The European Union is currently facing, as are other parts of the world, a slowdown in growth and job creation. Economic uncertainties and global political risks weigh heavily on the short-term outlook and have delayed a recovery. This makes it all the more essential to increase the capacity of our economies to grow, through sound macroeconomic policies and purposeful structural reforms.

At Lisbon three years ago the European Union set itself the strategic goal of building the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion. To deliver this, we committed ourselves to an ambitious, comprehensive and mutually reinforcing ten-year programme of reforms in labour, capital and product markets.

Considerable progress has been made with the Lisbon agenda, now entering its fourth year. Significant results have been obtained as regards, for example, opening up energy markets, creating a single sky, modernising competition policy, putting into place an integrated Europe-wide financial market, and agreeing on a Community patent. Five million new jobs have been created since the start of the Lisbon strategy - 500.000 of them in 2002 despite the less favourable economic climate, with unemployment declining by 2 million people.

Nonetheless, there is still a lot to do. It is time, in particular, for the Union and the Member States to fulfil their commitments regarding economic reforms by translating words into action. We reaffirm our strong personal commitment to the timely and effective delivery of reforms across the three pillars of the Lisbon strategy - economic, social, and environmental.

The promotion of sustainable growth and the creation of more and better jobs must remain firmly at the top of the Union's agenda. This can be done by pursuing growth and stability-oriented macroeconomic policies, pressing ahead with economic reforms, taking decisive action to increase employment and modernise the European social model, and implementing the sustainable development strategy adopted at Göteborg. At the same time, and despite recent progress, this reform agenda must now also address more effectively the challenges from ageing populations if it is to secure the long-term sustainability of public finances.

Enlargement increases the potential for economic growth and for achieving the Lisbon goals. The future Member States have been covered for the first time in the Commission's Spring Report. They are adopting reform measures and are starting to take part in the open method of coordination. The Lisbon Strategy offers common solutions to common problems and is an essential tool to be used to support the process of enlargement and share best practice and experience across the Union.

To push ahead with reform, the European Council identifies the following priorities:

Raising employment and social cohesion. There has been real progress on employment but reaching the 70% employment rate Lisbon target by 2010 will require far-reaching structural reform aimed at full employment, higher productivity and quality in work. EU labour markets must become more inclusive, with employment opportunities extended to all, at the same time as they become more adaptable to economic conditions. Member States will need to undertake substantial tax-benefit reforms, increase incentives for entering employment and labour market participation, and reduce gender specific differences on the labour market. Life-long learning should be promoted, and closer cooperation in enhancing transparency about skills standards across Europe encouraged.

Giving priority to innovation and entrepreneurship. Europe has a vast innovation potential - but it needs to do more to turn ideas into real value-added. Boosting the interaction between industry and research institutions is at the heart of realising our entrepreneurial potential. The industrial sector is a vital source of growth and employment and will continue to play an important role in the knowledge-based economy. The right conditions for R&D need to be developed - in particular by businesses - so the EU can move towards its R&D investment target of approaching 3% of GDP. Measures must be taken to facilitate market entry and exit for businesses of all sizes, improve access to finance and know-how, improve regulation and reduce administrative burdens. Action is also needed to encourage the spirit of enterprise among young people.

Connecting Europe - strengthening the internal market. A dynamic and well-functioning internal market is essential for productivity and growth, and even more so in an enlarged Union. It is important to push ahead to open up and integrate European markets further while improving the regulatory framework and ensuring a high standard of consumer protection. Reform of competition instruments - for anti-trust, mergers and cartels - must be completed and markets which are not working effectively investigated and addressed. The integration and greater connectivity in network industries such as energy, transport and telecoms must be pursued, while completing and extending networks, especially in view of enlargement. The potential of the internal market for services must be fully tapped and the implementation of the Financial Services Action Plan accelerated.

Environmental protection for growth and jobs. To achieve the Lisbon goals requires every Member State to perform to its full economic potential; but this must also go hand in hand with improvements in our environment and quality of life. Thus, pressing ahead with action in the environmental field remains as important as ever. This is an important factor for innovation and the introduction of new technologies, which lead to growth and employment. Environmental targets will work as a catalyst for innovation and modernisation in key sectors such as energy and transport and promote new investments in clean and more resource-efficient technologies.

To take these priorities forward the European Council has:

set the direction for the Broad Economic Policy Guidelines and the revised European Employment Strategy to be adopted in June;

invited the Commission to establish a European Employment Task Force to help identify practical reforms that can have the most direct and immediate impact on the implementation by Member States of the revised Employment Strategy;

identified key labour market reforms to be pursued at national level;

launched action to strengthen the Union's support for knowledge, innovation, and entrepreneurship in order to place competitiveness centre stage;

set deadlines for final agreement on remaining Lisbon reforms in key areas ahead of next year's Spring European Council: railways, energy markets, a Single European Sky, financial markets (including take-over bids), procurement markets, the information society, temporary agency work, cross-border social security rules, energy taxation, liability for environmental damage and climate change;

provided a comprehensive response on maritime safety in the aftermath of the Prestige disaster;

renewed its commitment to stronger cohesion across the Union and the Union's leadership in promoting sustainable development around the world.

The detailed actions to bring this about over the next twelve months are now set out.