PURPOSE: adoption of recommendations on the broad guidelines for the economic policies of the Member States and the Community (2005-2008).

LEGISLATIVE ACT: Council Recommendation 2005/601/EC

CONTENT: The European Council of March 2005 relaunched the Lisbon strategy by refocusing on growth and employment in Europe1. By taking this decision, the Heads of State and Government delivered a clear message concerning the Union’s priorities over the next few years. Europe must focus its policies further on growth and employment to achieve the Lisbon goals, against a sound macro-economic policy background and within a framework aimed at social cohesion and environmental sustainability, which are vital pillars of the Lisbon strategy.

Particular attention needs to be paid to the delivery of the Lisbon agenda. In order to achieve these objectives, the Union must do more to mobilise all the resources at national and Community levels so that their synergies can be put to more effective use. Furthermore, the involvement of relevant stakeholders can help to raise awareness of the need for growth and stability orientated macroeconomic policies and for structural reforms, improve the quality of implementation, and increase the sense of ownership of the Lisbon strategy.

To this end, these Broad economic policy guidelines (BEPGs) reflect the new start for the Lisbon strategy and concentrate on the contribution of economic policies to higher growth and more jobs. Section A of these BEPGs deals with the contribution that macroeconomic policies can make in this respect. Section B focuses on the measures and policies that the Member States should carry out in order to boost knowledge and innovation for growth and to make Europe a more attractive place to invest and work. In line with the conclusions of the Brussels European Council (22 and 23 March 2005), as a general instrument for coordinating economic policies, the BEPGs should continue to embrace the whole range of macroeconomic and microeconomic policies, as well as employment policy insofar as this interacts with those policies; the BEPGs will ensure general economic consistency between the three strands of the strategy. The existing multilateral surveillance arrangements for the BEPGs will continue to apply.

These guidelines are applicable to all Member States and to the Community. They should foster coherence of reform measures included in the National Reform Programmes established by Member States and will be complemented by the Lisbon Community Programme 2005-2008 covering all action to be undertaken at Community level in the interest of growth and employment. Implementation of all relevant aspects of these guidelines should take into account gender mainstreaming.

The European Parliament adopted the own-initiative report drafted by Robert GOEBBELS (PES, LU)

by 388 votes to 69 and 45 abstentions. (Please see the summary of 10/05/2005.) Parliament called on the Member States to implement structural reforms that help stimulate investment and therefore make full use of the low interest rates guaranteed by the ECB. Increased labour productivity, efforts to strengthen competitiveness, investment and growth are prerequisites for higher wages and an equitable distribution of the fruits of growth, employment and social cohesion.

Amended guidelines include reform of the tax systems, inter alia by reducing the burden on low wage earners. In addition, special attention must be given to the flexibility and security of the labour market.

The fulfilment of the Single Market, labour market reforms and a strengthening of the social partners' responsibility for low unemployment by decentralised wage negotiations are crucial to increase wages and reduce differences in income, while remaining consistent with the evolution of productivity and competitiveness. Member States should take measures to tackle the stigmatisation of young entrepreneurs who not been wholly successful and help them to start again.

Finally, Parliament felt that Member States should use environmental policies more pro-actively to enhance growth and employment by developing eco-technology and eco-innovation, especially investments needed to meet the Kyoto Protocol targets, including the efficient use of traditional forms of energy, especially those which do not pose a risk to the objectives of the Kyoto Protocol.

The European Parliament adopted the own-initiative report drafted by Robert GOEBBELS (PES, LU)

by 388 votes to 69 and 45 abstentions. (Please see the summary of 10/05/2005.) Parliament called on the Member States to implement structural reforms that help stimulate investment and therefore make full use of the low interest rates guaranteed by the ECB. Increased labour productivity, efforts to strengthen competitiveness, investment and growth are prerequisites for higher wages and an equitable distribution of the fruits of growth, employment and social cohesion.

Amended guidelines include reform of the tax systems, inter alia by reducing the burden on low wage earners. In addition, special attention must be given to the flexibility and security of the labour market.

The fulfilment of the Single Market, labour market reforms and a strengthening of the social partners' responsibility for low unemployment by decentralised wage negotiations are crucial to increase wages and reduce differences in income, while remaining consistent with the evolution of productivity and competitiveness. Member States should take measures to tackle the stigmatisation of young entrepreneurs who not been wholly successful and help them to start again.

