The Re-launch of Lisbon: A Wake-up Call to Citizens

Transcription

1 Asia-Pacific Journal of EU Studies Vo1. 5 No. 1 9 The Re-launch of Lisbon: A Wake-up Call to Citizens SAHOKO KAJI ** Faculty of Economics Keio University In order for the re-launch of Lisbon to succeed, it is not enough to increase the sense of ownership on the part of Member State policy authorities. The sense of ownership must also increase on the part of Member State citizens. This is because the changes must be (1) on the ground and (2) long term. Policies related to Lisbon are subject to the principle of subsidiarity and the Open Method of Co-ordination, and rightly so. Further, Lisbon is not a question of cyclical recovery but long-term structural improvement. EU citizens must recognise the responsibilities they have in attaining the Lisbon goals. And in as much as citizens in some Member States do so more than in others, the relative success of the re-launch will vary across the EU. Keywords: Lisbon strategy, Re-launch, Sense of ownership, Democracy, Citizens, Open Method of Co-ordination, Principle of subsidiarity I. INTRODUCTION The re-launch of Lisbon in March 2005 took place at a critical time for the EU was the mid-point towards the target year of 2010 for reaching the goals of the original Lisbon Strategy, 1 and everyone had to admit that progress was slow. Moreover, the EU citizens antipathy towards the EU was coming to a boil, one manifestation of which was the rejection of the Constitutional Treaty by the French and Dutch voters in late May and early June of In re-launching the Lisbon process, the EU chose to keep applying the princi- * Two anonymous referees provided valuable comments. Members of the Keio EU Study Group commented on Kaji (2006), parts of which are used in this article. The author would like to thank all of them, as well as those who provided valuable information during her visit to Europe in November of 2005 and ** Professor of economics, Keio University, , Mita, Minato-ku, Tokyo, , Japan; Tel: ; Fax: ; 8xyty9n02@sneak .com. 1 Pisani-Ferry and Sapir (2006) call this Lsibon 1, and the re-launched Lisbon process Lisbon 2. We shall follow this nomenclature here.

2 10 The Re-launch of Lisbon ple of subsidiarity and the Open Method of Co-ordination (OMC) 2, and to increase the sense of ownership 3 of the Lisbon Strategy. The choice to keep the principle of subsidiarity and the Open Method of Co-ordination was appropriate; not doing so was neither practical nor desirable. However, the EU has so far not been successful in increasing the sense of ownership of Lisbon. Pisani-Ferry and Sapir (2006) explain why and emphasise the lack of explicit methodology behind the evaluation of the National Reform Programmes by the. 4 The sense of ownership which Pisani-Ferry and Sapir (2006) focus on in their recommendation is the sense of ownership on the part of Member State policy authorities. 5 In this paper, we emphasise the sense of ownership on the part of the Member State citizens, be it the social partners, civil societies, NGOs, local and regional representative bodies and voters. Sense of ownership on the part of citizens is important due to the very nature of the policies that need to be implemented for Lisbon 2. These policies are, by nature, on the ground and long-term. They are policies related to how people are educated, how they work and how they retire. In that sense they are microeconomic, and call for the application of the principle of subsidiarity and the Open Method of Co-ordination. The policies are also long-term; they aim at changing the structure of the society and economy. And long-term changes cannot be sustained by political leaders alone, as they will be voted out of office unless supported by voters. Even if the politicians somehow managed to stay in office, they will not be able to implement any of the necessary policies if the public refused to accept change. For these reasons, the EU seems to have passed the point of effective policymaking by increasing the sense of ownership on the part of only the Member State policy authorities. Increasing the sense of ownership of Member State policymakers will certainly be a positive step. However, that is not sufficient for the EU to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion. 6 Both the political leaders and citizens have responsibilities. The political leaders have a responsibility to not shy away from explaining the trade-offs which the citizens face. And the citizens must face up to such trade-offs. For instance, if EU 2 According to Sapir (2003, pp ), the expression Open Method of Co-ordination was initially used by Hodson and Maher (2001)and Rodrigues (2002). This method, already adopted by the OECD and in the business world, comprises four elements; (1)set common guidelines for member policies, (2)develop performance indicators in order to compare best practices, (3) demand the members to adopt action plans for implementing the guidelines and (4) jointly monitor the results. 3 This expression appears frequently in official documents on the re-launch of the Lisbon Strategy. One example would be page 9 of European (2005d). 4 Sapir (2007), p. 1. What the National Reform Programmes are will become clear below. 5 Pisani-Ferry and Sapir (2007, p. 7) discuss the sense of ownership of citizens as their second criterion to assess advances of ownership. They find great diversity of approaches among Member States and note that 9 out of 25 did not even engage their national parliaments at the committee level while 18 out of 25 gave no indication at all on the potential follow-up to their reform programmes. But since it could be argued that such an ownership can by nature only develop over time, they put priority in assessing the intrinsic quality of the NRPs and of their evaluation. 6 European (2001a), p. 2.

