Lisbon in ruins

The ruins of Lisbon (1755 German copperplate image, courtesy of the National Information Service for Earthquake Engineering (NISEE), University of California, Berkeley, original in Museu da Cidade, Lisbon)

The Lisbon earthquake of 1755 was so terrible and destructive was felt, metaphorically, across Europe, causing many to doubt that God was really the guiding force behind history. The lamentable progress of the European Union’s economic programme – the so-called Lisbon Strategy – might lead to a similar loss of faith in European integration.

A seminar this evening discussed progress and problems in the Lisbon Strategy, asking whether it was “an agenda going nowhere”. (The chair of the meeting was insistent that the title was a question and not a statement.)

The strategy itself is intended to enable the EU “to become the most competitive and dynamic knowledge-based economy in the world” by 2010. An ambitious target, but one that will not be achieved simply by being declared. A comprehensive set of policies based on technology, research and development, innovation and economic flexibility were supposed to have been put in train, but have they?

The picture presented by the speakers at the seminar was mixed. Some member states are doing quite well (typically, northern European countries such as Sweden and Denmark) while others were doing less well (notably, the large member states of Germany, France and Italy). There are no sanctions to be faced by countries that fail to meet the various Lisbon targets (the sheer number of such targets was held to be a problem in itself), other than perhaps a “faint embarrassment”.

It is not even clear to whom the targets apply. Take the goal that R&D; should amount to 3 per cent of GDP. Is this a target for the EU as a whole, or is it a target for each individual member state? Some speakers doubted that it made sense to distribute R&D; activity thinly throughout the EU, it being preferable for it to be concentrated in centres of excellence. If this latter method is to be followed, then it is unlikely that every member state will reach the 3 per cent target and wrong therefore to judge them all accordingly. (Only Sweden and Finland actually meet this target, so right now the question is somewhat moot, but the principle nevertheless stands.)

The most compelling point made was that, when the Lisbon Strategy was first proclaimed in the year 2000, annual GDP growth was projected to be 3 per cent. In fact, it has been barely half that, which means that total GDP right now is 12 per cent less than envisaged. As a result, the resources available for research and infrastructure have been reduced, and the funds available for smoothing the path of adjustment have been squeezed. This last point is not only an economic one but also a political one. Economic reform, particularly of the sort envisaged at Lisbon, takes a toll on ordinary citizens: jobs are lost in declining industries to be replaced – in theory – by jobs in new ones, but the people who lose those jobs need to be tided over. That costs money, and saps political support. People on the crest of reform enjoy the ride; those in the trough fear the deluge.

And in the large member states of the eurozone, we see the consequences. It is hard to generate the political will needed to make meaningful progress in the necessary reforms. The problem isn’t a lack of knowledge or understanding, pace Gordon Brown, but a lack of political elbow room.

The conclusion is that the whole process is patchy. Some countries are doing better than others, with the reasons for the differences being national in origin. The problem isn’t Europe, it’s national. In fact, if you didn’t know that there was supposed to be a coordinated European strategy, you probably wouldn’t be able to detect it in the policies that are being followed. It is obvious that Europe has an agricultural policy and an environmental policy, but when it comes to economics, the picture is quite different.

In my view, and you would expect this, the absence of an effective European economic policy is a problem. But, as with the Lisbon Strategy as a whole, it is one thing to say it, another thing to solve it.

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