Finally, Parliament felt that Member States should use environmental policies more pro-actively to enhance growth and employment by developing eco-technology and eco-innovation, especially investments needed to meet the Kyoto Protocol targets, including the efficient use of traditional forms of energy, especially those which do not pose a risk to the objectives of the Kyoto Protocol.

The Council held a detailed discussion on the Commission's recommendations concerning the microeconomic aspect of the Integrated Guidelines (IG) for Growth and Jobs. The Council welcomes the Commission's recommendation on the IGs in relation to micro-economic aspects. It underlines the need for flexibility in order to take into account national specificities. The Council also stresses the need for close coordination (at national and Community level) and consistency between micro-economic and macro-economic policies and the employment guidelines.

Consistency is also required in the implementation of the IGs.

Regarding the content of the micro-economic guidelines, the following priorities were identified:

- Facilitating all forms of innovation.

- Investment in R&D. In this regard, the 3% objective was confirmed.

- Contributing to a strong industrial base, both in traditional and high technology sectors. Action is required at both horizontal and sectoral level.

- The achievement of the Internal Market is another major priority for creating jobs and meeting the challenges of globalisation.

Lastly, creating the conditions for attracting investment is an objective supported by all, in particular as regards infrastructure. Action is required, inter alia, to improve the quality of our legislation, facilitate access to financing and encourage entrepreneurship. The Council highlighted the key role of SMEs in the European economy.

Regarding the process as such, the Council agrees that one of the main weaknesses of the first stage of the Lisbon strategy was the lack of national ownership. It was decided to redouble efforts at implementation at national level of the "refocused" Lisbon agenda. The Council approves the swift implementation of the National Action Programmes (NAPs) with a view to encouraging the Lisbon process. It believes that the NAPs should be presented in autumn 2005 so that national parliaments and the social partners can actively cooperate. It underlines the importance of mutually supportive national and Community programmes. The Council noted with interest the Commission's ideas regarding the development of a common methodology concerning the structure of the NAPs. The Council also decided to ensure regular follow-up of the new strategy, especially as regards the national action plans and, if necessary, to make adjustments and strengthen its cooperation with the ECOFIN Council in the context of the IGs.

The committee adopted the own-initiative report by Robert GOEBBELS (PES, LU) on the Commission's proposals for broad economic policy guidelines for the Member States.

Although they welcomed the fact that the economic policy guidelines had been integrated with the employment guidelines, MEPs were unhappy that the two documents did not pay more attention to the environment. They also said the guidelines were excessively general in nature and encouraged the Commission to produce a tailored set of recommendations for each Member State . Moreover, they felt that coordinated budgetary policies and monetary policy needed to give equal weight to maintaining price stability and meeting the EU's other goals.

The committee said that the EU's major share of global trade belied "methodologically dubious" talk of relative decline in productivity. It stressed the need to focus on modernising the economy, knowledge and social welfare as well as institutional arrangements. It also noted that labour productivity, growth and investments were prerequisites for higher wages and an equitable distribution of the fruits of growth. It stressed the importance of job creation in the personal service sector and noted the importance of non-profit enterprises in providing such services.

The committee proposed a range of specific changes to the Commission's draft guidelines:

- Member States were urged to redirect public spending towards budget categories that support the objective of the Lisbon Strategy;

- there should be measures to stimulate private investment, creating a fiscal environment favourable to SMEs and job creation. This could in part be achieved by ensuring greater access to microcredit schemes and risk capital, and reform of the tax system, including the harmonisation of the corporate tax base. MEPs also wanted to reduce the stigma attached to young entrepreneurs who do not succeed in their first venture;

- there were calls for the opening up of protected markets, and greater flexibility in the labour market, and for a macroeconomic policy which would help restore consumer confidence and spending;

- to stimulate domestic demand, Member States should ensure better coordination of their economic and budgetary policies, initially by harmonising their budgetary timetables. They should also complete the reform of the Stability and Growth Pact and ensure it is strictly applied so as to re-establish confidence;

- Member States should make greater efforts to promote the sciences of the future, including the information society and biotechnology, and promote more objective information on controversial areas of research such as genetic modification and embryonic stem cell research;

- Member States should "use environmental policies more offensively to enhance growth and employment by developing eco-technology", and there should be high quality public investment aimed at decoupling growth from energy consumption and to meet the Kyoto targets.