Select Committee on European Union Sixth Report


Document (5256/00) from the Portuguese Presidency of the Council of the European Union
Lisbon, January 2000

"Employment, economic reforms and social cohesion—towards a Europe based on innovation and knowledge"


1.1.  A new strategic goal

Europe, as it enters the new millennium, demands a new vision and a long-term strategy. While retaining all that is best in its traditions and values, Europe must develop as a civilisation which bases its economic and social prosperity on the advancement of knowledge, cultural diversity and cohesion and which plays an active role in promoting a more balanced, peaceful and harmonious world order.

A new strategic goal needs to be defined for the next ten years: to make the European Union the world's most dynamic and competitive area, based on innovation and knowledge, able to boost economic growth levels with more and better jobs and greater social cohesion.

1.2.  An affirmative strategy

A new period is beginning in the process of European construction. The European Union is gaining substance economically, socially and politically. Initiatives in the area of common foreign and security policy and a common area of freedom, security and justice add to the great achievements of the single market and the single currency. The enlargement process too is now in full swing. These are major historical milestones in the affirmation of the European project.

Despite the economic recovery, serious social problems continue to exist, such as unemployment, social exclusion and the risks of future imbalance in social security systems - which are also the reflection of deeper-seated structural difficulties calling for bold reform. These difficulties are heightened by the unavoidable challenges posed by globalisation, technological change and an ageing population.

The economic and social strategy of the European Union must not be devised solely as a defensive response to these challenges but as an affirmative and creative response to the new opportunities which are emerging. This means redefining Europe's role in the world economy, building a new competitive platform, opening the way for new and better jobs and organising this movement with social cohesion.

It is essential that we regain the conditions of full employment geared to the needs of the emerging society, more open to the options of European women and men. This calls for the creation of a growth dynamic ensuring a sustained average annual rate of at least 3% for the whole of the European Union.

1.3.  Towards a new paradigm

Macro-economic stability is fundamental to consolidate the euro and ensure sustainable growth. It is also essential now to foster a culture of dynamism and entrepreneurship and a culture of strengthened social cohesion. The current improved economic situation is the right time for the necessary reforms to be undertaken.

Throughout the world nations seek to progress while maintaining the difficult balance between openness, diversity and cohesion. In the context of globalisation companies are increasingly defining their strategies in world terms and capital movements are increasingly being controlled by the major financial centres according to the level of national and business competitiveness. This is increasingly dependent on the capacity to provide a swift and innovative response to the more individual needs of the market, and calls for the generation and dissemination of a vast store of knowledge, made possible by the ongoing revolution in the field of information and communications technology.

A new paradigm is emerging, encompassing both a technological revolution and a major change in the social exchange of knowledge affecting all institutions, from schools to businesses and from public services to the media. The transition to an innovation and knowledge-based society and economy is under way.

Innovation and knowledge are increasingly becoming the decisive source of wealth and also the main source of difference between nations, businesses and people. Fresh opportunities for redefining European competitiveness and creating new jobs are thus arising, but also new risks of social exclusion.

1.4.  Coordinating policies

Despite a number of undeniable successes, Europe is lagging behind in this transition to the innovation and knowledge-based economy. This delay is apparent in the production and dissemination of much information technology but also in adaptation of social institutions and relations to the new potential opened up by such technology. While this failure to adapt to the new paradigm continues, there will be a shortfall in economic growth and an increased risk of unemployment and social exclusion.

We need to increase the pace of technological change but also of institutional reform and to learn best practices more quickly, but also to create new best practices. Innovation in political method is also necessary.

An economic and social strategy to renovate the basis for growth in Europe must combine macro-economic policies, economic reform and structural policies, active employment policies and the modernisation of social protection.

Institutional processes for the development of these policies, namely the Cologne process on macro-economic policies, the Cardiff process on structural policies and reforms and the Luxembourg process on employment policies, are now available to the European Union. Our intention is not, therefore, to launch a new Lisbon process.

However, we do see the Lisbon European Council as a particularly good opportunity to create the conditions for:

    (a)  articulating, simplifying and extending the existing processes through improved coordination, in order to achieve a new strategic goal

    (b)  adding new dimensions in key areas such as preparing for an innovation and knowledge-based economy, combating social exclusion and modernising social protection

    (c)  developing coordination methods for formulating, quantifying and monitoring policy objectives and instruments.

These methods may vary. For example: in the case of social protection, joint analysis, cooperation and the exchange of best practices; or, in the case of the information society policy, the definition of European guidelines, national plans and a benchmarking process with reference indicators permitting intra-European comparison and a comparison with other areas. This involves an open method of coordination coupling coherence with respect for national diversity. It also involves learning how to respond more quickly to structural change.

