Heise: Europe is the Allianz Group's home market. Consequently, growth and prosperity in the region are of crucial importance both to our own development and to that of our private and corporate customers in Europe.

At the Lisbon Summit exactly five years ago, the EU heads of state and government agreed on an agenda for economic and social development which aimed to make the European Union the world's most competitive economy by 2010. We have now reached the half-way mark, so this seemed to us a perfect opportunity to clarify what the EU has already achieved and what needs to be done in the future.

Heise: Our Lisbon Indicator is designed to measure that. It is based on economic ratios which directly relate to the political agenda agreed by the 15 heads of government. In designing it we have also considered the recent announcements made by the new Commission President José Manuel Barroso, in which he made some of the vaguer Lisbon objectives more specific.

All in all, progress at the half-way mark is disappointing. However, we believe that thanks to reform efforts in individual EU member states, some of which have been very bold, the EU is now in a good position to breathe new life into the Lisbon process. For optimum results it is now necessary to concentrate on the key objectives and to streamline the agenda, particularly as due to the recent demographic change the governments are running out of time in which they are still able to make policy changes.

Heise: We based our indicator on the five most important ratios, namely economic growth, employment, investment, and the development of productivity and per capita income in comparison to the USA.

At the same time we have not forgotten the level of debt, particularly with regard to the stability and growth pact, or the development of the euro. However, the EU's disappointing economic performance is primarily due to weak growth in labor productivity and per capita income.

Heise: In comparison to their American competitors, European companies have invested too little in information and communications technologies. Economic policy-makers would do well to make investment easier and to further improve the conditions for research and development in Europe.

In addition to that, one of the key tasks of European policy-makers is to integrate the European internal market even further. The Directive on Services in the Internal Market is a current focus and aims to make it possible for companies to offer their services throughout the EU without being subjected to complicated approval procedures.

Heise: Harmonization has its price. Any type of transition always creates work and costs, that can never be avoided. However, these costs really can be seen as investments, as they ultimately cause the markets to become more efficient.

Let me give you an example: Just ten years ago, if a company wanted to issue a bond it had to pay extremely high charges, but those charges have now fallen by half. Why is that? Because the integration of the finance markets which has already been achieved as regards large customers has increased competition and thus underwriting fees have fallen to same level as in the US.

We are expecting the Services Directive to have a similar effect. More competition, and international competition, benefits all customers.

Heise: We believe consumers are discerning people who can decide for themselves whether they want to pay more to ensure they receive services of a high quality or would rather pay a lower price for lower quality services.

However, in some areas, for example where safety is concerned, the EU must set out common standards and also ensure transparency so that the customer can make an informed decision. The standards simply need to be clearly recognizable to the customer, for example what qualifications a particular service provider has, how comprehensive his services are, and what guarantees he provides.

Heise: We can't bar the new member states from our markets forever. Besides, increased competition will cause prices to fall.

When prices fall, either demand rises or purchasing power is released in other areas. Ultimately, this leads to greater growth and higher employment in the EU as a whole. The winners are of course those countries which have low costs, while it is the countries where wages are high which bear the pressure to adapt.

Heise: The outlook is better than in the first half of the decade. There is now a much greater willingness to instigate political reform, the EU Commission has become more focussed in terms of its strategy and many companies have managed to make themselves competitive in a very short space of time.

Due to changes on the labor market, for example the Hartz reforms in Germany, flexible forms of employment such as part-time work, loan employment and low-paid work should become more widespread. This means that once again less capital will be employed per unit of output, thus leading to employment-intensive growth.

This could mean that unemployment will soon fall, but the price of that will be less significant growth in productivity and real wages.

As with all content published on this site, these statements are subject to our Forward Looking Statement disclaimer, provided on the right.