3 SAHOKO KAJI 11 citizens wished to enjoy cheaper consumer goods and more convenience, they need to accept the competition that comes with opening up to the rest of the world. If they insisted on keeping their current wages, working hours and holidays, they need to be ready to see a fall in their standard of living. If they chose to preserve the present degree of worker protection, they will have to face the problem of exclusion of some workers from the labour market. EU citizens will need to accept the consequences of their choices. They cannot have the cake (refuse to change anything) and eat it (expect prosperity to continue) too. The trade-offs are ineluctable, and EU citizens are responsible for admitting to these trade-offs and making informed choices. They need to vote, and vote for the politicians who are not afraid to encourage such informed choices. Until EU citizens come to realise that they themselves have such responsibilities in reaching the Lisbon goals, the ultimate goal of Lisbon is unlikely to be reached. And in as much as citizens in some Member States accept such responsibilities more than in others, the relative success in the re-launch will vary across the Member States. 7 To expound this thesis, we proceed as follows in this paper. Section I introduces the original Lisbon Strategy (Lisbon 1). Section II explains the mechanisms newly introduced in the re-launch of 2005 (Lisbon 2). We conclude by providing some evaluation and prospects of Lisbon 2 in Section III. II. THE LISBON STRATEGY 1. Lisbon 1 and its development The Lisbon Strategy (The Lisbon Agenda) was launched at the Lisbon European Council (Summit) of 23rd and 24th March It was called a new strategic goal for the next decade, whose objective was for Europe to become the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion. 8 Since its launch, the Lisbon Strategy frequently appeared on the European Council s agenda. At the Nice Summit of December 2000, it was decided that (o)n the basis of reports from the and the Council and a regularly updated scoreboard, the European Council will at each spring meeting look at how the (Lisbon) Agenda is being implemented, beginning at its Stockholm meeting in March The Stockholm Summit of March 2001 duly set spe- 7 The conclusion of this paper should be interpreted more as a prediction rather than a prescription. The closest that comes to a policy recommendation would be to say that the EU and Member States should aim at the right mixture of competitive pressure and stability, which encourages citizens to have an increased sense of ownership. 8 European (2001a), p. 2. The prepared European (2000a) for the Lisbon Summit. The conclusions of this Summit can be found at europa.eu /uedocs/cms-data/docs/pressdata/en/ec/00100-r1.en0.htm. 9 The Council had added that it invites the social partners, especially, to play their full part in implementing and monitoring it, particularly at an annual meeting to be held before the spring European Council meeting (V-A-16). This suggests that the Council was aware of the importance of in-

4 12 The Re-launch of Lisbon cific intermediate targets for employment rates across the Union as a whole, and encouraged the establishment of a single and efficient management structure before the end of The Barcelona Summit of March 2002 noted that there had been important successes, but also areas where progress has been too slow. The Summit introduced new goals such as a progressive increase of about 5 years in the effective average age at which people stop working in the European Union by By the time of the March 2003 Brussels Summit, it was becoming clear that progress towards achieving the Lisbon goals was not rapid. The conclusions of this Summit pointed out that there was still a lot to do even though considerable progress had been made in some areas, and called for the Union and the Member States to fulfil their commitments regarding economic reforms by translating words into action. 12 In July 2003, an Independent High-Level Study Group led by Professor André Sapir of the Université Libre de Bruxelles published a report on the Lisbon Agenda. 13 The report pointed out, among other things, that giving the utmost priority to growth implies that more (EU) expenditure needs to be channelled to growth-enhancing activities such as R&D and education which, (w)ith a constant budget, meant reducing the share allocated to agriculture. 14 Importantly, the report cast doubt on the effectiveness of the Open Method of Co-ordination in achieving the Lisbon goals. The European Council of March 2004 decided to try to identify the problems and increase momentum. The Council invited the to establish a high-level group headed by former Prime Minister of the Netherlands Mr Wim Kok to produce a report to identify... a consistent strategy for Member State economies to achieve the Lisbon objectives and targets. 15 The so-called Kok report 16 was produced in November 2004, and was critical of the lack of political will on the part of the Member States. The March European Council of 2005 came at the mid-point of the ten-yearperiod in which the goals of the Lisbon Agenda were to be reached. Following the proposal by the 17, the Council called for a re-launch of the Lisbon Agenda, with focus on growth and jobs. This re-launch had two new mechanisms; Integrated Guidelines and the New Cycle of Governance. creasing the sense of ownership on the part of the citizens, already at this early stage Sapir (2003). This study group was established on the initiative of the President of the European. 14 Ibid. p This proposal was repeated in the Kok Report (discussed shortly), but the European Council sealed the prospect of supporting Lisbon through budgetary incentives when they rejected the EU budget proposal of the Prodi, endorsed by the Barroso. See p.6 of Pisani-Ferry and Sapir (2006) p High Level Group chaired by Wim Kok (2004). 17 European (2005a), p. 14. This document is entitled Working together for growth and jobs A new start for the Lisbon Strategy. The Presidency conclusions are available as European Council (2005).