The development of these methods will need backing in its various stages from the European Commission, as an essential catalyst.

Europe must find its own way of constructing an innovation and knowledge-based society and economy. A rich scientific and cultural heritage and an immense capacity for generating new knowledge are available to it. The European way needs to open up opportunities for accessing knowledge, value cultural diversity at its true worth and use this transition in order better to forge a specific European identity and to identify citizens more closely with a European project which they themselves will define.

A way based on the gradual construction of a European public area, the exercise of European citizenship and the promotion of dialogue with the various actors, with the emphasis on social partners. The High Level Forum in June, bringing together representatives of Governments, the European Commission, the European Parliament, social partners, the Economic and Social Committee and the European Central Bank, will reflect this approach.

A major transformation is under way in Europe. It is for us Europeans, with our creativeness and political will, to endeavour to lend it shape and form.


Faced with the digital revolution Europe, like the United States, initially focused its response on information technologies, then on the information highways, and subsequently on the information society. Nowadays it is becoming clear that the problem is not only about information, but about knowledge and innovation, and not only about technological change, but also about economic and social change.

All societies are knowledge-based. What is new is that the information and communication technologies are changing the way in which knowledge is accumulated. More and more knowledge is being built into equipment, products and services. Knowledge is increasingly becoming the raw material of work. However, this newly emerging model is still giving rise to many dilemmas: how to develop the strategic segments of the new value chains taking shape worldwide? How to make room for cultural diversity in the cyberspace now being built? How to stimulate innovation, not only in processes, but also in products and services, in order to boost job creation? How to equip the workforce for much more rapid changes in occupational activities? How to cope with the new social inequalities?

Thus, given the wider implications of the new paradigm and the dilemmas created, the European strategy to be defined must:

    (a)  create a demand-driven dynamic stimulating innovation in products and services, meeting citizens' requirements and influencing technological choices on the supply side;

    (b)  create another competitive platform in infrastructure, hardware and software, available knowledge, entrepreneurial capacity and additional skilled jobs - which requires a major boost of intangible investment;

    (c)  mainstreaming the concern for social inclusion;

    (d)  play a pro-active role in organising cyberspace (on-going negotiations on e-commerce, register of Internet fields).

Moreover, the widespread development of scientific and technical skills must be recognised as a key factor of employment policy in Europe. The consolidation and updating of scientific and technical skills and the widespread acquisition of IT skills are central to the creation of skilled employment and the construction of a competitive economic and social base. In order to achieve these objectives, the importance of a scientific and technological culture for the entire population needs to be highlighted as does the need for far-reaching scientific and technological development supported by a strong and open European R&D policy.

In this wider framework the policy for an information and knowledge-based society cannot be dissociated from S&T policy, nor from the policy on education and training, and must also be linked to the policies aimed at supporting innovation (see point 3).

2.1.  A European policy for an information and knowledge-based society

Regarding the demand for knowledge, this policy must:

    (a)  encourage innovation in products and services with a larger knowledge input which can improve the quality of citizens' lives (in the field of transport, tourism, the environment, public administration, health and assistance to the elderly). This is a wide frontier to be explored with a view to boosting job creation.

    (b)  speed up the diffusion, in companies, of information technologies linked to flexible production systems, e-commerce, teleworking, telemedicine and also of information and knowledge-management tools;

    (c)  improve training for workers to help them cope with information technologies by adopting a reference frame of basic skills, setting up a European network of open learning centres equipped with multimedia technologies and distance teaching facilities and encouraging continuing training and the creation of learning organisations in companies; a "European passport" for information technologies must be a priority objective. The aim is to stimulate the acquisition and certification of basic IT skills by the entire European population and, to make it compulsory, for future generations of students;

    (d)  spread information technologies throughout the education and training system by providing all establishments with Internet-linked computers and suitably trained staff;

    (e)  provide guidance and educational and professional support to encourage everyone to adjust to the new requirements of information and knowledge-based society, giving particular attention to those categories in danger of serious social exclusion;

    (f)  modernise public services by using information technologies to improve citizens' and companies access to both information and the provision of services.

