The EU's Next Economic Strategy

Starting from this year and continuing up until 2020, all EU Member States will be closely monitored by the EU Commission with regards to achieving specific policy targets such as increasing investment spending on research and development, raising the amount of people working, lowering the amount of people living on the edge of poverty, and other economic and social goals.
 
The outline for this new ambitious approach taken by the EU Commission is entitled the EU 2020 Strategy, which is meant to replace the much criticised Lisbon Strategy. However, many sceptical voices have been raised concerning the likelihood of fulfilling the policy targets set out in the EU 2020 Strategy since the EU has no legal powers to force Member States to comply with it.

The result of the Commission’s monitoring (it was given the right to monitor since the lack of a monitoring mechanism had been a common criticism of the Lisbon Agenda) will be published in annual reports on which basis the Commission may present policy recommendations or warnings to the Member States. This will be done in addition to the European Council’s monitoring and guiding of the implementation of the EU 2020 Strategy.

In addition to the specific policies included in the EU 2020 Strategy, it also includes seven flagship initiatives that have also been introduced. These focus on resource efficiency, youth, the digital agenda, innovation, industrial policy, the fight against poverty and skills and jobs.

Background

The Commission adopted the EU 2020 strategy on 3 March 2010 and the European Parliament also adopted a resolution on the EU 2020 Strategy on 10 March. Five days after the European Parliament’s vote the Environment Council welcomed the EU 2020 Strategy and commended its climate change objectives. The European Council also announced its support on the 26 March whereas the Agriculture council, four days later, made clear that it thought it was regretful that there was not more focus on agriculture in the EU 2020 Strategy.

The European Parliament further discussed the EU 2020 Strategy during the plenary sessions on 5 May and 16 June 2010. During the latter session criticism was raised about the Council’s lack of ambition over the EU 2020 Strategy and the need for setting more concrete targets was emphasised. The Parliament nonetheless adopted the EU 2020 Strategy by 562 votes in favour, 57 votes against and 24 abstentions.

On 17 June the European Council adopted the ‘Council Conclusions’, which make clear that the objectives of the EU 2020 Strategy must be a priority for Member States.

What impact will it have on the EU?

Not everything is new in the EU 2020 Strategy. A few of the targets included in the EU 2020 Strategy, like the aim to ensure that 3% of the EU’s GDP will be invested in research and development, were included in the former Lisbon Agenda. Other targets in the EU 2020 Strategy, such as the target of a 20% reduction of greenhouse gas emissions and a 20% increase in the usage of renewable energy sources by 2020, have already been decided upon and are EU law. Notwithstanding their common features, the most important similarity between the two documents is the fact that neither is legally binding. This means that the EU does not have any legal mechanisms to penalise Member States that do not fulfil the EU 2020 Strategy’s stated goals. 

However, the EU 2020 Strategy does introduce, amongst other things, some ‘headline targets’ that the Member States are expected to fulfil. The Commission will monitor their progress in doing so and will also have the commensurate discretion to issue warnings and policy proposals for Member States lagging behind. The headline targets include:

• Increasing the employment rate of the population aged 20-64 to 75% (it is currently 69%) 
• Increasing Research and Development (R&D) spending to 3% of the EU’s GDP
• Achieving the EU’s ’20/20/20’ objectives on increasing the usage of renewable energy sources and reducing greenhouse gas emissions 
• Ensuring that 40% of the younger generation obtains a degree or a diploma and reducing the percentage of early school leavers from the current 15% to less than 10% 
• Ensuring that 20 million EU citizens who are currently at the risk of falling into poverty cease to live like that (i.e. securing a higher standing of living)
The EU 2020 Strategy also includes seven flagship initiatives where joint action (i.e. what should be done by the Commission at EU level and Member States at the national level) should be taken. They include:

• Resource Efficient Europe – to help decouple economic growth from the use of resources, support the shift towards a low carbon economy and increase the use of renewable energy sources 
• Youth on the Move – to enhance the performance of education systems and prepare young people for the labour market 
• A Digital Agenda for Europe – to secure the benefits that can be derived from having a Digital Single Market 
• Innovation Union - to improve framework conditions and access to finance for research and innovation
• An Industrial Policy for the Globalisation Era – to enhance the EU’s competitiveness and its business environment, especially for Small and Medium sized Enterprises 
• European Platform against Poverty – to strengthen social and economic cohesion  
• An Agenda for New Skills and Jobs – to promote lifelong learning and flexible labour markets

Next steps

The European Council will continue to discuss on how to implement further specific policies, beginning with innovation and energy. It has also given specific emphasis to the need to fully implement a functioning digital single market by 2015 (which the Commission will submit an implementation report on by the end of 2011). 

The European Council will discuss energy policy, in particular as regards the shift towards an efficient low-carbon economy and greater security of supply, in early 2011.

The EU task force on economic governance (a group of EU finance ministers and economic experts) will release a report in October 2010 in which it will, together with the EU Commission, make operational certain issues regarding macro-economic surveillance.