative burdens, improving human capital, developing a better environment for entrepreneurs and SMEs, making fiscal consolidation and public finances sustainable, raising the level of R&D expenditure to 3% of GDP, and increasing the employment rate to 70%. On the other hand, from the social side, there are main objectives of providing education and vocational training for living and working in the information society, developing active employment policy, modernizing social security, strengthening social cohesion, and combating social exclusion (European Council, 2000). 

Immediately after the Lisbon Strategy started to be implemented, it focused on translating the Lisbon European Council results into EU policy instruments; to add the environmental dimension and build on a sustainable development approach; pre-application in member states; introduction of basic mechanisms for implementation; and later introducing stronger mechanisms to the new European constitutional treaty enshrined in the Lisbon Treaty (Rodrigues, 2009). It was stated that the Council of Europe, which has the role of guiding and coordinating the implementation mechanisms, will hold a meeting every spring to monitor the progress in the implementation of the Lisbon Strategy, and The Commission will prepare a synthesis report on progress annually (European Council, 2000).

However, in the mid-term evaluation made in 2005 after the Lisbon Strategy was put into practice, it was revealed that the foreseen targets could not be achieved. The reasons for the failure were identified as the lack of coordination between the Commission and the member states, the failure to follow an effective method in implementation, conflicting priorities and the loaded agenda, and most importantly, the lack of political will in the member states towards the goals (European Commission, 2005b). In 2005, the renewed agenda, with the strategy re-launched after a medium-term review, encouraged a governance structure based on the partnership between EU institutions and member states, and focused peculiarly on growth and employment, while other issues were mostly considered long-term goals. Along with this new agenda, a set of 24 Integrated Guidelines (IGs) were adopted by the EU, combining broad pre-allocated economic policy and employment guidelines (European Commission, 2005a).

After the strategy is renewed, member states have initiated the preparation of the three-year National Reform Programs (NRP) as specific tools to determine their actions towards Lisbon goals. In addition, the Community Lisbon Programme (CLP), which includes various actions to be taken at the EU level, was also adopted by the European Commission (European Commission, 2005). However, despite the three-year new draft put into effect, the renewed strategy was maintained annually with pre-2005 evaluation methods, therefore the member states started to publish special implementation reports each spring on the content (Samardžija & Butković, 2010).

In 2008, the European Council prepared the third cycle of the Lisbon Strategy, valid until 2010, with minor adjustments to the existing set of 24 IGs. Also, the European Council reaffirmed the four priority areas identified at the spring 2006 meeting as the cornerstones of the renewed Lisbon Strategy, stating that the focus of the new cycle will be more on implementation. It is also noteworthy that this new Lisbon cycle also puts a stronger emphasis on the environment, climate change, and energy (European Council, 2008).

1.1. Evaluation of the Lisbon Strategy

The European Commission’s end-of-term analysis indicated that the reforms of the Lisbon framework delivered tangible benefits, including increased employment, a more dynamic business environment, more choice for consumers, and a more sustainable future. However, according to the Commission, the strategy did not adequately address the critical elements at the root of the financial crisis, such as robust oversight and systemic risk in financial markets, speculative bubbles, and credit-driven consumerism in some member states. These overlooked issues, coupled with wage increases, left productivity gains behind and enhanced high current account deficits. Moreover, one of the crucial shortcomings for them was that well-performing member states continued to make more impassioned reforms, while others have gradually created a large delivery gap, which has led to the inability to bridge the delivery gap between commitments and actions (European Commission, 2010c). While other independent persons made similar comments to the Commission’s analysis, they certainly brought harsher criticism than the Commission’s. Indeed, the former Swedish Prime Minister, Fredrik Reinfeldt, who was also the chairman of the rotating council chair at the time, interpreted the issue as “even if progress has been made it must be said that the Lisbon Agenda, with only a year remaining before it is to be evaluated, has been a failure”. (Duncan, 2009). 

Even though the targets were not fully achieved also in the previous period, the negative evaluations regarding the Lisbon Strategy are mostly stemmed from the post-2008 situation of the strategy, and it is possible to see that by taking the data of the previous period. According to the statistical indicators made before 2008, a 0.2% increase was observed in the potential GDP growth rate of the euro area, due to the reforms carried out. According to the statistical indicators made before 2008, due to the reforms, the potential GDP growth rate of the euro area increased by 0.2%, also the major employment growth led to the creation of about 6.5 million new jobs, while the overall EU employment rate approached its initial target of 70% by the rate of 64.6%. With the new pension programs implemented, while targeting half of the elderly workers, the employment rate of 42% was reached, and the female employment rate reached 57.2%, quite close to the target of 60%. In the area of public finance, the EU budget deficit was reduced from approximately 2.5% of GDP in 2005 to 1.1% in 2007, while public debt which was 62.7% in 2005 has fallen to almost 60% in 2007 (Samardžija & Butković, 2010). 