As regards the supply of knowledge, the policy must:

    (a)  bolster European R&D networks through closer cooperation and coordination not only under the Framework Programme but also all other programmes for international scientific and technological cooperation (e.g. EUREKA and COST), those of intergovernmental scientific organisations (ESA, CERN, EMBL, ESRF, etc.) as well as national programmes;

    (b)  develop content industries and set up a content database accessible to the public. Here it will be essential to take measures to promote digitalisation and accessibility of all information of interest to the public, and to make any State-held contents available to industry with a view to fostering added value;

    (c)  develop software for communicating and generating knowledge (specifically in the field of computational processing of natural languages, in order to boost interchange between languages and cultures, content industries, e-commerce, telematics for educational purposes, etc.);

    (d)  speed up the construction of trans-European broadband telecommunications networks (liberalisation, definition of standards, interoperability) and promote their accessibility on terms that are internationally competitive.

The e-Europe European initiative recently proposed by the European Commission and the latter's communication on employment strategy in the information society should act as catalysts for the Action Plan to be prepared forthwith by the Presidency and the Commission, as decided at the Helsinki European Council.

The Lisbon European Council will define the Action Plan's objectives and guidelines in order to enable the Presidency and the Commission to work out benchmarking indicators to be included in national initiatives on the information and knowledge-based society to apply from 2001, in accordance with the method of open coordination among Member States to be approved by the Feira European Council in June.

Reference indicators to assist benchmarking schemes for genuine political advances should be developed as a matter of urgency. The adoption of a Plan for an Information and

Knowledge-based Society should firmly commit Europe to meeting identifiable targets and disseminating best practices. This European Action Plan should serve as a guide to national plans integrated into national development strategies and linked to national employment schemes.

2.2.  Creation of a Europe-wide learning society

European policies on education and training should go beyond the successive reforms of the existing systems already implemented. The aim should be to create a European area of life-long learning and to bring about a learning society with opportunities for all. Without a learning society, the changeover to a knowledge-based economy will cause new breaches and new forms of social exclusion.

A learning society should be geared towards giving diversified and relevant answers to a wide range of target groups: young people, unemployed adults, workers at risk, but also businessmen and middle and senior executives, not to mention the large mass of workers who need to be given genuine life-long training opportunities. This is also a key area for action by the social partners, since there can be no life-long learning without the involvement of enterprises. It should likewise be a central concern of youth policies in the European Union.

Policies on education and training should, moreover, be geared towards creating a large stock of skilled jobs. The potential is already there. However, those jobs will only actually be created if there are skilled human resources to fill them.

The differences between Member States' education and training systems are huge; yet, notwithstanding the more general aims of citizens' personal, social and cultural development, concerns regarding the relevance of training for coping with the requirements of the new jobs are shared by all. Thus, the education and training input for the Luxembourg Process employment guidelines should be reinforced, to meet shared problems, namely by.:

    (a)  developing schools and training centres, into learning centres, using the most appropriate methods to cope with a greater diversity of target groups; promoting cooperation between education and training establishments and putting new learning facilities to good use;

    (b)  fostering the mobility of students, teachers and training staff, notably through recognition of diplomas and periods of study and training;

    (c)  equipping the said establishments with computer equipment and Internet connections and staffing them with teachers and other experts with up-to-date training geared to the objectives;

    (d)  renewing content production in combination with curriculum development and promoting the widespread development of scientific and technical skills as the essential basis for creating skilled employment;

    (e)  working out educational and vocational guidance schemes of general application, based on the identification of training requirements;

    (f)  setting up flexible schemes to certify knowledge acquired;

    (g)  introducing new forms of funding and time management to facilitate access to life-long education and training.

The Socrates and Leonardo da Vinci programmes, which are Commission initiatives, will be launched at the Conference of Ministers for Education, Labour and Social Affairs on 17 and 18 March. These programmes will stimulate the European dimension of education and training through the organisation of exchange networks, the production of common content and reference frames, the identification of training requirements and the promotion of mobility and qualification equivalence. This fundamental action needs to be reinforced; however, it would be even more effective if it were supplemented by a method of open coordination between Member States.

The Lisbon European Council should take forward:

    (a)  the definition of the contribution of education policies towards employment policies under the Luxembourg Process;

    (b)  other forms of coordination between Member States, particularly as regards mobility of teachers, students and training staff and the possibility of drawing up a European Charter of Basic Skills, with implications for curriculum updating. Europe's population, and young people in particular, must have extensive access to basic skills, such as being able to learn and to resolve problems, develop scientific culture and technical skills, use information technologies, speak foreign languages, develop a sense of initiative and entrepreneurship and be active, free and responsible citizens.