5 SAHOKO KAJI The Weak Co-ordination of policies The two new mechanisms; Integrated Guidelines and the New Cycle of Governance were introduced to improve the workings of the Open Method of Coordination. In this section we shall see how the nature of the Lisbon-related cooperation called for such mechanisms. Table 1 shows the different forms of economic policy co-ordination in the EU. The type of policy co-ordination that is essential in reaching the Lisbon goals is the Weak Co-ordination. 18 The problem with this type of policy co-ordination is that it becomes unclear who among the participating parties has the final responsibility to ensure solid implementation and a satisfactory outcome. One reason is lack of official sanctions. This type of policy co-ordination is not based on a single policy, such as the co-ordination in the Single Policy category of Table 1. Neither is it based on treaties or rules, as is the co-ordination that falls in the Close Co-ordination category. Weak Co-ordination policies are based on much looser forms of co-ordination such as dialogue, information exchange, commonly agreed objectives, discussion of best practices, guidelines and peer review. Another related reason why Weak Co-ordination results in blurred responsibilities is because the setting of policy goals, decision-making and policy implementation do not happen at one single level. The actors involved include not just the EU 19 level institutions and the Member States, but also the different agents within the Member States or Member State citizens. Let us elaborate on this latter point. Policy determination in the EU follows the principle of subsidiarity, which is the principle whereby the Union does not take action (except in the areas which fall within its exclusive competence) unless it is more effective than action taken at national, regional or local level. 20 The policies that come under Single Policy in Table 1 are the exceptions to this principle. These policies fall within the EU s exclusive competence, or can be conducted more effectively at EU level than at national, regional or local level. Member States send representatives to make sure their opinions are reflected in the final decisions, but the decisions are taken at EU level. The EU level decisions are respected and accepted by the Member States. Thus, for policies that fall in the category of Single Policy in Table 1, it is at the EU level that the policy goals are set, the policy decisions are made and the policies are (mostly, in the case of Competition Policy) implemented. Setting of goals, decision-making and policy 18 In Table 1, which was provided by DG ECFIN of the European, only Social Policies have the entry Open Method of Coordination (OMC) in the Procedures column. But other policies in Weak Coordination, in particular Wage developments, Labour market policies and Social Policies also have much to do with reaching the Lisbon goals. And in as much as they are related to Lisbon, they also follow the OMC. 19 An anonymous referee suggests that the EU has no entity and we need to define what the EU implies in this paper. When used with level, as it is here, it is used in contrast to the Member States and Member State citizens. When used as in EU policymakers, it signifies mostly the and the Council. When used independently, it signifies the European Union. 20

6 14 The Re-launch of Lisbon TABLE 1. FORMS OF ECONOMIC POLICY CO-ORDINATION IN EMU Single Policy Close Coordination Weak Coordination Policies Monetary Policy Exchange Rate Competition Policy Budgetary policy (balances) Structural policies (Internal Market) Policy-mix Budgetary policy (quality of public finances) Wage developments Labour market policies (structural reforms) Social Policies (Pensions, health care, social inclusion) Form of Coordination Single Policy (euro area) Single Policy (euro area) Single Policy -Treaty rules -Commonly agreed rules and objectives -Information exchange -Peer review -Rules -Joint decisions -Council directives -Peer review -Dialogue -Information exchange -Commonly agreed objectives -Dialogue -Information exchange -Information exchange -Discussion of best practices -Guidelines -Peer review -Information exchange -Discussion of best practices -Common objectives Mode of Coordination Single Institution Co-ordination in the Council Implementation by the Co-ordination in the Council Joint fora Co-ordination in the Council Joint fora Co-ordination in the Council Joint fora Co-ordination in the Council Joint fora Actors Involved ECB Council ECB Eurogroup Member States Council Member States Council Eurogroup Member States Council ECB Eurogroup Social partners Member States Council Eurogroup Social partners Council ECB Member States Council Social partners Member States Procedures EDP SGP BEPG BEPG SGP Macroeconomi c Dialogue (Cologne process) BEPG EG (Luxembourg process) BEPG Open Method of Coordination (OMC) BEPG

