TCS Daily

Cheese-Eating Vacation Monkeys

By Jeremy Slater - November 2, 2004 12:00 AM

The game's over and we're not even through its first half. That's the conclusion from Wim Kok and his group of advisers in their report on the Lisbon Agenda's progress - or lack thereof. The former Dutch prime minister will give his assessment to the European Commission on November 3, but his not totally unsurprising findings have been leaking out over the past couple of weeks. To anyone who had hopes for an economic revival for Europe it has made depressing and enervating reading.

In laying out the failure of the EUto come close to the targets which the leaders of Europe set themselves in 2000, Kok certainly does not hold back any punches. His report claims, "What is at risk ... is nothing less than the sustainability of the society Europe has built and to that extent, the viability of its civilisation."

The fact is that we will have to find a way to pay for our current long holidays and short working weeks with stronger economic growth -- or suffer the consequences. Kok points out the gap between Europe and the US has widened and not narrowed in the past five years -- thus endangering the Lisbon Agenda, which may become a synonym for failure.

One of the main reasons for this failure to boost growth, he argues, is that unanimity is needed for the European Union to go forward on just about any economic project. This has led to the failure for instance to agree on a European Patent Directive, which would allow for companies in any part of the EU to ensure that their copyright on a new product or service was protected throughout Europe. A deal was not brokered, because several member states said that the new patents should be made available in various national languages.

The report also finds there is still headway to be made in the financial services sector, which would allow a truly European capital market to develop and thus provide funding for new companies and projects at potentially cheaper rates of interest than are available now.

The departing president of the European Commission, Romano Prodi, has also weighed into the debate. In his final official presentation to the Brussels press corps (he will in fact stay on in the job now that the Parliament has scuttled his successor's starting date), he echoed Kok's complaints. Said Prodi, "We need cooperation in this field. If we cannot do this then we cannot make progress economically."

Kok report's proposes nine ways in which the European economy should be reformed:

* Europe must deal with its "aging" society, which "requires a policy shift away from early retirement";

* Europe's national capitals must present action plans for economic growth by the end of next year;

* All EU legislation that has reached implementation deadlines must become national law by next spring;

* MEPs and national governments must remove existing obstacles to the free movement of services across the EU;

* Remaining EU legislation arising from the EU's Financial Services Action plan must become national law by the end of next year;

* There must be an agreement on intellectual property. Kok suggests that all documents should be only translated into English;

* Europe must agree on a common definition of what is red tape and thus avoid any new forms of this;

* National governments should cut the cost of setting up a business by the end of next year - the cheapest costs in the EU's three best countries should become the standard; and

* A European Research Council should be established to take the technological lead.

Much of what has been suggested most of the readers of this site can agree on, although I expect one or two may have doubts about the last proposal as it smacks of corporatism. But similar ideas helped Japan become a successful high-tech society, which despite its ten-year recession still enjoys higher living standards than Europe, so perhaps we can forgive Kok that suggestion.

The problem, of course, is that these proposals still require get the backing of a majority of EU national governments to become law and within certain member states there are vested interests that will make reform difficult if not impossible.

For instance, look at France, where the 35-hour work week has been in operation for a few years. The government would like to dilute the law, but faces massive opposition from the public, largely organized by trade unions whose members come from the 40 percent of the country's workforce employed by the state.

Just as the findings of Kok's report were becoming public another member of the international political elite was revealing the conclusions of his study on the French labor market. Michel Camdessus, the former head of the International Monetary Fund, claims that France suffers from a "work deficit"-- which largely explains why France has lagged behind the economic growth rates of the US and the UK in the past 20 years. Camdessus also noted that France's unemployment rate has remained around the 8 percent level over the same period. This may be temporarily acceptable during the depths of recession, but over the long term it has consigned a generation to waste their lives away.

Surely this is unacceptable as it means that Europe is allowing much of its talent base to be under-utilized. Just as Britain had to face the prospect in the 1980s of some unpopular policies leading to a revitalization of its economy now nearly half of Europe has to face up to the same.

If not we will become a comfortable museum where our wealthier cousins from the US, Japan and China come for very pleasant visits and thus enjoy some of the fruits of their vibrant economies. However, we Europeans will still suffer the consequences of sluggish economies, but be cushioned by a social system that encourages only a small part of the population to work while the rest sit around with nothing to do. If that is the case then we truly will become nothing better than cheese eating vacation monkeys.


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