After the financial crisis that hit hard in 2008 and 2009 and plunged Europe into one of its worst recessions since the 1930s, many of these impressive results have been doomed to negative changes. Between March 2008 and December 2009, unemployment rose to 7 million, industrial production fell by 20% and GDP in the EU fell 4% in 2009 alone. In addition, public finance was severely affected by a public deficit of more than 7% of GDP by 2010, leading to debt estimates of over 80% of GDP in the post-2010 period (European Commission, 2010).

With the effect of the enlargement wave and the global economic crisis during the Lisbon process in the EU, the world has reached a very different position from 2000, the strategy targets were not fully achieved, the problem of unemployment and economic growth continued. On the other hand, China surpassed Japan and became the third-largest economy in the world after the USA and the EU. After the outbreak of the economic crisis, the EU took action to stabilize the financial system, set up bailouts to restore confidence in the markets, and mobilize demand but it was clear that a wider and more comprehensive approach was needed. Fiscal consolidation and structural reforms have become a necessity, with investment in job creation (Gros & Roth, 2012). Under all these circumstances, the foundations for the new Europe 2020 strategy have begun to be laid.

2. Europe 2020 Strategy

The Europe 2020 strategy, which launched in 2010, exhibits a vision of Europe’s social market economy for the 21st century. This strategy was set out as a result of the need for a strategy to help the EU to get out of the crisis stronger and transform the EU into a smart, sustainable and inclusive economy by overcoming the structural weaknesses of the European economy, improving competitiveness and productivity (European Commission, 2010a). Effective socio-economic governance at national and local levels established at the EU level was also a necessary condition for a successful result of this strategy. With this logic in mind, Europe 2020 is organized around three integrated pillars (European Commission, 2010a and 2010b). The first was macro-economic surveillance aimed at providing a stable macro-economic environment conducive to growth and job creation, the second was thematic coordination focusing on structural reforms in the areas of innovation and R&D, resource efficiency, business environment, employment, education, and social inclusion, and the third was fiscal oversight under the Stability and Growth Pact, which will contribute to strengthening fiscal consolidation and promoting sustainable public finances (European Commission, 2010a).

To fulfill the three mutually reinforcing EU priorities of smart, sustainable, and inclusive growth, the June 2010 European Council agreed to set EU headline targets to guide the action of the member states and the union (European Council, 2010). To this end, it has determined the following targets: Increasing the employment rate of the population aged 20-64 to 75%; allocating 3% of GDP to R&D expenditure; achieving a 20% reduction in greenhouse gas emissions compared to 1990; increasing the share of renewable energies to 20% of final energy consumption and reaching 20% in energy efficiency; reducing the early drop out of school and education rate of young people to less than 10% and ensuring that at least 40% of 30-34 year-olds have higher education or equivalent qualifications; and lastly reducing the population at risk of poverty or social exclusion by at least 20 million (European Commission, 2010a).

The Commission proposed seven key initiatives that should encompass a wide range of actions at the national, EU, and international levels to support these goals and accelerate progress under each priority theme. European Platform Against Poverty (EPAP), which is one of the most striking of these initiatives, has not been evaluated beforehand on what will happen by the commission and how it will relate to the existing EU coordination and cooperation in the social field. Europe 2020 came under initial criticism because of the EPAP, an initiative that did not have very clear coherent thinking and lacked any consultation with stakeholders (Frazer & Marlier, 2010).

Finally, in October 2010 ten Integrated Guidelines for the implementation of the Europe 2020 Strategy were adopted by the Council, six of them were broad guidelines for Member States and EU economic policies and four of them were guidelines for employment and social policies. What distinguishes these Guidelines from the Lisbon principles is that they were adopted based on Articles 121 and 148 of the Treaty on the functioning of the EU. These IGs’ purpose was to guide Member States in defining their NRPs and implementing reforms, demonstrating the importance of interdependence and in line with the Stability and Growth Pact (EU Council of Ministers, 2010 and 2010a).

