08 May 2010 Project Europe 2030: Challenges and Opportunities
A report to the European Council by the Reflection Group on the Future of the EU 2030
FROM MEMBERS OF THE REFLECTION GROUP
TO THE EUROPEAN COUNCIL
Dear President and Members of the European Council,
We have the honour of submitting the report requested by the European Council, at its meeting in Brussels on
14 December 2007, on the challenges that are likely to face the EU in 2030 and how we might address them.
This Report reflects the work of a diverse group of individuals with diverse priorities and interests. It is the outcome of lengthy debates and discussions, and as such it represents both consensus and compromise. Not all the proposals have every Member’s support, but every Member supports the majority of its contents.
The uncertainty which characterises our times has made the task entrusted to us particularly difficult. We were forced to base our analysis only on those long-term trends that are easier to discern.
Our findings are reassuring neither to the Union nor to our citizens: a global economic crisis; States coming to the rescue of banks; ageing populations threatening the competitiveness of our economies and the sustainability of our social models; downward pressure on costs and wages; the challenges of climate change and increasing energy dependence; and the Eastward shift in the global distribution of production and savings. And on top of this, the threats of terrorism, organised crime and the proliferation of weapons of mass destruction hang over us.
Will the EU be able to maintain and increase its level of prosperity in this changing world? Will it be able to promote and defend Europe’s values and interests?
Our answer is positive. The EU can be an agent of change in the world, a trend-setter, and not just a passive witness. But this will only be possible if we work together; the challenges ahead are too large for any European country to address on their own. Our ability to influence developments beyond our borders will in turn depend on our capacity to secure solid growth and internal cohesion within the Union. This is the conclusion reached by our Reflection Group, following intensive deliberations and consultations with numerous experts and institutions.
All our members agree on one fundamental issue: Europe is currently at a turning point in its history. We will only overcome the challenges which lie ahead if all of us - politicians, citizens, employers and employees - are able to pull together with a new common purpose defined by the needs of the current age.
Since our group was established, Europe has seen a number of important developments, including the institutional crisis caused by the rejection of the Lisbon Treaty, and the recent financial crisis which has triggered a global recession.
The successful ratification of the Lisbon Treaty allowed us to end a long period of introspection which had distracted the Union from the major challenges affecting our future.
Unfortunately, the financial crisis, which was the result of shortcomings in the functioning and supervision of our financial institutions, is still with us today. The situation within the Union, and therefore our own reflections, have been deeply affected by the social, economic and political ramifications of the crisis. At this crucial juncture, the EU needs to act decisively and together in avoiding protectionist temptations.
This crisis, whose origins lie on the other side of the Atlantic, has affected Europe more than any other region of the world by uncovering structural weaknesses in the European economy that have long been diagnosed but too often ignored.
The crisis has therefore acted as a wake-up call for Europe to respond to the changing global order. As with all transformations, the emerging order will result in new winners and losers. If Europe does not want to be among the losers, it needs to look outwards and embark on an ambitious long-term reform programme for the next twenty years.
EU leaders must continue adopting measures to overcome the current crisis but these must be connected to the medium and long-term reforms which the Union needs.
We speak of the Union because of our Single Market, because of our common currency and our stability and growth pact which mean we are interdependent. Europeans must tackle the crisis together, or each see our respective initiatives fail.
In order to exit fully from the crisis, we must continue the stimulus measures until our economies can function on their own. If spending is cut too early, our recovery could slip into reverse. Our top priority must remain creating jobs and growth. And those Member States that can no longer afford to spend, due to costly rescue operations, rising social expenditure and declining sources of revenue, will have to rely on the EU and other Member States to take the lead in setting up the conditions for economic recovery.
Strengthening economic governance in the EU is urgently needed if we are to avoid the asymmetric shocks which derive from the co-existence of our monetary union and single market with divergent economic policies. The origins of the crisis had little to do with the Euro and Stability and Growth Pact, but these mechanisms have not been sufficient to ensure economic convergence during the crisis. The EU needs to find solutions to the existing imbalances between Member States, by examining and correcting the losses in competitiveness reflected in balance of payments and current account deficits. These issues need to be included in the Union’s convergence criteria and an instrument for ensuring monetary stability is needed to confront unforeseen crises.
If the EU is to avoid a repeat of the crisis, it must urgently undertake reforms to the functioning and supervision of our financial institutions. Today, these financial institutions have changed few of the practices which led to the crisis, except to significantly reduce their lending. It would be desirable for these reforms to be coordinated among the G20, but until this happens, the EU must develop its own regulatory norms and mechanisms for control and supervision. Our citizens will simply not tolerate another rescue operation on the scale we have witnessed.
Looking to the 2030 horizon, Europeans will need a highly competitive and sustainable social market economy in order to maintain social cohesion and fight against climate change.
This will require an ambitious reform programme with clear priorities and much more effective enforcement mechanisms than the Open Method of Coordination can provide. In this context, we assume that the Commission’s new Europe 2020 strategy will form part of this major endeavour.
The EU must therefore implement without further delay the structural reforms that are still pending from the Lisbon Agenda. This will require reforming the new strategy’s implementation mechanisms, by means of a more effective system of incentives, to ensure that the objectives decided by the European Council and other European institutions are actually met.
