Brussels, 21/02/2002 (Agence Europe) - As reported in yesterday's EUROPE (p.9), the European Commission adopted a report on Thursday assessing the implementation of the 2001 Broad Economic Policy Guidelines (BEPG) and detailed factsheets on each EU country. The Commission argues that macroeconomic policies adapted appropriately to strong challenges and that structural budget positions generally did not worsen. Further progress was made in promoting economic growth potential and employment but the report draws Member States' attention to the fact that the structural reform process seems to have lost momentum in 2001 and renewed impetus is needed to achieve the Lisbon strategy goals.
The report indicates that for:
Labour markets. Greater effort is required, notes the Commission, since progress in Lisbon labour market reforms has slowed down in 2001. Employment growth slowed down to 1.1% and the unemployment rate decreased only slightly to 7.8% at the end of the year although the average unemployment rate of 7.7% was 0.5% lower than the 2000 average. The overall employment rate rose by 0.7% to 63.9%. The Commission asserts that "the decline in the momentum of structural reform is especially worrying in the context of the current cyclical slowdown and the still insufficient growth potential". In terms of tax and benefit systems, "unemployment and poverty traps,… remain a serious problem for labour market participation in most Member States" argues the report. "Where work incentives are concerned, although some Member States (Spain, France, Ireland, the Netherlands and Finland) achieved significant progress in strengthening the incentives associated with both taxes and benefits in former years, overall efforts in 2001 were rather scattered". Most Member States only opted for a partial approach, eg by addressing benefit schemes for specific target groups. Obstacles to job mobility "have hardly been addressed" and bottlenecks exist in a number of countries for different reasons, namely tight labour markets (Denmark, Ireland, Luxembourg, the Netherlands, Austria and Portugal), strong regional unemployment disparities (Belgium, Germany, Spain, Italy and the UK) and high structural unemployment (Greece, Spain, France, Italy and Finland).
Goods and services markets. "Progress towards creating a fully integrated and efficient internal market has been mixed" (see yesterday's EUROPE, p.9). "Reforms have continue din the network industries and have started to pay off in terms of price reductions" but "prices remain relatively high in Belgium, Germany, Italy and Portugal". Conditions "for effective competition are not met in certain Member States because the degree of market opening only reaches the legally required level (Greece, France, Ireland and Portugal) or because of the continued high market share of the incumbents (Greece, France and Ireland ). Some countries (like Greece, France, Ireland and the UK) took steps to increase the powers and operating capacity of their competition authorities. State aid as a percentage of GDP fell in most countries with the EU average falling form 1.4% of GDP in 1995-1997 to 1.2% in 1997-1999. Aid is highest in Belgium, Germany, France, Finland, Spain, Luxembourg and Portugal.
Securities markets. The Commission believes that it is vital for all the EU institutions to respect the deadlines set in the action plan for financial services, adding that the thrust of modernising and consolidating the sector continued in 2001. Further progress was made in terms of setting up a suitable regulatory framework for the development of the risk capital market with legal/regulatory constraints being eased in Belgium, Austria, Italy and Denmark. Quantitative constraints remain in most countries, except Ireland, the Netherlands, Finland and the UK which have no such constraints beyond a general requirement for prudence. Portugal, Italy, Spain and the UK have taken measures to stimulate the risk capital market but little has been done to counter the disincentive of onerous bankruptcy and insolvency procedures.
Encouraging entrepreneurship. Belgium, Denmark, Greece, Spain, France, Italy, the Netherlands, Austria, Sweden and the UK have taken measures to reduce the regulatory burden on business and stimulate business creation. Differences remain important in terms of the time it takes to set up a new business and how much this costs.
The report concludes that improvements are underway in terms of ensuring the quality and viability of public finance; macroeconomic policies passed the stress test of the downturn and the aftermath of the September 11 attacks; little progress has been made in unbundling the local loop or in the negotiations over a common framework for energy taxation in the EU.