7 SAHOKO KAJI 15 Product and capital market policies (structural reforms) External representation and communication -Information exchange -Discussion of best practices Guidelines Peer review Co-ordination in the Council -Agreement on a Joint fora common understanding (communication only) Source : European, DG ECFIN. BEPG = Broad Economic Policy Guidelines. EG = Employment Guidelines. EDP = Excessive Deficit Procedure. SGP = Stability and Growth Pact. Member States Council ECB Eurogroup Reports on economic reform product and capital markets- (Cardiff process) BEPG implementation are all done at the same level, the EU level. Contrast this with the policies that come under Weak co-ordination in Table 1. Here, setting of policy goals, decision-making and policy implementation are not done at the same level. Policy goals are set by the EU. The role of the EU here is to set the policy goal, and also to gather information from Member States and Member State citizens, set out guidelines, and offer opportunities for dialogue, information exchange and peer review. On the other hand, it is up to the Member States, as well as the Member State citizens to decide and implement the policies. Note that Member States and Member State citizens do not make the decisions on policy totally on their own. Rather, they take into consideration the policy goal, guidelines and the results of information exchange with the EU institutions, other Member States and Member State citizens. To what extent the Member States and Member State citizens take into account the EU s policy goal and other information depends on their preference and the policy in question. When the policy is finally decided, the decision would have been influenced, to many different degrees and at many different levels, by the many agents involved. As a result, it is no longer clear who is responsible for the decision. This often means that it is also unclear who is responsible for the successful implementation of this policy. In general, when the setting of policy goals, policy decision-making and policy implementation are done at one single level, the responsibility clearly lies with this one level. Most importantly, the responsibility to see to it that implementation is completed and the goals are reached, lies with the institutions at this one level. To be sure, all of the actors involved will have to take appropriate action if the goal of policy is to be attained. But it is institutions at this one level that have the responsibility to make sure that all agents involved will take actions consistent with reaching the goal, i.e. to ensure effective implementation of policy. In contrast, policies that fall within Weak co-ordination do not share this characteristic. The goals are set by the EU (although the Member States and its citizens can express their opinions), while decision and implementation are up to the Member States and its citizens (taking into account the feedback from the EU

8 16 The Re-launch of Lisbon and other Member States). The setting of policy goals, the decision on policy and implementation of policy are done at different levels, involving many agents. We are not certain who has the responsibility to secure effective implementation of policy. In sum, the policies to realise the Lisbon Strategy goals belong to the Weak Co-ordination category of Table 1. They are based on the principle of subsidiarity and Open Method of Coordination. There are two ways in which this fact makes it difficult to attain the goals set out in Lisbon. One, even though the goals of policy are shared, attaining the goal depends on peer pressure, not official sanctions. Two, for reasons stated above, it is not obvious who has the responsibility to ensure effective implementation. Obviously, the incentive to work towards attaining the goal is lower. It is perhaps not surprising that the Lisbon strategy had to be re-launched as Lisbon The Implementation of the Lisbon Strategy In assessing the progress on the Lisbon Agenda, most people agree that the Agenda per se is not the problem. The problem lies in the implementation. How can we improve implementation of policies aimed at attaining the goals set out by the Lisbon Agenda? This was the question which EU policymakers tried to answer in re-launching the Lisbon strategy at the Council of March As explained in the previous section, the policies to realise the Lisbon strategy come under the principle of subsidiarity and belong to the Weak Co-ordination category. As a result, it is not easy to see who is responsible for effective implementation, and there are no official sanctions for violators. Given this fact, there are only two ways to improve implementation. One way is to remove the policies related to Lisbon from the condition of subsidiarity and Weak co-ordination, and turn them into single policies with sanctions. This choice, however, is neither productive nor realistic. It is not productive because policies related to the Lisbon Agenda are just the kind of policies to which the principle of subsidiarity and Weak Co-ordination justly apply. When for instance the goal is to improve the productivity of human resources in individual countries, individual regions, individual industries or firms, it would not help to set the details of policy at some location far removed from the scene. 21 If subsidiarity was not removed but official sanctions were introduced, that would increase incentives to follow the policy. But to have official sanctions, a treaty must be signed, and it would be difficult to turn policies catered to individual Member States into an EU-wide treaty. Furthermore, removing subsidiarity and Weak co-ordination is not realistic, given that many EU citizens, rightly or wrongly, feel that the EU is making decisions which should be made at Member State level or other levels closer to their 21 In a hypothetical case where we ignored this fact and subsidiarity was not applied, so that a supranational institution set, decided and implemented policy, responsibility for effective implementation would clearly lie with this institution. Even this, however, is not sufficient for attaining the goal of the policy. We need official sanctions in addition.

