Austria, Netherlands, Estonia 'heroes' of EU reform

by Jan Strupczewski

Published in on the Guardian website, 3 March 2008

Austria, the Netherlands and Estonia are "heroes" of European Union reforms to boost economic growth and employment while Greece and Italy share the symbolic title of "villain", an annual study released on Monday showed.

The study, by the London-based Centre for European Reform (CER), looks at reforms to help the 27-nation bloc pay for generous social policies in the future as its workforce ages and companies struggle against rising Asian competition. An initial, more ambitious reform agenda first agreed by EU leaders in Lisbon in 2000 was slimmed down in 2005 due to disappointing progress in the first five years.

Denmark and Sweden lead in the ranking as last year, but the CER noted weak productivity growth in Denmark and low business investment, exceptionally high youth unemployment and large numbers of people on long-term sick leave in Sweden.

"While they still top the rankings, Denmark and Sweden are not the heroes of the scorecard," the CER study said. "Austria and the Netherlands, ranked third and fourth, are this year's heroes. Estonia is our final hero," it said.

It praised the Netherlands for combining high productivity with high employment and Austria for decisive improvement of its labour market and business environment. Estonia also scored high on the employment market as well as for showing rapid growth in gross domestic product per capita, Internet usage and firms moving up the value chain.

ITALY, GREECE LAMBASTED
Even though not lowest in the ranking, Italy and Greece received "villain" status. "Italy is going to have to raise its game to avoid a further decline in its relative prosperity within the EU," it said, noting that Italy in 1997 was richer than France and Britain but now poorer than both and below Spain in terms of GDP per capita. "It scores poorly on just about every indicator, ranking 23rd overall," the CER said.

"The outgoing government of Romano Prodi made very tentative moves to introduce more competition in previously regulated markets and liberalise some professions. But it failed to build on the limited labour market reforms introduced by the previous government of Silvio Berlusconi," it said.
Greece had an even worse review. The CER said the country was slow to adopt new technologies, and shortcomings in its education system meant that was unlikely to change soon. It said Greek governments had consistently been among the slowest in the EU to liberalise product markets, and the country had one of the least favourable regulatory environments for business in the bloc.

It also said Greece lacked the human capital to flourish in a world where knowledge would increasingly determine the wealth of economies. Not only was its labour market highly restrictive, but overall skill levels were low.

"Unlike the new member states, Greece has had plenty of time to take advantage of the Lisbon agenda, but it has wasted many opportunities. For this reason, it joins Italy as one of the two villains of the 2008 scorecard," the CER said. The EU's other big economies - Germany, France, Britain and Spain - were a mixed bag but all should do more to reform, the CER said. Poland and Malta came bottom of the rankings.

The CER scorecard is a rare example of naming those in the EU that do not implement agreed reforms, something the European Commission has been keen to avoid despite claims from think tanks that such a practice would boost performance. EU leaders are to take stock on March 14 of the implementation of the jobs and growth reforms amid signs that past efforts are to some extent paying off.

The slimmed-down reform agenda from 2005 aims to bring into the workforce more women, youths and older people, overhaul pension and health-care systems and keep people working longer and more productively. It also aims to promote new technology, research and development and further liberalise the internal EU market.