The Lisbon Agenda is Off Course
30 Mar 2004
Challenges for an Enlarged EU, Chairpersons of EU Foreign Affairs Committee, Dublin Castle 30 March 2004
Address by David Begg, General Secretary, Irish Congress of Trade Unions
Employment has improved from 62.5 per cent in 1999 to 64.3 per cent in 2002 but it is not enough to reach the interim target of 67 per cent in 2005, with the ultimate objective of reaching 70 per cent by 2010. There is a sub-target of achieving a participation rate of 60 per cent for women by that time.
In an article in the Financial Times last week it was suggested that the Lisbon Agenda has become caught up in a fierce debate between economy and liberals and those who believe social and environmental matters should be to the fore. I think it could be argued that it was always thus. The very objective of the Lisbon Agenda "to make Europe the most competitive and dynamic and knowledge based economy in the world be 2010..... and to provide more and better jobs" is reflective of this liberal social democratic split.
The European Trade Union Confederation takes a pragmatic view. We believe that on both the supply side and the demand side questions have to be dealt with. In relation to the demand side the role of the European Central Bank is crucial. The banks' conservative approach to interest rate reductions has made it difficult to stimulate growth in the European economy and the Stability and Growth Pact has really been a failure. One problem we have in Europe is that there are 3.8 billion Euros tied up in savings and a more confident population of consumers would spend that money with all the attendant benefits that it would bring. Of course, an ageing population may be more concerned about savings and this is a fact of the demographics of Europe. Attempts to stimulate the Japanese economy for a number of years were unsuccessful because of its ageing population and the concern they had with security and savings.
There is a conundrum on the supply side in that a number of European countries have high levels of unemployment but when economic activity begins to pick up and vacancies are created, it becomes difficult to fill those vacancies thereby choking off the nascent recovery. At one level it is perplexing that unemployment should remain high while vacancies remain unfilled and the general view is that reform of the welfare code is necessary to alter this situation. On the trade union side we take the view that a more creative approach to active labour market interventions is necessary. Talk about "flexibility" and "making work pay" tend to be seen as coercive prescriptions for forcing people into jobs that may not suit them. Popular resistance to this type of approach should not be underestimated. The difficulties with the agenda 2010 approach in Germany and the recent election results in France give testimony to the concern of the public about reform.
There is also the problem of insecurity created by supply side interventions eroding consumer confidence because this in turn impacts on demand. It has been estimated that about 70 per cent of economic activity is related to consumers and governments need to be careful about supply side policies which have unintended effects on the demand side.
Out of this conundrum has come the concept of "flexi security" - an approach which seeks to achieve flexibility in the labour market while reassuring people about their employment and their future. The case for "reform partnership" put forward by the Irish presidency last week, and as recommended in the Wim Kok report on employment, is something which we support. Mr Wim Kok has also been appointed to head up a new committee to monitor progress on the implementation of the Lisbon Strategy. While we have some reservations about the establishment of another committee, which we feel might have a focus on the purely competitiveness aspect of the strategy, we do have a lot of confidence in Mr Kok. His report on employment was very impressive and it was an holistic analysis of all aspects of the conditions of the labour market, recognising that labour supply issues and issues of caring for children and older people in society have to be taken together.
I wish to return now to the different philosophical approaches to the future of Europe. People of a liberal persuasion are very preoccupied with the performance of the United States and see the free market model as being appropriate for Europe in the future. This would not be my viewpoint. The social market economy model is, in my opinion, the only approach capable of securing the support of the peoples of Europe. Already there is considerable amount of disaffection with the European project and it would be most unwise to exacerbate that. Moreover, it has to be taken into account that the US recovery has been powered by the biggest monetary and fiscal stimulus in history but has resulted in massive fiscal and current account deficits. The imbalance in the economy could unwind in ways that could be quite damaging. What I mean is this; the price of oil is now at an all time high of $38 per barrel of Brent crude and this price is at least driven in part by the weakness of the Dollar. In order to maintain their income streams the oil producing countries have increased prices as the Dollar has dropped in value. However, the increase in the price of oil increases the current account deficit for the United States putting further downward pressure on the Dollar. This has the potential to go into a cycle of decline with lower Dollar values further pushing up the price of oil, further increasing the deficit and further reducing the value of the Dollar. If that happens, the Federal Reserve Board will have to act at some point to increase interest rates. If interest rates are increased it could choke off the economic recovery in the United States with potential serious implications for the global economy. In that situation the United States could become less an object of admiration than a cautionary tale. Europeans should look for solutions closer to home.
It seems to me that a core finding of the Wim Kok report is that the Nordic countries and the Netherlands, on any measures of economic efficiency, including productivity, research and innovation, skills enhancement or flexibility are well ahead of the United States. Therefore, my conclusion is that Europe as such does not have a competitiveness problem but individual countries do.
The article in the Financial Times of last Thursday also mentioned that Ireland and Finland were two countries where economic efficiency and social cohesion could be achieved in tandem. I think that the article may have been more generous to us than the evidence would suggest in relation to social cohesion. Nevertheless, social partnership in Ireland has achieved a great deal in the economics sphere. Many of the structural problems which oppressed the economy in the 1980's have been dealt with and we have been able to move from a position of having 17 per cent unemployment to a level of 4.7 per cent now. In the same period GDP per capita has moved from being 60 per cent of the European Union average to being in excess of the European Union average. Social partnership has been good for Ireland and for that reason I would tend to see it, and the Irish presidency proposal, as a possible way in which structural problems in the European economies could be addressed without the social consequences which attend purely supply side solutions to these problems. But social partnership is something which needs constant attention. It needs a lot of work, it needs consistency and it needs commitment. It cannot be turned on and off at will.
In conclusion I believe that the achievement of the Lisbon Agenda is very important to the future of Europe but it must be achieved in full. If we pursue only those questions of economic growth and competitiveness it will leave us in a situation where the conditions of European citizens will be less good than they are today. The whole problem of globalisation which we are trying to deal with is one where inequality is a permanent threat. The challenge for Europe in this age is to try to tame globalisation and harness it to being a positive force for the citizens of Europe. The revitalisation of the Lisbon project has to be seen in that context.