9 SAHOKO KAJI 17 daily life. This feeling is partly to blame for the kind of antipathy towards the EU which recently manifested itself in the ratification process of the Constitutional Treaty. The other way to improve implementation is to leave the application of subsidiarity and Weak co-ordination untouched, but clarify where the responsibility for effective implementation lies. Specifically, Member States and its citizens have to become more aware that successful implementation is their business, that they themselves are responsible to see to it that the policies actually led to the desired results. Naturally, the EU chose the latter method, i.e. to increase the sense of ownership of the Lisbon strategy. To do this, follow-up had to be more rigorous and the policies had to be made more comprehensible and consistent with each other. It was for this reason that the EU introduced the Integrated Guidelines and the New Cycle of Governance. III. THE MECHANISMS OF LISBON 2 1. Integrated Guidelines In time for the Spring European Council of 2005, the European proposed a fundamental revision of the Lisbon strategy, to focus on growth and jobs and to introduce at its heart the Lisbon Action Plan (or Programme). This Programme identifies responsibilities, sets deadlines and measures progress. In particular, it makes a clear distinction between actions at Member States and European Union level. 22 The Council of March 2005 endorsed this proposal by the and invited the to produce the Integrated Guidelines for Growth and Jobs ( ). 23 The word integrated signifies the integration of the Recommendation on the Broad Economy Policy Guidelines (BEPGs) based on Article 99, and Proposal for a Council Decision on the Employment Guidelines (EGs) based on Article 128, of the Treaty establishing the European Community. 24 The two 22 European (2005b), p. 15. The Action Plan outlined actions to be taken at EU and Member State levels under three policy areas: Making Europe a more attractive place to invest and work, Knowledge and innovation for growth and Creating more and better jobs. 23 European (2005d). The Integrated Guidelines comprises two parts. Part 1 is The Broad Economic Policy Guidelines and depicts the macroeconomic policies (Section A) and microeconomic policies (Section B) at both the EU and Member State levels, that contribute to growth and jobs. The takes the view that the macro and micro policies complement each other; if one does not succeed the other does not lead to results either. Section B includes the policies that should be taken by the EU and Member States in order to make Europe a more attractive place to invest and work, and to increase knowledge and innovation. Part 2 is The Employment Guidelines and includes the proposal for a Council decision on the Employment Guidelines. This part points to the need for modernisation of social protection systems, for the purpose of sustainability and adaptability. It also discusses the employment policies aimed at creating more and better jobs of the Lisbon Agenda. The European Parliament, the European Social and Economic Committee and the Committee of the Regions are to comment on these proposals. 24 At their Council meeting on 15 July 2003, the Ministers of Economic and financial affairs decided that acceding countries should be included in the update of the BEPGs from 2004 and in the BEPG Implementation Report from They also invited the acceding countries to provide on a voluntary basis Cardiff reports on structural reforms in goods, services and capital markets for the

10 18 The Re-launch of Lisbon were integrated in order to clarify the relationship between the BEPGs, EGs and the Lisbon Strategy, and to increase the sense of involvement and responsibility on the part of Member States and its citizens. In general, integrating several policies aimed at one goal provides the overall picture, and illuminates the mutual relationship between the different policies. This is productive in at least two cases. One is the case in which different policies aimed at the same goal are mutually contradictory. Not infrequently, different policies which, on their own, bring about economic improvement are not consistent with each other. If in such a case we had the overall picture, we can prioritise. This process of prioritisation removes the inconsistencies and helps us recognise where the responsibilities lie. If in contrast we did not have the overall picture and conducted several mutually contradictory policies at the same time, failure of one policy can always be attributed to other policies. When none of the policies turn out to be effective, the different agents that conducted the mutually contradictory policies can blame each other. Nobody will have to take the responsibility. 25 The second case in which integrating several policies is productive is when different policies aimed at the same goal are mutually complementary. In such a case, seeing the overall picture and being aware of this complementarity allows us to take better advantage of the mutual reinforcement effect. Or we could decide that one of the mutually complementary policies would be sufficient and save the expense by conducting only one of the policies. In this way, the integration of the Guidelines was designed to contribute to attaining the Lisbon goals. However, in order for this to be effective, a mechanism was needed to further clarify the responsibilities of the Member State citizens. This was the New Cycle of Governance. 2. The New Cycle of Governance The New Cycle of Governance 26 is the actual mechanism incorporated in the Integrated Guidelines to increase the sense of ownership of the Lisbon strategy. The cycle is the cycle of policy between the Member States and the European, via the European Council, Council of Ministers and the European Parliament. Within this new cycle, the will play its central role of initiating policy and ensuring implementation at the EU level, while being a facilitator through benchmarking, financial support, promotion of social dialogue or by setting up best practices at national level. 27 Figure 1 depicts the cycle. The duration of one cycle is three years. The first cycle began with the Integrated Guidelines in 2005, and a new cycle will begin in first time in October This is a point emphasised in Kaji (1998) and Kaji (1999). 26 The explanation on the New Cycle of Governance relies on European (2005a) pp. 2-3, p. 15 and aged=0&language=en&guilanguage=fr. 27 Pisani-Ferry and Sapir (2006, p. 1) describe the new governance model as one in which the European plays the role of a coach, instead of the role of a schoolmaster in Lisbon 1.