2.3  Developing a European research area open to the world

European S&T policy has passed through various stages: after focusing on major fundamental research projects at European level and subsequently on major European pre-competitive projects, it has recently switched to research linked to company innovation. On the whole, and notwithstanding major national differences, comparison between the EU and the US reveals some significant shortcomings as things now stand:

  • restrictions on innovative fundamental research;
  • reduced sensitivity of public research to market requirements;
  • reduced private-sector contribution to S&T activities;
  • fragile interface between S&T supply and demand;
  • less effort to promote a scientific and technical culture;
  • under-developed institutional capacity to conduct European S&T policies.

Yet Europe, having an abundant heritage and capacity, should strive to be in the forefront of the development of scientific knowledge. This is an essential condition for renovating the economic base for employment. An organisational effort is required at two levels:

  • fundamental research: here, an added European dimension is needed to achieve scale and scope. This involves organising a European research area using joint activity networks and joint infrastructures in order to overcome the current situation of fragmentation and overlapping of national institutions. The R&D Framework Programme, in coordination with other policy instruments, should serve as a stimulus to such networks;

  • applied research and development: here it is necessary to stimulate company-based R&D, to internationalise - but also to develop the interfaces with companies and with regional innovation systems, taking advantage of the diversity of competitive factors in Europe in the case of both the high-tech industries and the traditional industries undergoing modernisation, as well as in the field of services.

The linkage between these two levels of R&D must grasp with new opportunities. It is proving necessary nowadays to set up more effective coordination mechanisms in many areas, for example oceanography, meteorology, etc.

The following priorities should be emphasised:

    (a)  Stepping up European coordination with regard to the various ways of organising S&T systems, combining local, sectoral and international resources the in order to produce, disseminate and adapt knowledge and exploit new opportunities for scientific and technological development, adapting existing coordination bodies or creating appropriate European bodies.

    (b)  Creating a high-speed, low-cost trans-European data transmission network to provide support for the construction of a European research area. This broad-band network will have to support not only the development of European S&T cooperation, but also cooperation between schools and training centres, libraries and science centres and museums.

    (c)  Creating the conditions for encouraging the mobility of S&T staff and opening up European systems to exchange with the outside world. Europe must strengthen its role as a major world centre for R&D, fully integrated into the big international networks and able to attract new talent from anywhere in the world.

    (d)  Promoting the scientific and technological education of European citizens, stimulating cooperation between research institutions and schools, encouraging the production of multilingual scientific works, promoting their export outside Europe and making careers in science and technology more attractive.

On the basis of the Commission communication on a European Research Area, the Lisbon European Council will have to define the medium-term joint European objectives and prepare for decisions on the new European S&T initiatives, as well as ways and means of coordinating national S&T policies.


The establishment of the single European market has been essential for European construction. The gradual elimination of barriers to the free movement of goods and services, together with competition policy and privatisation procedures, has produced very encouraging results for firms and consumers in various sectors: suffice it to mention the recent case of telecommunications. The economic basis for employment has been comprehensively improved.

But the aforementioned effort has to continue, as indicated in the recently approved strategy for the internal market, in conjunction with the Cardiff process of economic reforms, not only in order to improve how the markets work, but also to create new competitive factors, increase innovation potential and develop entrepreneurship. European markets have to adapt to the prospects opened up by an economy based on innovation and knowledge.

The Lisbon European Council will have to:

  • Establish an open method of coordination to provide impetus for the Cardiff process, organising a process of benchmarking centred on sound practices relating to priorities defined at European level and making use of initiatives launched by the European Commission, such as the action plan for financial services, the action plan for risk capital, the proposal on the European patent and the initiatives relating to the policy of support for enterprises.

  • Define guidelines for the elaboration of a European Charter for micro-enterprises for final evaluation at the Feira European Council, with the aim of encouraging this new potential for creating employment.

The following priorities have been identified in the context of the Cardiff process:

    (a)  to increase the opportunities for trade by developing telecommunications and e-commerce;

    (b)  to improve transport logistics and the transport network to cope with the increase in trade;

    (c)  to modernise public services, in particular by using various public-private partnership arrangements;

    (d)  to accelerate the integration of the financial markets, implementing in full the action plan for financial services;

    (e)  to improve the sensitivity of the financial markets to the value of intangible investments and investments in knowledge;

    (f)  to encourage access to risk capital at European and local level, entirely in line with the action plan for risk capital;

    (g)  to establish a single European patent system and organise the technological know-how markets;

    (h)  to encourage entrepreneurial initiative and development.

Specific action by the Member States and the European Commission is also needed to encourage the networks and dynamics of innovation: entrepreneurial innovation, financial innovation, human resources innovation and more efficient technology-transfer mechanisms. There is a need to signal a new frontier to be explored for entrepreneurial initiative: that of goods and services with greater substance in terms of knowledge, in line with new needs. Many quality jobs can be created through this dynamic.