Human capital is the key strategic instrument for ensuring success in the global economy. And yet, Europe has lost considerable ground in the race to a knowledge economy. Catching up will require a coordinated effort. Member States must mobilise the resources they agreed to invest in R&D, with the help of the private sector, and reform all aspects of education, including professional training. The Union must also act through its own revised budgetary instruments, while making better use of the European Investment Bank and the European Investment Fund. Finally, we need to consider the possibility of opening up new sources of revenue, for instance through the imposition of a carbon tax.
The EU needs to implement a common energy policy with both internal and external dimensions that will allow us to achieve greater energy efficiency and savings of the kind advocated in the Europe2020 strategy, and diversify our energy supplies from third countries. Europeans also need to embark on a serious discussion about the need for safe nuclear energy in Europe, and to define the contours of a permanent system of incentives for the development of alternative energy sources.
The EU must continue leading the fight against climate change. Yet, in order to be more effective and relevant in the emerging world order it must avoid repeating the mistakes we made in Copenhagen. It will be necessary to develop a truly common negotiation strategy which would allow us to defend our interests better.
Europeans must tackle our demographic challenge. If urgent measures are not taken, our ageing societies will put unsustainable pressure on our pension, health and welfare systems, and undermine our economic competitiveness. Priority measures must include increasing the proportion of women in the workforce; facilitating a better work-life balance; reforming our approach to retirement, so that it is seen as a right and not an obligation; and developing a more pro-active immigration policy suited to our demographic and labour market needs.
The EU must strengthen the Single Market against temptations of economic nationalism and complete it to include services, the digital society and other sectors, which are likely to become the main drivers of growth and job creation in a market of 500 million users and consumers. The strengthening and completion of the Single Market should be accompanied by improved tax coordination.
Europeans must reform the labour market and modernise our corporate governance practices. If we are to fully realise the potential of the technological revolution, we must make major changes to our labour market structures. Some Member States have already implemented successful reforms based on the model of flexicurity; we have to learn from these experiences while adapting them to our different national circumstances. We must increase the employability of our workers and the flexibility of our companies in an economy that is in constant flux. Improving labour productivity must become a priority, and productivity gains must be made directly proportionate to levels of income.
Addressing these challenges will not require changes to the Treaty. Nor, in accordance with our mandate, does the report rigorously distinguish between the different levels of power or at what level action has to be taken. We are not concerned about who should act, but rather which is the right course of action to take, and without further delay. This also means that it is urgent to assess existing budgetary levels and priorities, including both the funding earmarked by the Union and that assigned by the Member States in pursuit of priorities agreed at EU level. When ambitious objectives are pursued with limited resources and weak implementation mechanisms, we have a recipe for disappointment.
If the EU is to achieve its goals, the European Council and the Eurogroup will need to strengthen their leadership role, in coordination with the Commission and the European Parliament.
As we embark on these reforms, we must take full advantage of the new tools contained in the Treaty of Lisbon to develop greater citizen participation in the Union; an effective internal and external security policy; more solid relationships with our neighbours; and the ability to represent our interests abroad.
The EU project should also become a citizens’ project. Our citizens are convinced, often more than their leaders, as surveys show, that it is in the interest of the Union and its Member States for the EU to become a more relevant and effective global player, and to speak with one voice in its efforts to promote our common interests.
Our citizens demand greater European coordination in the fight against organized crime and terrorism, because they know this is the only way to address these challenges in an area where people are free to move across borders.
Our citizens realize that our wellbeing, development and security are linked to those of our neighbours, with whom we must develop especially close cooperation in pursuit of our common interests.
Our citizens know that our foreign policies will be more powerful and effective if we are able to act together in defence of our interests, and not in a show of disunity where each Member State competes for a starring role in the style of bygone years.
Our citizens want the European Union to serve their interests, and therefore expect their social, civil, family and employment rights to accompany them wherever they may move within the Union. It is by guaranteeing the portability of social rights that the Union will become more meaningful to our citizens.
All of this calls for a new compact between the European institutions and economic and social actors; and between different levels of power – national, regional and local. Above all, the situation calls for strong political leadership, a form of leadership marked by the capacity to sustain an honest and fruitful dialogue with citizens and to govern in partnership. Ensuring the support of our citizens will be vital, not only for the Union to withstand the social and economic impact of the crisis but also for it to undertake the structural reforms needed if Europe is to emerge stronger in the future.
The EU is more than a common market. It is also a Union of values. With the support of the citizens of Europe the EU can lead efforts to address major global challenges. Confronted by a crisis which they did not create, our citizens will only renew their belief in the European project if their leaders are honest with them about the scale of the challenges ahead, and if they are called upon to make efforts comparable to those that brought prosperity to Europe after the Second World War.
Sincerely yours,
Members of the Reflection Group
Felipe González Márquez, Chairman, Vaira Vike-Freiberga, Vice-Chair, Jorma Ollila, Vice-Chair, Lykke Friis (until her nomination as Minister for Climate and Energy on 24 November 2009), Rem Koolhaas, Richard Lambert, Mario Monti, Rainer Münz, Kalypso Nicolaïdis, Nicole Notat, Wolfgang Schuster, Lech Walesa. |