11 SAHOKO KAJI 19 FIGURE 1. THE NEW CYCLE OF GOVERNANCE March 2005: Spring European Council New Start for Lisbon (1) April 2005: New Integrated Guidelines for Growth and Jobs 2005~2008 adopted by and Council (2) July 2005: Community Lisbon Programme 2005~2008 presented by the (3) Autumn 2005: First National Reform Programmes adopted by Member States (4) January 2006: adopts First Annual Progress Report and proposals for possible update of Integrated Guidelines and Recommendations (5) March 2006: Spring European Council Possible input from European Parliament (6) November 2006: Implementation Reports adopted by Member States (7) January 2007: adopts Annual Progress Report and proposals for possible update of Integrated Guidelines and Recommendations (8) March 2007: Spring European Council Council invites to present an interim report in autumn 2007 with a view to its proposal for the Integrated Guidelines for Growth and Jobs (2008~2011) (9) November 2007: Implementation Reports adopted by Member States January 2008: adopts Annual Progress Report and proposals for possible update of Integrated Guidelines and Recommendations March 2008: Spring European Council April/June 2008: New Integrated Guidelines for Growth and Jobs 2008~2011 Adopted by and Council June/July 2008: Community Lisbon Programme 2008~2011 presented by the Autumn 2008: National Reform Programmes adopted by Member States Source: European (2005e), European Council (2007) and ReleasesAction.do?reference=MEMO/06/23&format=HTML&aged=0&language=EN&guiLanguage=en Numbers in parenthesis indicate the links to the relevant documents: (1) (2) (3) (4) (5) en/ com/ 2006/com2006_0030en01.pdf, (6) (7) (8) (9)

12 20 The Re-launch of Lisbon FIGURE 2. THE IMPORTANCE OF INCREASING THE SENSE OF OWNERSHIP AT THE LEVEL OF MEMBER STATE CITIZENS Lisbon Strategy Re-launched Increased sense of ownership at Member State level Potentially Effective National Reform Programmes Increased sense of ownership at the level of Member State citizens No increase in the sense of ownership at the level of Member State citizens Co-operation and/or compromise among governments and social partners on labour market reform, deregulation, educational reform etc. Support for politicians who support and/or encourage reform Lack of cooperation and/or compromise among governments and social partners Lack of support for politicans who support and/or encourage reform National Reform Programmes effectively and continuously implemented National Reform Programmes not effectively implemented Lisbon goals attained Lisbon goals not attained In the autumn of 2005, the Member States submitted their respective National Reform Programme for Growth and Jobs 2005~2008, as requested by the

13 SAHOKO KAJI The, on its part, submitted the Community Lisbon Programme 2005~2008, 29 as the EU-level programme parallel to the Member State programmes. The evaluated the national programmes, and in January of 2006 submitted the Annual Progress Report. 30 The Spring European Council of March 2006 welcomed this Report and the fact that all Member States have rapidly drawn up their National Reform Programmes (NRPs) on the basis of the Integrated Guidelines. 31 The Member States adopted their Implementation Reports in November 2006, and the adopted the Annual Progress Report in January The Spring European Council of March 2007 invited the to present a proposal for the Integrated Guidelines for the next three-year-period of IV ASSESSMENT OF LISBON 2 1. The Problem with Lisbon 2 By leaving it up to the Member States to write their own Reform Programmes, the EU continues to apply the principle of subsidiarity and Open Method of Coordination in this area. At the same time, if follow-up is strengthened with this cycle, the EU will be increasing its intervention into the policies set by each Member State. Pisani-Ferry and Sapir (2006) 32 do not find the cycle to be sufficient, and calls for a reinforcement of the instruments, among other things. They compare the cycle with the OECD s Going for Growth exercise, which provides a reasonable explicit framework for undertaking consistent country-by-country assessments. Their conclusion is that (u)nfortunately, the same cannot be said for Lisbon 2 (p. 9). They ask whether a governance system that rests almost exclusively on national action programmes with little or no benchmarking and little or no EU funding (p. 6) can deliver, and conclude that they do not consider that Lisbon 2 is on track to succeed (p. 13). The weaknesses of Lisbon which they identify are the unevenness of the rationale (for EU involvement), the weakness of the instruments (i.e. lack of benchmarking and peer pressures) and the inadequacy of the process (i.e. insufficient sense of ownership as well as weak methodology and implementation by the ) (p. 13). 28 The National Reform Programme for Growth and Jobs 2005~2008 made available by the Member States are at 29 European (2005c). This programme reflects the policies contained in European (2005a) and the Community elements of European (2005b). 30 European (2006a). Separately, each Member State evaluated the Report submitted by another Member State following the suggestion of the UK, which held the presidency at that time. These reports, however, have not been made public p Their recommendations are to strengthen the rationale, reinforce the instruments, improve the process and to address the euro dimension. In the text below, the quotes are from Pisani-Ferry and Sapir (2006) with this author s addition in parenthesis. Page numbers immediately following the quotes indicate the location of the quotes in their paper.

