EUROPE 2020 AND SUSTAINABLE DEVELOPMENT Can it all be reconciled? Iain Begg European Institute, London School of Economics

POLICY CONTEXT: Promising? Sustainable development a core Treaty aim, plus… –Everyone is in favour of it –Everyone is in favour of it –Every policy has to embed it –Every policy has to embed it …yet not much actually happens  Establishment of EU “mega-strategies” Growth and jobs (Lisbon strategy ) Energy security & efficiency; climate change Sustainable Development (revised June 2006) NS for Social Protection and Social Inclusion –Adds up to significant, yet ‘sub-Treaty’ reform

WHAT WE KNOW IS COMING Demographic change –The relative ageing of the population Challenges of labour supply: the vexed issue of immigration The funding legacy left to the next generation(s) –Implied shifts in economic structures Care, health, ‘grey’ consumers The necessary shift to a low-carbon economy –Prospect of new vectors of inequality A notion of ‘carbon justice’ as well as social Globalisation as an enduring challenge –Ramifications for fiscal sustainability of social model(s) –Potential ‘demands’ on global governance

STRATEGIC DIRECTIONS: What needs to be reconciled? MACROECONOMIC AIMS Nurturing recovery Maintaining stability Global policy linkages DISTINCTIVE MODELS Social, including labour Financial systems Regulatory traditions SUPPLY-SIDE REFORM Multiple goals Knowledge economy …but also ‘green’ Competitiveness …but also fairness Diverse starting-points ALL IN A SINGLE, CREDIBLE AND SUCCESSFUL CO-ORDINATION PROCESS…!! “Wagner’s music is better than it sounds” A metaphor for EU co- ordination processes?

UNCERTAINTY PRINCIPLES Connections to sustainability A central feature of capitalist economies –Unpredictable outcomes Security as the antithesis of uncertainty –Economic impacts minimised –Social consequences mitigated: Employers, workers and flexicurity mechanisms The socially excluded –Climatic effects controlled Risk-taking –Lessened by too much uncertainty? –Consequences for entrepreneurial activity

VARIANTS ON SUSTAINABLE Macroeconomic –Growth that avoids current imbalances –But provides for future developments Environmental – obviously –Resource use –Costs of abatement/mitigation Social – much more amorphous –Overlap with macroeconomic on pensions –But separate inclusion/cohesion agenda

FIVE “JUSTICES” TO PURSUE Social, incorporating investment and protection Carbon – burden-sharing on emissions cuts Historical – who caused the problem Current – who is aggravating it Developmental: the energy-GDP correlation –China stance on development first, curbs later Inter-generational Meeting the needs of the present Without compromising needs of future generations Knowledge – can intellectual property be pooled?

SCENARIOS FOR POST-2010 Scenario 1 – A bump in the road –Recovery takes hold quite rapidly Unemployment peaks well before post-2010 –Limited change in underlying trends and drivers >> Growth and jobs focus continues Scenario 2 – Enduring recession or ‘lost decade’ –Risks of long-term unemployment and exclusion –Policy focus on mitigating adverse effects >> Links between employment & social enhanced Scenario 3 – Reinvention: towards new model –Active intervention to re-shape the economy >> Sustainable development & low carbon paradigm

MACROECONOMIC GOALS Difficult choice of exit strategy –Timing, with the risk of adverse spillovers –Manner: fiscal leading monetary …or vice versa –The spectre of inflation Need to stress quality of public finances –Spending better, but substantially less Growth enhancing programmes –Locking-in future savings – recasting pensions Debt reduction & winding-down imbalances

EUROPE 2020 THEMES Commission paper of 03/03/10 Recognition of challenges of exit from crisis –Integration of Europe 2020 and Stability & Growth Pact Main headlines for policy co-ordination –Smart growth: knowledge & focus on innovation Education, research, creativity –Sustainable growth: green and competitive Lower energy intensity; industrial policy? –Inclusive growth New skills allied to cohesion Emphasis on ‘second generation’ flexicurity approaches >> Yet weak in explaining ‘why Europe?’

KEY QUESTIONS FOR EU Selling a post-2010 narrative for policy –Countering climate change as obvious one Chimes with public mood –Maybe, also, a reinforced social dimension One-size-fits-all targets or differentiation? –Is it time for customised guidelines, targets, etc. Joined-up governance for Europe 2020 –Co-ordination and budget must work in tandem Defining EU role is, hence, politically tricky –Key is, therefore, political leadership