Another significant impulse for competitiveness and employment will be provided by the definition under elaboration of the policy for support to enterprises with a view to preparation for the new multiannual plan. That policy should place emphasis on the following priorities:

    (a)  support for the incorporation of new technologies and the creation of intensive knowledge services for support to firms;

    (b)  development of clusters and innovation networks;

    (c)  encouragement of partnership and associative relations, both locally and internationally;

    (d)  organisational innovation and new instruments for knowledge management;

    (e)  development of certification procedures linked to the promotion of total quality;

    (f)  adapted financial instruments;

    (g)  adapted schemes for the training of human resources;

    (h)  simplification of administrative procedures and modernisation of public support services.

It is also important to see to specific needs in each standard case. For example:

  • SMEs of a high technological level give rise to development needs and appropriate procedures for access to the capital market and additional technological capabilities.

  • Start-up companies must be stimulated on the basis of strengthened risk capital, technical and logistical support and the simplification of procedures and obligations.

  • Besides simplification of procedures and obligations, micro-enterprises may encounter encouraging prospects with the development of e-commerce and the upgrading of local networks and entities. This new potential to create micro-enterprises and proliferate small-scale entrepreneurial initiative should be given impetus by the European charter for micro-enterprises.


The European Union has already defined, notably in the context of the European employment strategy, the major priorities for the employment objective. The twofold strategic objective of combating unemployment and increasing the employment rate requires:

  • the creation of jobs in the services sector, in which Europe has significant deficits and opportunities for growth;

  • a resolute inversion of the trend towards early retirement from the labour market, promoting the employment of older workers;

  • an increase in the rate of female employment, encouraging equal opportunity of access to the labour market and positive action in favour of the employment of women.

To make use of the above employment potential also requires stock to be taken of the European social model, which is one of the strong suits of the European project. But there are two prerequisites for its continuation in the context of globalisation: the renovation of its economic base, building new competitive factors, and the modernisation of its very structure. This will make it possible to find a new synthesis with more jobs and greater social cohesion.

Understanding the contemporary problems of the European social model and finding solutions to them requires starting from an adequate concept of welfare. Welfare is not only a guarantee of income in the face of social risks. Welfare is also based on personal services, quality of work and living opportunities. And all this contributes to the cohesion of a society.

A positive strategy of renewal of the European social model needs to be adopted:

  • aimed at raising employment levels and creating job opportunities for all;

  • combining the principles of initiative, responsibility, social justice and solidarity.

The above renewal endeavour should involve not only the official authorities, but also the remaining protagonists at the various levels, with the accent on the social partners and the role of the European social dialogue. The contributions secured in this way could be used to develop a European social agenda, along lines to be defined during the French Presidency.

Apart from reconsideration of the concepts of employment, work and activity, new ways of regulating the labour market will have to be developed, combining flexibility and security, an area which will require a significant contribution from the social partners. In addition to the progress made in the field of working conditions and minimum standards, there is a need to:

  • strengthen the role of active employment policies;

  • modernise social protection systems, consolidating their sustainability;

  • increase the efficacy of policies to combat social exclusion, which should ensure a solution when the foregoing fail.

4.1.  Active policies and the European employment strategy

The Luxembourg process has made a significant contribution to strengthening active employment policies in the framework of the European employment strategy.

A mid-term review of the Luxembourg process will be carried out during the Portuguese Presidency. That review should contribute to a major rationalisation of the guidelines and to more detailed indicators, but it should also coincide with strategic discussions. It is not a matter of revising the guidelines, but first of examining the synergies between these guidelines and between employment guidelines and broad economic guidelines. It is therefore a matter of harmonising the methodology for the involvement of other protagonists, in particular the social partners.

The Lisbon European Council will have to lay down orientations for the aforementioned mid-term review.

From the point of view of creating employment and renewing the European social model, four areas warrant priority:

    (a)  Improving the efficacy of active employment policies as regards employability. Guaranteeing a prompt response, using information technologies in employment services, diversifying alternatives and making full use of the local level are basic elements for success. It is particularly important to agree on programmes which enable the direct conversion of the unemployed through qualifications of which are in a shortage on the labour market.

    (b)  Strengthening the synergies between adaptability and lifelong learning. The development of learning organisations, recourse to the ongoing training network, management of working time, job rotation and cost-sharing should be central to the redefinition of the labour contract and to negotiations between social partners at all levels. The official authorities should also contribute, with specific support, to facilitating such negotiations. Firms which invest in their human resources should benefit from fiscal and parafiscal incentives.

