The Stockholm European
Council was supposed to focus on Europe's "new" economy and the goal
of creating "the world's most dynamic and competitive knowledge-based economy
by 2010". In the event, age-old problems in agriculture and the Balkans
grabbed the headlines. EU leaders left Stockholm with the bare minimum that
allows them to say plausibly that the economic reform process, launched a year
ago in Lisbon, remains on track. There is still a broad convergence in long-term
thinking on economic reform, but it is now only too apparent that short-term
domestic political considerations can easily block progress.
France's decision to veto the setting of a date for opening the energy sector
was a major setback. The Germans were reluctant to force the issue, not wanting
another row with France so soon after last December's acrimonious Nice summit.
But France's victory may prove short-lived. Energy policy is subject to qualified
majority voting, and the Commission's proposals to liberalise this sector stand
a good chance of moving forward later in the year. That would bring evident
benefits to businesses and households across the continent.
As for the Lisbon target of promoting innovation, the Commission's Innovation
Scoreboard (to be launched in June) will give scores for member-state performance
on criteria such as patent generation and spending on R&D and ICT. This
should encourage the exchange of best practice and help to raise the EU's overall
performance. Nevertheless the lack of progress on establishing the Community
Patent - because of arguments over which languages are important - is a major
obstacle to realising the EU's potential in frontier technologies. It currently
takes twice as long and costs five times as much to protect intellectual property
in the EU as in the US.
One real breakthrough was the summit's adoption of the Lamfalussy Report on
the regulation of financial markets. The relatively high cost of capital in
Europe, due partly to the fragmented nature of the financial services markets,
has been a major barrier to growth. The report recognises that previous EU attempts
to regulate fast-moving global industries have been at best ineffectual and
at worst damaging to competitiveness. So Lamfalussy has proposed the establishment
of a Securities Committee, made up of senior officials from the member-states,
which would speedily draft appropriate regulations within an overall framework
set by EU legislation. Despite some continuing reservations in the European
Parliament, the commitment of the 15 governments to this new procedure means
that there is a good chance of implementing the EU's Financial Services Action
Plan by 2005. EU leaders also pledged to reach agreement on a single format
for stock market prospectuses, and on common accounting standards by 2003.
The thinking behind the Lamfalussy Report may have reverberations beyond financial
markets. When the EU reviews broader issues of European governance this summer,
there may well be suggestions that the Securities Committee could serve as a
model for other areas. Telecoms, for example, could also benefit from speedier
rule-making procedures and the involvement of national regulators.
Before the end of the year, the EU will return to two areas of unfinished business
from Stockholm. One is the full liberalisation of postal services. Achieving
real competition in mail delivery would be a boon to e-commerce. The other is
the creation of a "Single European Sky", through the integration of
over-burdened national air traffic control systems. Delays in European air travel
are estimated to cost consumers and businesses 5 billion euros a year.
Goran Persson, the Swedish prime minister and summit host, could not disguise
his disappointment at the modest outcomes of the Stockholm meeting. Undoubtedly
the political dynamics of Stockholm were different from those at Lisbon 12 months
previously. Then, Europe's leaders looked across the Atlantic and beheld the
wonders of the American economic miracle, with levels of growth and job creation
they could only dream of. Now they see a stock market in decline and blackouts
in California. It is not hard to find Schadenfreude in some EU capitals, even
though the slowdown threatens European growth rates.
By next spring's summit on economic reform, to be held in Barcelona, it will
be easier to judge whether the process that began in Lisbon still has momentum.
Jose Maria Aznar, the Spanish prime minister - and an ardent advocate of economic
reform - will preside over a summit that will focus, among other things, on
labour markets. The Commission will produce an Action Plan on how to improve
the regime on the mutual recognition of qualifications, and on how to make supplementary
pensions more portable. In Barcelona the Council and the Commission will report
on how best to increase labour force participation, with the emphasis on curbing
disincentives in the tax and benefits system for people to take up jobs (an
area where France has made much progress in recent years).
Advances in such areas - which can only come about through peer-group pressure
rather than centrally-set rules - is not going to be quick or spectacular. In
sovereignty-sensitive areas such as labour markets, the EU has to move forward
through this "open method of co-ordination" or not at all. The complications
of this method should not be an excuse for immobility. As commissioner Frits
Bolkestein has put it, the EU needs "less poetry and more motion".
