Assessing the EU's 'Lisbon Strategy:' Failures & Successes

The quest for economic supremacy has been at the heart of the European integration process since its very inception. Tracing the historical origins of the economic progress agenda, Europe’s ambition to bolster its economy vis-à-vis its main competitors has traditionally rested on major projects, namely the foundation of the common market in the 1950s and 1960s, the Werner Plan in the 1970s, the Single European Market in the 1980s, and the Economic and Monetary Union in the 1990s (James 2012: 10). In March 2000, the European Council Summit in Lisbon marked yet another significant step in an attempt to offset the EU’s uninspiring economic performance. The so-called Lisbon Strategy set out to make the EU “the most competitive and dynamic knowledge-based economy in the world capable of sustainable economic growth with more and better jobs and greater social cohesion” by the end of the decade (European Council 2000). With emphasis on decentralized ‘soft law’ governance mechanism – Open Method of Coordination (OMC) – as a means of spreading the best practices, the implementation of the agenda relied heavily on voluntarism and peer pressure (Papadimitriou 2012: 2). However, since its launch, the scheme has been falling far short of expectations and came under a great deal of critical scrutiny, most notably from Sapir (2003) and Kok (2004), prompting a substantial revision of its ambitious targets halfway through its term in 2005 only to be struck by the emerging financial crisis in 2008.

This aim of this article is to assess the Lisbon Strategy in terms of its failures and successes. In order to gain a comprehensive understanding of the Lisbon Strategy, the essay identifies two distinct categories of failures. The first category involves output-oriented failures that centre on the Strategy’s performance in light of its goal quoted above. By examining the development in each individual sub-aim, the analysis posits non-fulfilment in every aspect of this overarching aim. I label this set of failures as consequential, as they constitute a direct outcome of the underlying category of causal failures. These relate to the way the Lisbon Strategy was pursued, allowing us to understand factors that induced the disappointing results of the project in the first place. In simple terms, whereas the first category demonstrates how the Lisbon Strategy culminated into a failure, the second one explains why this was the case. Finally, the essay acknowledges that the single positive, yet still dubious, development of the Lisbon Strategy lies in its capacity to encourage policy learning through partial Europeanization of policy problems.

Consequential Failures of the Lisbon Strategy

Of all the consequential failures of the Lisbon Strategy, perhaps the most visible one refers to the fact that it fell short in transforming the EU into “the most competitive economy and knowledge-based economy in the world.” In the last decade, the Member States failed to fulfil almost all the official targets set in 2000-2005, ensuing the EU’s continued economic backwardness in relation to its main competitors (Copeland 2012: 232). According to the World Economic Forum’s Lisbon Review 2010, the EU-27 lagged behind the US as well as the East Asian economic region in seven out of eight competitiveness indicators with only sustainable development being the exception (World Economic Forum 2010: 11). However, it is important to ascertain a considerable variation and disparity in performance across Member States, with some countries performing very well and others lagging behind. While the Nordic and Western European countries have consistently tended to stay on par with its international competitors, many of the post-2004 accession countries have demonstrated a high degree of economic backwardness. As such, some commentators maintain that the large-scale enlargement from 15 to 27 countries had a negative effect on the EU’s competitiveness, since the EU’s challenge became not only narrowing the developmental gap with the overseas, but also reducing the gap between the old and new members (Puślecki 2007: 5). On the other hand, it should be noted that even the ‘old’ EU-15 have remained behind the US and East Asia, mainly due to the poor performance of southern European countries, namely Portugal, Spain, Greece and Italy.

At the same time, the Lisbon Strategy did not succeed in terms of increasing the performance of innovation and research. In fact, the Lisbon Review 2010 identified the biggest gap between the EU and its competitors in this very area (World Economic Forum 2010: 11)! With regards to innovation, the Strategy implicitly assumed that combining national programmes for growth and jobs with the OMC would lead to a successful dynamism in the policy. As Edler (2012: 171-173) points out, the mode of coordination relied on a framework of common policy objectives and benchmarking activities, yet the Member States would still build their own national innovation strategies and define their own targets, rather than engage in producing a joint action. Following the critical account of the Kok Report, highlighting a little progress in the innovation policy, the Commission shifted its approach and established new larger initiatives at the EU level in order to bring the actors from Member States closer together. In particular, it demanded that the Member States embed Lisbon’s goals in their regional operational programmes and regularly provide accounts of progress in its governance. Furthermore, it consolidated and enlarged existing initiatives into the Competitiveness and Innovation Programme (CIP) in 2007, seeking to aid innovation activities of small and medium-sized enterprises (Edler 2012).

As for the area of research policy, the EU laid out a strong integration dynamics through devising the concept of European Research Area (ERA) already in 2000. In essence, the main rationale of ERA approach was to fundamentally shift the scattered landscape of research that existed in Europe prior to the launch of the Lisbon Strategy. In other words, the ERA aimed at developing a holistic framework of shared governance, which would promote a tighter co-ordination among national research policies. To commit national policies to EU goals, the concept set out a range of common indicators, most notably the ambitious goal of spending at least 3 per cent of GDP on research and development (R&D) by the end 2010 (Edler 2012). In contrast to policy-makers in the innovation area, policy-makers in the research area also managed to establish five high-level expert groups with the aim of exchanging ideas about national practices and co-developing indicator systems (Caracostas 2003: 52). To further broaden the co-ordination arena, the Commission introduced networking of national funding programmes and initiated the so-called ‘technology platforms’. All in all, the OMC succeeded in promoting a neo-functional governance dynamics, whereby not only the administrative, but also societal elites (scientists, industry representatives, and funding managers) started to engage on a trans-national level (Edler 2012).