2.1. Evaluation of Europe 2020 Strategy

In a period of strong and continuous recovery since 2013, the EU has made progress, particularly in the field of employment, and saw strong employment growth in the first quarter of 2019, with a record of 240.7 million people. There are huge differences between EU countries in how much employment and social situations were affected by the crisis and how well they recovered afterward. However, for most member states many more indicators are showing positive improvements than negative ones. This increase is rooted in the job-rich nature of the economic recovery, the greater participation of women and the increased skill level of the 20-64 age group, and the success in keeping workers in the labor market longer. As a result, the employment rate has increased by almost 5% since the adoption of Europe 2020 (European Commission, 2019).

However, the 2019 Commission Economic Forecasts showed that slowing economic growth is negatively impacting the pace of recovery. For example, following the marked increase in the aftermath of the crisis, the total number of people at risk of poverty or social exclusion returned to below the 2008 level in 2019 but remained below the 20 million reduction target. We can link the limited progress towards the goal of poverty and social exclusion with various developments, but one of the most important is the continuing labor market transformations, including job polarization, linked to the deepening of market income inequalities, which leads to greater polarization of the wage structure towards higher and lower-wage jobs. Other factors contributing to the lack of significant progress in poverty reduction since 2008 have been the transition to less progressive national tax systems and the weakening of the effectiveness of social protection systems. In some member states, this has been tried to be balanced with tax cuts targeted for lower salaries (European Commision, 2019). Unfortunately, some analyzes claim that the coronavirus epidemic we are currently exposed to also has negatively affected these figures, but this can be analyzed better after the data published in the upcoming period.

The economic crisis and its subsequent rising unemployment had caused the Member States to shift their primary focus to controlling public finances and reducing public spending in the short term. Despite challenges, several countries have adopted new reforms in recent years focusing on improving access to care, increasing primary care capacity, greater use of e-Health, and more efficient use of resources. Across the Member States, long-term care (LTC) needs to tend to be much less met by social protection systems than healthcare needs. Therefore, although the LTC service has undergone various reforms in most EU countries over the past decade, Member States face and will continue to face significant long-term care system challenges in the face of demographic aging. When it comes to pension, most pension reforms have focused on maintaining the financial sustainability of pension systems and encouraging retirement to delay. Regarding investment in children aimed at preventing population aging, Member States have made CSRs on childcare capacity, income support, and related issues ranging from disincentives to inclusive education, but not enough progress has been achieved also in that topic. Finally, it is a fundamental goal not to reduce the high share of young people, neither in employment nor in education or training and it was noted that with their work in this area Member States have made positive progress under the Council Recommendation establishing the Youth Guarantee (European Commision, 2019).

Conclusion

Against the new world order that emerged with the rapidly developing technology and globalization process, the EU started to need to strengthen its own economic and social structure and increase its competitiveness. For this reason, the European Commission set the goal of transforming the EU into “the world’s most competitive, dynamic and knowledge-based economy” by 2010, with the Lisbon Strategy. This strategy was an important strategy that would set an example for future developments in the EU. However, although the strategy was good in theory, there were serious difficulties in implementation and a balance could not be achieved between the member states within the union. New regulations were made in 2005 and 2008 to further develop the strategy. Nevertheless, the global financial crisis that occurred in the USA in 2008 spread rapidly to the EU, caused this project to be disrupted, and led to a departure from the targets determined within the scope of the strategy. In the face of this picture, the European Commission developed the Europe 2020 Strategy based on the Lisbon Strategy, taking into account the global financial problems and the new conjuncture created by debt crises. The Europe 2020 Strategy has been determined to facilitate the smart, sustainable and inclusive growth process in the EU. Therefore, the European Commission has created a multi-faceted strategy that includes the goals of transforming the European Union into an economy based on knowledge and innovation, laying the foundations for a more resource-efficient, environmentally friendly, more competitive, and high employment economy with social and regional cohesion. One of the most important criticisms of the Lisbon Strategy was the complex structure of this strategy, also Europe 2020 did not deviate from this line much. In a way, we can consider the Europe 2020 Strategy as a more comprehensive and more complex version of the Lisbon Strategy. Likewise, when we come to the evaluations of the Europe 2020 strategy, it is seen that there are implementation problems similar to the Lisbon strategy, but to a lesser extent. Consequently, after 20 years of implementing these two strategies, the results show that although the EU as a whole has progressed, some regions are lagging behind or even retreating, and in some countries the regions are diverging. Although these results are due to the EU’s implementation problem, the effects of extreme events such as the economic crisis in the period should not be ignored. Nowadays, with the expiration of the Europe 2020 strategy, the EU has come up with a new strategy, but the effects of the new strategy will be observed with the reduction of the effects of the coronavirus epidemic and the passage of some time.

Şura Pekcan

European Studies Internship Programme

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