European Growth & Competitiveness in a Globalised World
I am delighted to have the opportunity to address this meeting. The World Economic Forum is a highly esteemed organisation, and I recognise the importance of this annual meeting as your showcase event. As key players in the world economy, you play a crucial role in forging new partnerships to make the world a safer and a more prosperous place.
I am here in my capacity as President of the European Union, a position that I am honoured to hold at a time when we will witness the historic enlargement of the EU from 15 to 25 Member States.
This, Ireland's sixth Presidency, is faced with a challenging agenda. The ongoing negotiations on a constitutional treaty for Europe is clearly a major priority. We are currently consulting our partners and assessing the scope for progress in these negotiations. If a real prospect of agreement seems possible, we will seize the opportunity.
The Irish Presidency will spare no effort to make progress and to facilitate consensus during our term in office.
The negotiations on the constitutional treaty, important as they are, are not the only important item on the European Union's agenda.
We have always recognised that enlargement of the Union and the European economic and social agenda would be central to our Presidency. At a time when there is widespread evidence of a growing sense of public disconnection with the European Union, there is a pressing need for Europe to demonstrate that it can make a real difference to the lives of its people. Real opportunity, real prosperity, real security - these are the foundations on which the European Union has been built. These are the issues our peoples expect us to work on together. These foundations must be reinforced in the enlarged European Union.
Enlargement
On the 1st of May, we will welcome the 10 new Member States into our Union. We will finally end the artificial divide that has separated our peoples in Europe. This is enormously significant for the European Union and for each Member State.
This enlargement will bring the population of the EU to 450 million and create the largest single market on the planet. This enlarged Union must be a dynamic economic force that drives sustainable economic development.
We want to see a strong and vibrant European Union, ready and willing to accommodate further expansion in the coming years.
Enlargement will pose new challenges for the European economy. But with these challenges come exciting new opportunities: for growth, trade; tourism; and collaboration in research and knowledge networks. Our enlarged European Union will be a Union where knowledge, innovation and ideas will be the key resources for economic success.
The main economic challenge that the new Member States face is to catch up in terms of income levels with the rest of the EU. Taking account of differences in purchasing power, GDP per capita in the new Member States is around 45% of the average EU level. Some progress towards economic convergence with the EU 15 has already been achieved. But the income-per-capita levels of the new Member States remain unacceptably low compared to the EU average.
Ireland is perhaps the best example of a Member State that has, over the course of its membership, achieved full economic convergence from a position on accession of 60% of the EU's average GDP per capita. That success could not have been achieved without EU membership.
Effective and well-resourced cohesion policies will play a key part in ensuring economic convergence for the new Member States. But the creation of both a fully effective single market and the economic and social policies that support growth and convergence across the EU, will also be critical to success.
Economy
This is why the Irish Presidency has placed the Union's economic agenda at the centre of its Presidency programme. In order to ensure the success of the enlarged European Union in the global economy, we must promote growth and competitiveness. At the Spring European Council next March we will be seeking to make significant progress in these areas.
Back in 2000, the EU agreed a strategy - the Lisbon Agenda - to make Europe, by 2010, the world's most competitive and dynamic knowledge-based economy, capable of sustaining economic growth, with more and better jobs and greater social cohesion. This goal has been instrumental in speeding up reform in Europe and in strengthening a modern, successful European economy.
We have made progress since 2000. But our results are mixed. Europe's recent economic performance has been disappointing. We need to give fresh impetus to what we have set out to achieve. If we do not do so, then Europe will continue to lag and we will not reach our full potential. In the Lisbon Agenda we have a strategy. We must implement it.
There are welcome signs of global economic recovery on the horizon. Europe must avail of the economic upturn to deepen the process of economic and social reform, both at EU and national levels.
The gulf between the EU's ambition to be the most competitive and dynamic knowledge-based economy in the world and the reality, is still very wide. We are still some way behind the United States and other global economies. We have to compete in a rapidly integrating world market that includes, for example, a rapidly growing Chinese economy.
The Lisbon Agenda is the strategic framework within which Europe can increase its rate of economic growth. Our twin priorities at the Spring European Council next March are Growth and Employment. Fostering competitiveness is the key to tackling these.
In order to enhance our competitiveness, the EU must promote a business environment in which enterprise can flourish, in which regulatory burdens are eased, and in which efficient capital markets operate. We must focus on:
increasing investment in physical infrastructure, in education and training, and in research and development;
ensuring that our people can respond to and exploit the opportunities of the knowledge-based economy;
creating an employment market that provides more and better employment for all citizens;
exploiting the full potential of the Single Market and developing within the enlarged Union a regulatory and business environment from which companies can compete confidently in the global markets; and
last but not least, maintaining effective levels of social protection and cohesion.
The EU Competitiveness Council has set out an ambitious programme for a competitive and dynamic Europe. The Council will work actively to raise Europe's growth potential through increasing productivity.
Our long-term prosperity will also depend on the development of a careful balance between fiscal restraint and necessary infrastructural investment. Investment in capital is essential for competitiveness and growth, and this is being supported through the Growth Initiative at EU level. Governments across the enlarged EU are being encouraged to make the necessary capital investments at national level.
Employment
Central to raising productivity is investment in people, skills, research and lifelong learning. Such investment is vital if we are to provide more and better employment for our citizens.
We are not close to meeting the Lisbon employment target of 70% and related social targets as yet. However, a lot has been achieved. In particular, the EU already has a strong record in the social policy area - in providing social protection, in equality and in combating disadvantage. It has also had significant benefits for workers - in terms of health and safety regulation, in modernising our workplaces and in improving their conditions of employment.
We need now to deliver more quality employment in Europe. All Member States are being asked to reaffirm their commitment to the employment objectives set out and agreed at European level. More recently, the Report of the Employment Taskforce, chaired by Mr Wim Kok, provides us with a good opportunity to take firm action on employment. The Irish Presidency work programme in this area will be informed by the Taskforce Report, and will build on the EU Employment Guidelines. The way ahead is clear. It is essential that we now take decisive action at Member States and European Level.
What does this mean? It means that at every level we must increase the ability of workers and enterprises to respond to change. We must make work more attractive and we must ensure more effective investment in human capital. I am working to ensure that the European Council gives a clear signal of Europe's intent to act on the employment agenda.
Stability & Growth Pact
In Ireland and across Europe, a commitment to sound public finances is an essential part of our growth strategy. Fiscal discipline at government level is required to underpin general economic confidence.
It is true that in times of economic weakness, countries face more severe budgetary pressures, and the Stability & Growth Pact has come through a testing time recently. However, the fundamental commitment to fiscal stability has remained solid, and the sensible fiscal rules of the Stability & Growth Pact continue to command support.
Of course, every set of rules may need to be modified from time to time, to ensure continued relevance to the times we live in. No-one pretends that Europe's systems of economic coordination could not be improved - particularly in the light of Europe's recent experience of weak growth and fiscal strain. My own view is that a period of reflection on the rules of the Stability Pact, and on how these rules operate to support growth and prosperity, would be useful at this time. I note that the European Commission will soon be bringing forward its own proposals for improving the EU's system of economic governance, and I am sure this will be an important input to our deliberations.
Conclusion
To conclude, my view in relation to Europe's economic development is simple and straightforward. We already know what needs to be done. We must stick to policies we have already identified and implement them with determination. The European Union has identified a series of reforms and has provided the instruments that will enable us to successfully achieve our goals.
True, the 2010 target set at Lisbon may be ambitious, but I believe that we have the will and the ability to rise to the challenge, to revitalise the European economy and to ensure the ongoing success of the European project.
Thank you.
ENDS