14 22 The Re-launch of Lisbon As regards the Integrated Guidelines, Pisani-Ferry and Sapir (2006) point out that they are simply a juxtaposition of the Broad Economic Policy Guidelines and the Employment Guidelines (which) comprise no less than 24 guidelines (with) no direction as to which of the 24 guidelines should be pursued as priorities by individual member states (p. 8), in spite of the heterogeneity (p. 4) among the Member States. The, in its effort to apply the principle of subsidiarity and by assuming that more political ownership could only be gained at the expense of transparency in performance assessment 33 (p. 12), refrained from setting up a benchmarking framework and did not tailor the Integrated Guidelines to each Member State. Instead, the left it to the individual Member States to come up with their own reform programmes. According to Pisani-Ferry and Sapir (2006) this was counterproductive, as the Guidelines remained complex and the methodology remained weak. The two authors do not give high marks on the National Reform Programmes (NRPs). The NRPs were supposed to play a key role in the new cycle. The process of preparing these programmes was meant to encourage Member States involvement and increase their awareness. Member States were asked to list the priorities in the macroeconomic, microeconomic and employment aspects of their programmes. If there were policies on which they did not place priority, they had to explain why. They also had to state how the public institutions and social partners at each level would involve themselves in implementing the policies. Clearly, the EU was asking Member States and its citizens to commit themselves to attaining the Lisbon goals. But Pisani-Ferry and Sapir (2006) report that NRPs usually refer only vaguely if at all to (the Integrated Guidelines), raising the suspicion that in several cases NRPs consist simply of a repackaging of existing measures (p. 10). In fact, they conclude that the Integrated Guidelines lack relevance in the whole process. In its assessments of the NRPs, the also refers to (the Integrated Guidelines) very loosely (p. 10), and the ( s) evaluation was more based on the prevailing consensus among international organisations (such as the OECD) than on a direct implementation of the guidelines (p. 11). Since Pisani-Ferry and Sapir (2006) was written, the Council and the have acted upon the authors criticism. 34 The Economic Policy Committee established a Lisbon Methodology (LIME) Working Group to tackle the problems identified in Pisani-Ferry and Sapir (2006). Sapir (2007) welcomes this and emphasises the two factors on which the success of Lisbon depends; the partnership between Member States and the Community institutions, in particular the European and a clear definition of objectives and instruments Sense of ownership on the part of citizens With regard to the sense of ownership, Pisani-Ferry and Sapir (2006) and 33 Pisani-Ferry and Sapir (ibid.) call this a questionable assumption in the first place. 34 Sapir (2007), p Sapir (2007), p. 3.

15 SAHOKO KAJI 23 Sapir (2007) focus their policy recommendations on increasing the sense of ownership on the part of the Member State policy authorities. They conclude that Lisbon 2 does not seem to have succeeded in increasing the political ownership of the Lisbon strategy by national authorities (p. 12). Increasing the sense of ownership of Member State policymakers will certainly be a positive step. If this means that policymakers take concrete measures to impress upon the citizens their responsibilities, it would contribute to increasing the sense of ownership on the part of the citizens. By following Pisani-Ferry and Sapir s recommendations, the citizens sense of ownership may eventually increase, if we wait long enough. However, that would mean that Lisbon 2 will succeed also if we wait long enough. 36 The citizens sense of ownership needs to be increased because of the very nature of the changes that need to take place. First of all, these changes require compromise and consensus-building on the ground. They pertain to working conditions such as wages, working-hours and holidays, as well as the involvement of the State in education, medical care, pensions and other services. These are all case-specific issues suitable for subsidiarity. Changes this close to the ground cannot take place, if the increased sense of ownership was shared among national policy authorities but not the citizens on the scene. The citizens will simply not vote for the politicians who support such changes, or even refuse to participate in the negotiating process. 37 The problem, of course, is that it is not easy to increase the sense of ownership on the part of citizens. When tackling this issue, the problem of the democratic deficit inevitably rears its ugly head. This problem at the EU level has already been known to exist for some time. After trying to deal with the democratic deficit for decades, the EU has still not resolved the problem of how to effectively inform and involve its citizens in European integration. There are hundreds if not thousands of booklets, books and Web-pages that explain the EU, its institutions and its policies. Many a seminars and debates are held before each referendum. The Constitutional Treaty was drawn up by a Convention involving Member State parliamentarians, social partners and NGOs among others. And still the EU and its projects remain misunderstood. Perhaps one cannot be blamed for wanting to throw one s hands up in the air. The democratic deficit exists at the Member State level as well. Many Member States need to re-evaluate the functioning of their democracy. One source of difficulty is that the citizens are not monolithic. They are divided between those that already benefit from globalisation and those that are afraid of it. The multinational companies and their executives tend to belong to the first camp. Workers whose jobs are lost or threatened belong to the latter. To those who belong in the first group, it is already quite evident what changes need to take place if Lisbon 2 were to succeed. But the workers who think they will be negatively affected refuse to see any relationship between their refusal to change and failure to attain 36 If anything, it could be argued that the increase in the sense of ownership at the level of Member State policymakers comes AFTER its citizens sense of ownership has been increased, given that the Member States are democracies. 37 Figure 2 is an attempt to depict this logic in a flowchart, as suggested by an anonymous referee.

