Innovation Europe > News > Innovation EU Vol2-1 > Europe 2020: innovation, green growth and jobs

The Europe 2020 strategy for sustainable growth and jobs launched in March comes in the midst of the worst economic crisis for decades. Against a backdrop of a changing world economic order the Europe 2020 Strategy puts innovation and green growth at the heart of its blueprint for re-establishing the competitiveness of the EU economy.

TheEurope 2020 Strategy replaces the Lisbon Strategy, adopted in 2000, which it is generally agreed largely failed in its grand attempt to turn the EU into “the world’s most dynamic knowledge-based economy by 2010”.

Only time will tell if the Europe 2020 Strategy will be more successful than the last, but perhaps more importantly whether the EU can learn from its past mistakes.

Economic pillars

The 2000 Lisbon Strategy, which set out to reinvigorate the European economy, was launched against the background of the dot-com boom (or bubble) and the decline in classic manufacturing industries in Europe. The economic mantra of the day for reviving economic growth and generating new jobs was to focus on knowledge-based activities and leverage the EU’s core intellectual expertise.

The Europe 2020 Strategy predecessor, the Lisbon approach was founded on three pillars:

• An economic pillar to prepare the ground for the transition to a competitive, dynamic, knowledge-based economy. The emphasis here was placed on the need to adapt constantly to changes in the information society and to boost research and development
• A social pillar designed to modernise the European social model by investing in human resources and combating social exclusion
• An environmental pillar recognising that economic growth must be decoupled from the use of natural resources.

The Lisbon process established a lengthy list of targets, most of which fell almost exclusively within the sphere of competence or control of the member states – or, critically, out of the control of EU institutions.

Midway through its lifespan, in 2005, the strategy’s failures were already very visible: an overly complex structure with multiple goals and actions, an unclear division of responsibilities and tasks and a lack of political engagement from the member states. To this could be added weak leadership by the Commission.

A harsh mid-term assessment was undertaken by a high-level group under former Dutch Prime Minister Wim Kok. The “Facing the Challenge” report concluded that the disappointing delivery of the strategy had been due primarily to a lack of determined political action. It suggested that the original agenda had been overloaded, co-ordination had been poor, and there were also even conflicting priorities.

The report led to the 2005 re-launch of the strategy, focusing almost exclusively on growth and jobs, and with a slight adaptation of the governance model to enhance the partnership between the European Commission and the member states. However, the 2007 financial and economic crisis was the final blow to the Strategy, with EU growth and unemployment trends plummeting, leaving the objectives of the 10-year programme in tatters.  

New economic context

In the decade since Lisbon, the global economic landscape has also undergone a transformation. The EU is now faced by the serious competitive threat of the upcoming economic powerhouses such as China and India. Furthermore, the environmental agenda has also moved on. Under the imperatives of climate change, the new thinking of the Europe 2020 Strategyhad to take a broader view and bring together the economic, social and environmental agendas of the EU in a more structured and coherent way.

At the Spring Summit, in March 2010, EU leaders endorsed the European Commission’s proposal for a Europe 2020 strategy, replacing the heavily criticised Lisbon Strategy, and this Europe 2020 Strategy is now the centrepiece of the Commission’s mandate.

The Europe 2020 Strategy puts knowledge, innovation and green growth at the heart of the EU’s blueprint for competitiveness and proposes tighter monitoring of national reform programmes, one of the greatest weaknesses of the Lisbon Strategy.

Important elements of the Europe 2020 Strategyhave yet to be fleshed out and further details will be agreed at the June 2010 EU summit, including country-specific targets. Later in the year, member states are to submit stability and convergence programmes, as well as national reform programmes.

The new Europe 2020 Strategy sets out to correct the main failures of its predecessor and also to lay down a comprehensive roadmap for the EU’s economic recovery and growth. The basic proposal is to continue to promote EU growth based on knowledge and innovation, alongside high employment and social cohesion, while promoting a sustainable perspective (both in competitive and environmental terms). 

Five headline targets

To ensure the member states’ commitment to the new Europe 2020 Strategy, the Commission has set down five quantitative targets coupled with a deadline, and possible immediate action on issues, such as R&D spending, labour market participation rates, third- level education and poverty reduction, and so on.

