Ref. :  000017824
Date :  2005-03-17
Language :  English
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Lisbon strategy can make a significant contribution to growth, a Commission report shows

Author :  Union européenne


A survey of empirical evidence shows that the type of measures envisaged in the Lisbon strategy would raise the European Union’s potential growth rate by 0.5-0.75 percentage points, bringing it closer to the 3% objective. Over a 10-year period this would imply an increase in the GDP level of up to 7-8 %.

The last 10 years have seen a growing number of studies analysing the economic impact of the types of structural reforms envisaged in the Lisbon strategy. These studies show that such reforms are essential for increasing the growth potential of the EU economy in the medium- and longer-term. Doing nothing is not an option. For example, the impact of ageing alone will reduce the potential growth rate of the EU by nearly half over the coming decades, from the present 2-2.25% to around 1.25%.

A survey of this literature allows the Commission services to estimate the costs [1] of not introducing the Lisbon structural reforms. The investigation focused on measures which remove the remaining barriers to the efficient functioning of the Internal Market, further integrate financial markets, encourage investment in knowledge and innovation, modernise labour market policies, increase social cohesion and improve the environment.

According to the Commission estimates, product and labour market reforms in the second half of the 1990s resulted in an increase in annual GDP growth of almost 0.5 percentage point over the medium term. If the effects of the increased knowledge investments foreseen with the Lisbon strategy are also accounted for, the increase in EU potential growth could reach ¾ of a percentage point. This would bring the EU potential growth rate closer to the 3% objective and would result in a cumulated increased growth of 7-8 % over a period of 10 years."

Studies also show the benefits of having a comprehensive package of structural reforms. In order to be most effective, measures in one reform domain need to be accompanied by flanking measures in another domain. For example, innovators need well functioning product and capital markets to bring growth enhancing innovations to the market and a highly qualified workforce to make use of the new technologies.

Completing the internal market for goods and services and ensuring effective competition in sectors such as electricity and telecommunications are two examples of the type of product market reforms that are required. A study [2] cited in the report estimates a 0.6 percentage point increase in GDP in the long run as a consequence of the liberalisation of electricity and telecommunications markets. This is why the Commission is closely following up on progress in these sectors and this week pursued action against 10 member states for not implementing legislation aimed at opening up the energy sector to competition (see IP/05/319).

In yet another example, the Commission adopted a communication this week aimed at improving the regulatory environment for businesses (see IP/05/311).The administrative burden associated with poor regulation tends to hamper Europe’s growth potential. A recent study[3] cited in the report estimates that a 25% reduction in the administrative burden in the EU would result in a 1% increase in real GDP.



[1] The study: « The economic costs of non-Lisbon : a survey of the literature on the economic impact of Lisbon-type reforms » is available on http://europa.eu.int/growthandjobs/index_en.htm

[2] European Commission, 2002, “ Chapter 2 – Structural reforms in labour and product markets and macroeconomic performance in the EU” in : “The EU Economy: 2002 Review”.

[3] Tang, P and G. Verweij, 2004, « Reducing the administrative burden in the EU », CPB Netherlands Bureau for Economic Policy Analysis working paper.


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