    (c)  Increasing employment in services, facilitating entrepreneurial initiative, decreasing the administrative burden on SMEs, reducing the non-wage costs of the less qualified and encouraging equal opportunities. As regards personal services, where there are major shortages, private, public or third-sector initiatives can be associated, possibly using a social voucher in favour of the least-favoured categories.

    (d)  Developing mainstreaming to promote equal opportunities, with particular implications for all aspects which help to reconcile working life and family life. Strengthening the family-support services, in particular child care services, is of special importance.

4.2.  Modernising social protection, consolidating its sustainability

Where the population is ageing, where new forms of family are emerging, where new risks on the labour market are surfacing, the tension arising therefrom tends to centre on social security benefits schemes, in particular pensions. This trend is becoming burdensome and is today of concern to all European governments, irrespective of the great diversity of social protection schemes. For that reason, a cooperation process at European level was recently initiated for the modernisation of those schemes. Taking into account the recent communication from the European Commission on a concerted strategy for modernising social protection, the High-Level Working Party now set up will have to opt for evaluation of the long-term sustainability of those schemes as a priority.

Under the present circumstances, bolstering the sustainability of protection schemes depends to a large measure on one factor: increasing the rate of employment of European populations, which is at a particularly low level. The rate of employment in the European Union at the end of the 1990s was little more than 60%, as against figures in excess of 75% in the USA and Japan.

An increase in the rate of employment implies a considerable improvement of the net creation of jobs. To achieve that goal, in addition to the need to ensure macro-economic stability and galvanise growth factors, it is necessary to improve the actual operation of the labour market, in particular by:

    (a)  strengthening employability and adaptability on the basis of lifelong education to prevent unemployment;

    (b)  increasing the efficiency of active employment policies, activating social policies;

    (c)  modernising fiscal and parafiscal systems so that employment is of benefit to all citizens;

    (d)  promoting a more active ageing, combating early retirement from the labour market;

    (e)  making working time flexible throughout working life, enabling a better balance between working life and family life and more flexible careers based on upholding basic social-protection and access-to-training rights.

But consolidation of the sustainability of social benefits is not the only issue. Welfare is not only guaranteed income. It is also access to services. The crisis for the traditional family unit needs to be offset by the development of family-support services, especially for children and the elderly. A large range of services should therefore be encouraged for that purpose, with the advantage of also being very intensive in the creation of new jobs.

The above therefore seem to be some of the basic components for a positive strategy for the modernisation of social protection and the renovation of the European social model. It is a positive strategy because:

  • it bolsters the sustainability of social protection schemes;

  • it strengthens support for families;

  • it reinforces equality of opportunities for men and women;

  • by introducing greater flexibility, it maintains basic security and opens new prospects for upward mobility in the labour market;

  • it is based on the creation of more jobs.

  • That strategy will improve the overall outcome for welfare and social cohesion, in line with the broad concept referred to above.

The Lisbon European Council will:

    (a)  approve the setting up of a high-level working party on the modernisation of social protection and will define its working priorities, with emphasis on the carrying out of a forecast study on the sustainability of the pensions scheme for the period 2010-2020;

    (b)  define the forms of cooperation and of exchanges of best practices between Member States;

    (c)  call upon the European Commission to develop the procedures necessary for strengthening information systems on social protection.

4.3.  Stepping up the fight against social exclusion

Europe in the 21st century needs to have a systematic policy to combat poverty and social exclusion in their old and new forms.

In spite of the high levels of economic development of the EU as a whole and the existence of significant social protection instruments, social exclusion still abounds in various forms.

The above phenomenon affects all Member States, albeit in various forms and intensities, in particular the most vulnerable social groups, the most deprived economic areas and those citizens who are particularly disadvantaged as regards the labour market.

On the other hand, social dynamics continue to give rise, with some frequency, to the emergence of child poverty and social integration problems for children and young people.

The intensity of the changes which are foreseen from the point of view of the qualifications required by new technological challenges facing firms also involve the risk of developing new social exclusion processes.

The problem of social exclusion therefore requires major coordination at European level.

On the basis of the report on the social situation and of the Commission communication "Towards a Europe for all", the Lisbon European Council will define the open method of coordination which will have to be applied respectively to two forms of action to be combined by each Member State, involving the other active partners in promoting social inclusion:

    (a)  to mainstream this objective in education, training, employment and social protection policies;

    (b)  to develop integrated, targeted programmes for social groups in situations of major social exclusion, with the top priority of eradicating child poverty by 2010.

