Failure to implement Lisbon could cost EU dear, finds study
A new study on 'The economic cost of non-Lisbon' has warned that failure to implement the reforms foreseen under the revamped Lisbon agenda could mean the EU misses out on an eight per cent or higher rise in GDP over the next ten years. The staff working document consists of a survey of existing literature on the economic impacts of 'Lisbon-type structural reforms' such as the Internal Market Programme which, while not exactly the same as those in the Lisbon package, nevertheless are designed to achieve the same goals. The result, the Commission says, is an 'admittedly partial assessment of the benefit of implementing the reforms foreseen in the Lisbon strategy'. The reforms are analysed under five separate headings: product and capital market, investments in the knowledge-based economy, labour market, social policy, and environmental. These in turn relate to five key Lisbon objectives: greater competitiveness, creation of a dynamic knowledge-based economy, increased employment, better jobs and social cohesion, and a better environment. Given the broad scope of the Lisbon reforms, the economic literature surveyed was 'wide ranging and not easy to summarise', according to the report. 'Nevertheless, a clear impression emerges that Lisbon-type reforms (such as the Internal Market Programme, measures that encourage investment in knowledge, or tax and benefit reforms) have substantial positive economic effects.' For example, estimates show that product and labour market reforms undertaken in the latter half of the 1990s were responsible for an annual growth rate in GDP of almost half a per cent. When the impact of increased knowledge investments foreseen under Lisbon are factored in, this figure rises to as high as three quarters of one per cent. 'Over a ten year period, this would imply an increase in the GDP level of up to 7 or 8 per cent,' states the report. What is more, its authors say that this may even underestimate the cost of not implementing Lisbon, as their estimates ignore the frequent complementarities between reforms in different domains. However, the report also makes the point that the growth potential offered by Lisbon is far from assured, even if the necessary reforms are pursued. '[O]ne needs to recognise that reforms have to be properly designed and implemented. For example, ill-conceived regulatory reforms can lead to anti-competitive behaviour or inadequate incentives, resulting in higher prices and under-provision of services.' In its conclusion, the report reiterates that its findings are based on partial impact assessments only, and calls for further research to provide a systemic approach and better understand the interactions between the different Lisbon reforms. 'Further reflection is also required on what accompanying policies are needed in order to maximise the benefits of Lisbon while minimising the adjustment costs,' it ends.