The five “headline targets” are to be adapted at national level to reflect “differing starting points”:

• Raising the employment rate of the population aged 20-64 from the current 69% to 75%
• Raising the investment in R&D to 3% of the EU’s GDP
• Meeting the EU’s 2020 objectives to cut greenhouse gas emission by 20% and source 20% of its energy needs from renewable sources
• Reducing the share of early school leavers from the current 15% to under 10% and making sure that at least 40% of youngsters have a degree or a diploma
• Reducing the number of Europeans living below the poverty line by 25%, lifting 20 million out of poverty from the current 80 million.
• Monitoring those targets, the Commission says, “should be an integral part of our economic governance”.

How realistic are these targets? Anne Mettler of the independent think-tank the Lisbon Council is critical of the continued use of the R&D target of 3% as a proxy for innovation performance, which she says is “too simplistic and downright misleading”. The Lisbon Council cites the case of Japan where despite high R&D expenditure, the country experienced a “lost decade” of low growth, declining global market share and precarious state of pubic finances.

A high degree of innovation is not driven by research, but by changes in processes, business models and workplace organisation, Mettler points out. A different target is required or at least the R&D target should be complemented by other targets, such as productivity growth. 

Also, education and social objectives did not feature in the Lisbon Strategy. No measurable targets have yet been established in this area and these need to be defined for the June EU summit.

Given the reluctance of member states to let the EU get a serious handle on policies in those domains where competence or decision-making remains at national level, this will certainly be the first main test of the real will of member states to invest the Europe 2020 Strategy with more than just economic interests. 

In addition to the list of measurable targets, a series of “flagship initiatives” were identified where joint action will be initiated: on innovation, youth, the digital agenda, resource efficiency, industrial policy, skills and jobs and the fight against poverty.

Reform of governance

The key element of the Europe 2020 strategy is the reform of the governance model that had been heavily criticised in the context of the Lisbon Strategy, and cited as one of the main reasons for its failure. 

To enhance governance, two important innovations have been introduced:

• The European Council is now clearly in charge of driving the process, on the basis of Commission proposals
• The Commission has a new capacity to issue “policy warnings” if a member state fails. 

The reporting system on the member states’ efforts to achieve the 2020 targets in the Europe 2020 Strategy will also be better co-ordinated and aligned with the reporting system of the Stability and Growth Pact. This deals with the legally binding obligation for member states to report on their reforms in the domains of macroeconomics and public finances.

Though the two processes will still remain separate, by reporting them almost simultaneously it is hoped that member states will be pushed to better co-ordinate their macroeconomic reforms with the thematic initiatives expected to be driven by the Europe 2020 Strategy. 

Through this ingenious linking, policy recommendations could be made to member states both under the Stability and Growth Pact – which carries legal weight – and under the thematic parts of national policy programmes.

In an attempt to give some teeth to the process, the Commission can issue a “policy warning” if an EU country fails to meet its policy recommendation in the agreed timeframe. Such a warning would be under obligations of the EU Treaty (Article 121.4) and would need approval by the member states. It could also be made public in order to give it more political weight.

Implementation at national level

One major criticism of the Lisbon Strategy has been that national governments did not buy into the process and monitoring was too loose and lacked sanctions for failing member states.

The new EU President Herman Van Rompuy has said that to be successful the new Europe 2020 Strategy “requires ownership and commitment at the highest level”. “The new strategy needs to become our joint responsibility.”  

But criticism is already being levelled that the proposed governance mechanism is seen to be lacking any force and relies too much on benchmarking, monitoring and recommendations. The strategy of trying to embarrass member states into action has not proved very successful in the past.

Some business groups are already calling for a mid-term review of the Europe 2020 Strategy to be scheduled for 2014. A rigorous assessment at that point in time could take a view on whether the current Commission had done enough. Many feel that the 2000 Lisbon Strategy failed because too little was done in the first five years.

Carrots, not sticks

The European Policy Centre, a Brussels think-tank, has already questioned whether the EU had the tools to deliver on its ambitious objectives. “Looking at the targets, it looks like the tools to deliver are mostly at member-state level so it remains to be seen how far member states will match action to aspiration this time around,” they say. “The 2020 document offers some carrots, but few sticks other than a possible warning from the Commission, which is unlikely to send a shudder down the spines of national finance ministries.”

The Greens have also criticised the Europe 2020 Strategy for being weak on national implementation measures. “The Commission is repeating the mistakes of the Lisbon Strategy by presenting a programme without demanding obligations. We need binding targets for critical issues such as resource and energy efficiency, as well as for social objectives.”