The Lisbon European Council will also call upon the High-Level Working Party and the European Commission to prepare a monitoring panel with indicators for monitoring the social situation, making it possible to set policy objectives which can draw on the experience of the various Member States.


There is one central item on the European political agenda: achieving a policy mix which stimulates growth and employment, ensuring macro-economic stability and consolidation of the euro. This means, in the context of the Stability and Growth Pact, stimulating growth and the transition to an economy of innovation and knowledge. This will in particular mean assigning a more important role to structural policies and reforms.

A fundamental pillar of the policy mix is monetary and exchange policy. The main aim of monetary policy, defined and implemented by Eurosystem, is to guarantee price stability. The extent to which it can support the Community's general economic policies depends on what happens in the other fundamental pillars of the policy mix. The second pillar is fiscal policy defined and implemented by national governments, in the light of the provisions of the Stability and Growth Pact. The third pillar consists of wage developments, chiefly determined by negotiations between the social partners.

It is important to continue to monitor budgetary policies on many fronts, in particular endeavouring to:

    (a)  Improve methods of monitoring expenditure, debt and deficit, as regards not only level, but also content.

    (b)  Adjust the monitoring of deficits so as to maximise the room for manoeuvre of automatic stabilisers.

    (c)  Improve the quality of public spending, redirecting it towards promoting public investment and meeting new priorities (R & D, education and training, modernisation of the public administration, affordable telecommunications, etc.).

    (d)  Define new methods of public-private partnership so as to speed up investment necessary to the modernisation of economies, while also making use of new products to be launched on the financial markets.

Specifically with regard to tax policy:

    (a)  Develop tax coordination, endeavouring to overcome problems of harmful competition as yet unresolved.

    (b)  Make progress as regards changes in taxation more friendly to the aims of employment and social cohesion.

    (c)  Reinforce those tax incentives which encourage firms and individuals to adapt to an economy of innovation and knowledge.

    (d)  Promote a tax system more favourable to SMEs.

However, it is also vital to improve multilateral coordination of macro-economic policies so as to make full use of Economic and Monetary Union to encourage growth on a sustainable basis.

Economic coordination may take place in successive stages. Some stages are already taking place: the setting of common objectives, their translation into national plans and multilateral monitoring of their implementation. However, it is possible to move on to further levels of coordination:

    (a)  Evaluation of the aggregate effects of the various choices made at national level.

    (b)  The development of strategies for coping with problems such as asymmetric or global shocks and the creation of large-scale infrastructure at European level. In order to exercise a greater effect on such large-scale infrastructure, we must consider making greater use of the role of the EIB and the EIF, of public-private partnerships and of other financial instruments, and strengthening the trans-European networks programme, particularly with regard to "knowledge structures".

On the other hand, it is vital that we define and coordinate more clearly the role of each of the bodies and protagonists involved: ECOFIN, Euro-11, EFC , SCE , ECB, the social partners, macro-economic dialogue. The aim is to create a relationship of trust and interchange between all the parties involved, and in this context macro-economic dialogue may play an important role.


The political construction of Europe is a unique experience. Its success has been dependent on the ability to combine coherence with respect for diversity and efficiency with democratic legitimacy. This entails using different political methods depending on policies and the various institutional processes. For good reasons, various methods have been worked out which are placed somewhere between pure integration and straightforward cooperation. Hence:

  • Monetary policy is a single, common policy within the euro zone.
  • National budgetary policies are coordinated at European level on the basis of strictly predefined criteria.
  • Employment policies are coordinated at European level on the basis of guidelines and certain indicators, allowing some room for adjustment at national level.
  • A process of cooperation is beginning with a view to the modernisation of social protection policies, with due regard for national differences.

Policies aimed at building the single market, such as monetary policy or competition policy are based, as is logical, on a stricter method of coordination as regards the principles to be observed. However, there are other policies which concentrate more on creating new skills and capacities for making use of this market and responding to structural changes. They involve learning more quickly and discovering appropriate solutions. Such policies have resulted in the formulation of a coordination method which is more open to national diversity, the best example of which currently is the so-called "Luxembourg process" relating to employment policies.

It is a case of defining strategic guidelines at European level for coping with structural change and then organising a process whereby Member States emulate each other in applying them, stimulating the exchange of best practices, while taking account of national characteristics. Despite some difficulties, the results obtained have been stimulating and encouraging.

The open method of coordination varies in intensity depending on the subject areas to which it is applied and on how the subsidiarity principle is expressed in each of them. In its most complete form, this open method of coordination consists of the following steps:

    (a)  In the light of diagnosis and evaluation, setting of Europe-wide guidelines with the political commitment to apply them being assumed into at the highest level.