16 24 The Re-launch of Lisbon the Lisbon goals. Many of them vote for politicians who denounce the EU and the forces of globalisation. And then there are voters who do not vote, and are therefore excluded not just from the labour market but from the democratic process as well. The politicians, even those who are the so-called mainstream, respond by promising protection rather than explaining the benefits of the EU and convincing the public that changes are needed to ensure prosperity in a globalised world. Needless to say, a properly functioning democracy needs to pick up all of the voices of the different groups. But if that leads to policy paralysis and/or a coalition government that cannot implement any policy, that might indicate a need for an overhaul of the political system. An added source of complication is the fact that the lines between the different groups are not easily drawn. For instance, Pisani-Ferry and Sapir (2006) give the following assessment, when they touch upon the sense of ownership of the wider public, in the context of media coverage of the National Reform Programmes: The media attention received by the Lisbon strategy appears to derive mainly from its overall goals and each country s relative performance in achieving them, rather than from the innovations of Lisbon 2. This tentative conclusion is reinforced by the impression that even the media savvy national elites seem to be mostly unaware of the very existence of the NRPs, let alone the process of their preparation. National surveys would probably reveal, therefore, that the wider pubic in most member states has remained entirely unaware of the NRP process. 38 This tells us that insufficient communication is pervasive, while all citizens need to be well-informed about the costs and benefits of the choices they are making. The Member States and the EU need political leaders who inform their citizens, instead of appeasing them by promising protection from globalisation without telling them about the cost of protection. They need politicians who have the courage to tell citizens that there are costs to protection, so that the citizens can see both the benefits and costs of accepting change. Only by seeing both the benefits and costs of globalisation can EU citizens see the correct trade-off they face, and make an informed choice. The EU citizens have responsibilities, too. After all, the politicians are only behaving in ways that keep them in office. If the EU citizens wished to enjoy cheaper consumer goods and more convenience, they need to accept the competition that comes with opening themselves up to the rest of the world. If they insisted on keeping their current wages, working hours and holidays, they need to be ready to see a fall in their standard of living. If EU citizens chose to preserve the present degree of worker protection, they will have to face the problem of exclusion of some workers from the labour market. 39 Some argue that one source of lower productivity in the EU (in the retail, wholesale and financial sectors, compared to the USA) is the management style which tries to avoid unemploy- 38 Pisani-Ferry and Sapir (ibid.), p European (2006c) points out that some Member States employment policies discriminate against the unemployed, by protecting the employed.

17 SAHOKO KAJI 25 ment and bankruptcies of small and medium sized companies at all cost. 40 If this is the case, corporate culture and established relationships between social partners may have to be changed. The trade-offs are ineluctable, and the EU citizens are responsible for admitting to these trade-offs and making informed choices. They need to vote, and vote for the politicians who are not afraid to encourage such informed choices. Nobody can have the cake (refuse to change anything) and eat it (expect prosperity and stability to continue) too. 3. Some Prospects The re-launch of Lisbon should be seen as a wake-up call to EU citizens. Until EU citizens come to have an increased sense of ownership of Lisbon, the ultimate goal of Lisbon is unlikely to be reached. 41 For policies at the microeconomic level to be effective, the responses also have to happen at the microeconomic level. And because the changes needed for Lisbon are structural, policies have to be effective in the long-term. For policies to be effective in the long-term, the policies must be supported by citizens in the long-term. Otherwise, politicians who support such policies will be voted out of office, and consensus will not be built locally where it is needed. And in as much as citizens in some Member States accept such responsibilities more than in others, the relative success in the re-launch will vary across the Member States. 42 The French Presidential elections of May 2007 does send some positive signals. Voter participation was high, and the new President is someone that has called for a rupture with the past. As prime minister-designate, Francois Fillon stated that (t)he truth is not always rosy and promised a government free of useless protocol. 43 Some point out, however, that the demographics of the French voters who voted for and against change points to a return to the left in the near future. 44 This reminds us that it is not enough for today s citizens to have an increased sense of ownership. A successive generation of citizens must have that. As for the recent economic recovery in Germany, the social partners may already have played a role in bringing this recovery about by recognising the need for change. But whether the nature of the change is such that it supports only a 40 Cf. Giles (2006) and its references. Sapir (2007) reports that during the period 1975~1995 productivity increased more rapidly in Europe than in the USA but labour input increased more slowly, while during 1995~2005 labour input increased faster and labour productivity grew more slowly in Europe than in the USA. 41 European Council (2007, p. 3) states that the European Council emphasises the significance of exchanging best practices in the context of multilateral surveillance and calls for increased cooperation between Lisbon coordinators. It confirms the importance of a stronger sense of ownership by civil society, social partners, regions and local authorities, which are all key elements in the achievement of the objectives of the Strategy. In this context further efforts should be made in order to improve communication. The European Council underlines the conclusion of the Tripartite Social Summit of 8 March 2007 regarding the key role of social partners and the necessity of their ongoing and active contribution towards the Lisbon objectives. 42 An anonymous referee directs our attention to the European envy effect argument, put forward by Mr Holger Schmieding ( 43 Hall (2007). 44 See Munchau (2007).