Ömer Fazlıoğlu September 2005 – Ankara ASAM-Roundtable Workshop Rethinking Lisbon Strategy: Is it the Right Agenda for a Genuine Economic Development Ömer Fazlıoğlu September 2005 – Ankara ASAM-Roundtable Workshop

Global Competitiveness and its Components Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Global Competitiveness and its Components To set as a premise: Reduce the role of the status quo – rely on competition! Increasing Asian competitiveness  uncompetitive European economies Greying /old Europe New /Young Europe Awaken Giant: Asia

Basis for European Economic Development: Lisbon Strategy Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Basis for European Economic Development: Lisbon Strategy The Lisbon Agenda Strategic goal of the Lisbon Strategy for the next decade: To become the most competitive and dynamic knowledge based economy in the globe, capable of sustainable economic growth. Specific targets of the Lisbon Strategy for 2010: An overall employment rate of 70 % An employment rate for woman over 60 % An employment rate of 50 % among older people Annual economic growth of 3 % competitiveness and social cohesion Economic, Social and Environmental Reforms

Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? PERFORMANCE ASSESMENT OF THE EU IN THE CONTEXT OF LISBON TARGETS (200-2005) The outcomes to be disappointing, particularly with regard to employment and growth A Mid-Term performance assessment the Lisbon strategy revealed the structural problems of Lisbon Strategy: Problems of Implementation: Calls for the completion of Single Market in the full sense Problem of Complementary National Policies: Need for labour Market Reforms and Modernization of Social Policies Problem of Design: Promotion of Innovation and Knowledge Estimated Growth for EU-25 (2005-2006) → 2.0 % , 2.6 % Estimated Growth for Euro-zone (2005-2006) → 1.6 %, 2.1%

Low Potential of EU Growth and R&D Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Low Potential of EU Growth and R&D Chain Relationship: Knowledge matters for productivity, and productivity in R&D matters for the accumulation of Knowledge. In the production of “valuable patents” Europe lags far behind the Japan because: the stock of accumulated knowledge is lower Productivity in the R&D sector is lower.

LISBON STRATEGY AND SECTORAL TARGETS I. EMPLOYMENT Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? LISBON STRATEGY AND SECTORAL TARGETS I. EMPLOYMENT Employment Target Employment (%) Target Year EU - 15 Avarage (2003) # of successful MS (EU-15) EU- 25 Avarage (2003) # of succesful MS (EU- 25) General Employment Rate %67 2005 % 64.40 7 % 63 8 Women % 70 2010 %64.40 4 % 57 % 56.10 9 % 55.1 14 Between the ages of 55 – 64 % 60 %41.70 %40.2 6 Retirement Age Avarage Approx. 65 % 61.40 % 61

LISBON STRATEGY AND SECTORAL TARGETS II. R&D, INNOVATION, EDUCATION Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? LISBON STRATEGY AND SECTORAL TARGETS II. R&D, INNOVATION, EDUCATION R&D – Innovation and Education Target Target Year Reference Year EU – 15 Avg. # of succesful EU-15 Countries EU-25 # of succesful EU -25 Countries R&D Expenditure /GDP % 3 2010 2003 % 1.99 2 Sweden Finland % 1.93 R&D Expenditure / Business Sector Contribution % 66 % 56 3 % 55.40 Schools with Internet Access % 100 2002 % 93 1 - Internet Access at House % 30 2004 % 47 12 % 44 15 E-Governance %45

Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Relaunching the Lisbon strategy for the Second Half of the Decade – What’s new? Better Cycle of governance for the Lisbon Agenda A new Partnership with Member states: clarify the responsibilities and confirm the role of the Commission as facilitator, supporting policy developments in Member States; Far reaching simplifications: national reform programme (subsidiarity) Ensuring 3 crucial issues at stake i) Guidelines on Labour market policies (the Luxembourg Process): Refocusing on growth and employment relationship, vocational training and education ii) Guidelines on Microeconomic & structural Reforms (the Cardiff Process): Focus on internal market reforms, Entrepreneurship, R&D spending (business sector contribution) iii) Guidelines on Macroeconomic & budgetary measures (the Cologne Process): fiscal spending, growth-oriented spending.

Dilemma of the Lisbon agenda: Convergence and Catching-Up-Process Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Dilemma of the Lisbon agenda: Convergence and Catching-Up-Process “To investigate growth factors is not identical to the issue of convergence, i.e. the catching up process. Lisbon Strategy’s major motive is not to create a catching-up process between the new MSs and the old continental European ones. But to facilitate convergence. (to approach the level of economic prosperity of the economically leading countries) In fact, the Lisbon Agenda designed to yield EU to the path of becoming a growth engine for all Europe, not for the acceding countries. However, it turned out to serve as an Catching-up mechanism for the new MSs whom are incapable of being the motor for European development.

Rhetoric of the Relaunched Lisbon Strategy Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Rhetoric of the Relaunched Lisbon Strategy Relying on competition to enhance dynamic performance Strengthening human capital formation Reducing the share of government Cutting subsidies in half Reducing marginal tax and contribution rates Relying on wage moderation where unemployment is high Deregulating the labor market to allow a more decentralized wage formation the firms. Strengthen the external dimension: Doha and the regional agreements Spread access to the information society Take into account the environmental dimension Finalise the single market: transposing the directives, achieving the legal framework of the single market, re-directing State aids, a better regulation, focusing on SMEs, Engage the reform of the labour market and of the social protection

Some Considerations about the Future of the Lisbon Strategy Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Some Considerations about the Future of the Lisbon Strategy Relaunching the Lisbon Agenda with almost the same rhetoric will not be able to solve EU’s structural economic problems. The EU should understand that the only reason for the failure of the Lisbon strategy (2000-2005) does not lie in the problems with implementation. The EU has, in fact, serious structural problems –including mentality- regarding the relative competitiveness against Asia and US. The EU correctly diagnosed the lack of MS involvement to the Lisbon Agenda and take some preconditions in line with conditionality. The next coming 5 year will probably lead to some kind of conditionality

Concluding Remarks & Points of Discussion Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Concluding Remarks & Points of Discussion The New Era Rhetoric sounds nice but isn’t it too familiar ? The Lisbon Agenda and Implications on Turkey The so-called “absorption capacity” debate Turkey’s demographic factor The strategic importance of Turkey’s economic model

Thanks... For follow-ups, please contact: omer.fazlioglu@epri.org.tr Rethinking Lisbon Strategy: Is the Right Agenda for a Genuine Economic Development? Thanks... For follow-ups, please contact: omer.fazlioglu@epri.org.tr