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European Union

Europe's Economic Ambitions in Shambles

Strategic Insights

— 2 min read

Four years after the Lisbon summit, the European Union is still lagging behind the US in key economic areas, including growth rate, productivity, and employment. The EU's ambition to become the world's most competitive and dynamic knowledge-based economy by 2010 seems increasingly unattainable. Despite promises of reform, the EU's economic performance has been described as mediocre, with the Union's rate of economic growth stuck at 2 per cent, far short of the target of 3 per cent per year.

Key Takeaways:

  • The EU's rate of economic growth has been stuck at 2 per cent, far short of the target of 3 per cent per year.
  • Productivity in the EU has slipped, with a growth rate of 0.5-1 per cent, compared to 2 per cent in the US.
  • Employment in the EU has risen to 64.3 per cent, but is unlikely to reach the Union's interim target of 67 per cent next year, let alone the final target of 70 per cent in 2010.
  • The EU's efforts to catch up with the US are at a standstill, with the Union's gross domestic product per head stuck at 72 per cent of the US level.
  • The Lisbon agenda has become mired in contradictions, with the EU struggling to reconcile its twin ambitions of becoming an economic powerhouse while enjoying strong environmental and social protection.
  • Industry leaders say that Brussels' regulatory zeal is hurting competitiveness, with the number of regulations growing exponentially.
  • The financial services industry is concerned about the implementation of the EU's Financial Services Action plan, which has been watered down or altered in many instances.

Statistics:

  • 2.5m jobs created by the single market
  • Every EU household is made richer by around Euros 6,000 (Dollars 7,400) as a result of the single market
  • 80 per cent of intra-EU commerce is still old-fashioned trade in goods
  • 40 per cent of all EU laws relating to Lisbon have yet to be transposed by the member states
  • Over 1,000 legal challenges outstanding by the Commission against national capitals
  • EU's rate of economic growth: 2 per cent
  • EU's target rate of economic growth: 3 per cent per year
  • Productivity growth rate in the EU: 0.5-1 per cent
  • Productivity growth rate in the US: 2 per cent
  • EU's employment rate: 64.3 per cent
  • EU's interim target for employment rate: 67 per cent
  • EU's final target for employment rate: 70 per cent

Sources:

  • European Commission report, January 2004
  • Alasdair Murray, Centre for European Reform, study on the Lisbon process, published this month
  • Frits Bolkestein, EU single market Commissioner, speech this month
  • Callum McCarthy, chairman of the UK's Financial Services Authority, speech this month
  • Bernd Dittmann, EU expert at BDI, the German Industry Federation, speech this month
  • Mario Monti, EU competition commissioner, speech last year
  • Pascal Lamy, EU trade commissioner, speech last month.

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