    (b)  Identifying good practices and reference indicators for benchmarking purposes in these guidelines.

    (c)  Preparing national plans for applying these guidelines in a suitable way so as to involve all the various protagonists, identifying intermediate goals and learning processes.

    (d)  Organising the various partnerships responsible and implementing the national plan.

    (e)  Monitoring and evaluating the results obtained, allowing for discussion and peer pressure and possibly formulation of recommendations.

In this context, the European Commission initiative programmes may gain additional scope and effectiveness. As well as promoting a typically European dimension, as is their aim, they may play an extremely important role in supporting the whole process of the open method of coordination between Member States. Thus, it will be possible to step up the efforts made on the basis of the Community budget and the efforts made by the Member States, depending on their own circumstances.

Here the European Parliament should also be encouraged to become involved and the other European Union institutions consulted.

If economic and social innovation is to be stimulated, there is also a need for innovation in the political method. This open method of coordination also makes it possible to progress with due regard for diversity. It will have to be applied with the necessary adjustments in new areas, as proposed in the previous sections.

In order to ensure that there is overall coherence and that objectives are the same in all areas in which this method is applied, the Lisbon European Council will have to ask the European Commission to draw up a proposal for a monitoring panel of the most important indicators for structural change, showing their effect on the rate of economic growth and the rate of employment throughout the European Union.


A European growth and employment strategy requires better coordination between macro-economic policies, structural policies and reforms and active employment policies, based on the Cologne, Cardiff and Luxembourg processes.

These processes overlapped in time and their procedures and timetables arose from their beginnings and specific motivations. Taking into account the framework set by the Treaties and the different levels of subsidiarity and specialised Councils they involve, there is justification for preserving them as three distinct processes. However, the time now seems to have come for their coordination, synergy and joint efficiency to be improved.

The Lisbon European Council will have to develop the conclusions adopted at the Helsinki European Council so that the Broad Economic Policy Guidelines (BEPG) carry even more weight as a framework document, as regards not only the various macro-economic policies, but also political and structural reforms, and also the connections with the employment guidelines. The coherence and synergy between these three components must be dealt with explicitly and systematically.

For that purpose, ECOFIN will have to receive contributions from other Council formations, particularly from Labour and Social Affairs, but also namely from Internal Market and Industry, as part of a coordination process subject to the political guidance of the European Council. The Cardiff and Luxembourg processes will make it possible for us to deal with their subject matter in greater detail.

In addition, the BEPG must define the guidelines to be adopted by the EU and the recommendations to the Member States, providing a framework for next year and looking forward to the years ahead, while taking into account recent developments in the Member States.

The importance of the BEPG justifies more substantial involvement by the European Council in their general drafting.

More political weight should also be given to the mechanisms for monitoring the formulation and implementation of recommendations, with the involvement of the relevant specialised Councils.

On the other hand, it will be important to inform and consult the social partners on the basis of the structures provided for in the social dialogue, the Standing Committee on Employment and the macro-economic dialogue, so as to identify the contribution they can make to the guidelines to be adopted and to the implementation of the European Employment Pact.

It will be for the Portuguese Presidency to conduct the first practical exercise in applying this new concept of the BEPG, in terms to be defined by the Lisbon European Council.

Another coordination instrument which must be given more weight is the annual report prepared by the European Commission based on Article 127 of the Treaty, on "Community policies in support of employment", which explains how to use mainstreaming to achieve the aim of employment on the basis of Community policies.

The setting up of an Observatory on Industrial Change on a proposal from the European Commission to be approved by the Lisbon European Council must also reinforce the exchange of best practices for the management of change, with the involvement of the various actors, in particular the social partners and enterprises in general.

The quest for concerted action must involve many other actors in addition to governments and the European Commission, starting with the major institutions such as the European Parliament and national parliaments, the European Central Bank, the social partners, the Economic and Social Committee and the Committee of the Regions. A High-Level Forum will take place before the June European Council in order to review the various processes and share out responsibility for directing them. The aim is to enhance the content of the European Employment Pact adopted in Cologne. The Lisbon European Council will consider the possibility of holding this Forum annually.

Finally, such action depends to a large extent on the initiative of the actors in civil society, the social partners, enterprises, associations, regions and the citizens in a European civil society, which we must continue to build.

Europe's capacity to influence its own mode of development depends on all of the above. The Portuguese Presidency is counting on the participation and commitment of all these actors in order to give a new long-term impetus to the construction of Europe. The time has come.

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