However, despite some structural progress in research and (to a lesser extent) innovation, Lisbon’s Strategy overall tangible performance in these areas ended up as a failure. The overall spending on R&D had improved only slightly from 1.8 per cent in 2000 to an estimated 2.0 per cent in 2010 on average across the EU-27! This debacle is even more remarkable taking into account that the Strategy emphasised the “significant role played by R&D in generating economic growth, employment and social cohesion” (European Council 2000). Yet again, it must be stressed that the scores among the Member States vary to a significant degree. Nonetheless, only the three Nordic countries – Denmark, Finland and Sweden – exceeded the 3 per cent mark by the end of 2010 (Eurostat 2012). The story of innovation is also disappointing; according to Innovation Union Scoreboard 2010, the US and Japan have held a stable lead over the EU-27 over the decade. Similarly, only the Nordic countries accompanied by Germany are able to match the scores of the two major international competitors (Innovation Union 2010: 14-16).

Failure to achieve sustainable growth with more and better jobs and greater social cohesion

The Lisbon Strategy declared that applying ‘appropriate macro-economic policy mix’ would be the key to achieve a sustainable growth in the EU. However, the fiscal part of the mix has been highly criticized, as the budget policy regulated by the Stability and Growth Pact (SGP) has not been respected by Member States. The improper implementation of SGP resulted in a gradual increase of an annual average deficit of Member States from 1.3 per cent of GDP in 2001 to 2.6 per cent of GDP in 2004 (Eurostat 2005). As a result of higher deficits, the equilibrium interest rates soared, impeding an investment and growth (Collignon 2008: 92). The post-2007 financial crisis further revealed the serious weaknesses within European economic policy coordination. As Dyson and Quaglia (2012: 200) state, countries that had been considered to be sustainable such as Ireland and Spain, were shown to be unsustainable, because they relied almost exclusively on consumer indebtedness and asset price bubbles in financial and property markets. In 2012, Greece, Italy and Portugal also suffered from weak competitiveness, large account deficits and unsustainable fiscal positions as measured in sovereign debt (Dyson and Quaglia 2012: 201). Ultimately, even the Commission conceded the failure of Lisbon Strategy to prevent the crisis and bring about sustainable growth. As it stated: “GDP fell by 4% in 2009… Public finances are in tatters, with deficits now reaching 7% of GDP and debt levels having increased by 20 percentage points” (European Commission 2010: 2).

While the arrival of the crisis in 2008 signified a remarkable backlash for progress towards the Lisbon aims, even before the crisis most of the Lisbon benchmarks were missed by wide margins. The area of employment, which gained a primary status after the Strategy’s relaunch in 2005, was no exception. Drawing up new Employment Guidelines, the Lisbon Strategy intended to increase a total employment rate to 70 per cent, female employment rates to 60 per cent, and the employment rate of older workers (aged 55 to 64) to 50 per cent (Vural 2011: 13). At first glance, the results seemed encouraging; between 2000 and 2008, the total rate grew in all Member States with the exception of Portugal and Romania. Even though the total rate rose by close to four percentage points in this period, reaching 65.9 per cent in 2008, the target has still remained far from being achieved. The rate of female employment in the EU-27 increased rapidly from 53.7 per cent in 2000 to 59.1 per cent in 2008 – almost reaching the set target. The most substantial progress has been made among the category of workers aged 55 to 64, where the employment rate rose from 36.9 per cent in 2000 to 45.6 per cent in 2008. Yet again, the desired target of 50 per cent was not met. In aggregate, there has been an improvement in performance of the EU labour market, but the nature of this improvement has been modest at best. The crisis should not be blamed for this failure, as it safe to claim that two-thirds of the Member States would come nowhere near reaching their targets even in the absence of the crisis (Tilford and Whyte 2010: 68-70).

Finally, the social dimension of the Lisbon Strategy, was framed in terms of increasing social cohesion. The long-term aim was to draw up guidelines for social protection at the transnational level, which would be implemented in the same manner as the Employment Guidelines. This strategy would involve setting objectives that are ambitious and realistic, using clear indicators, ensuring flexibility for the Member States to be able to implement their respective policies, and closer cooperation based on the exchange of experience (de La Porte, Pochet and Room 2001: 297). However, this programme was not even slightly realized, as the Member States opposed any intrusion of the EU into their domestic arrangements and concurrently there was no commitment device to sanction them for non-compliance. The main difficulty for agreeing on common direction was that Member States had different conceptions and mechanisms of the welfare state, with their national social protection systems being embedded within particular institutional structures (de La Porte, Pochet and Room 2001: 297). The reluctance towards coordination of the social agenda was officially recognized in the Nice Treaty, whereby Member States stipulated that the EU policies ‘shall not affect the right of Member States to define the fundamental principles of their social security systems’ (Article 144). Additionally, the redesigning of the Lisbon Strategy midway through the decade to focus exclusively on growth and jobs marginalized the developments in the area of social cohesion even further (Daly 2012: 90). As a result, the field remained sidelined up until the end of the decade with no collective objectives, no guidelines, no recommendations and no peer-reviews being configured.Continued on Next Page »