Almost given up for dead, the Lisbon Agenda experienced a surprising Renaissance a few days before the EU Summit 2007. The exceptionally positive development during the past year seems to have brought the ambitious agenda to make Europe the leading science-based economic zone in the world within reach. This is the conclusion of the joint study entitled "European Growth and Jobs Monitor" carried out by Allianz SE and Brussels think tank the Lisbon Council.

The EU -15 are only slightly off track towards achieving the goals formulated in the Lisbon Agenda for 2010. The current level of goal attainment is 90 percent for 2006, while at the end of 2005 it was only 73 percent.

Reactions to the study that was launched by Allianz Chief Economist, Michael Heise, in Brussels last Tuesday are correspondingly positive. The study is set to be a central focus of debate in the media and among politicians at the spring EU summit being held on 8 and 9 March.

Chancellor Angela Merkel quoted from the study in her government declaration on the EU spring summit, stating that Sweden, Belgium, Germany and Great Britain had caught up with the USA as far as productivity was concerned. "This result gives encouragement for more steps in the direction of reform," according to the Chancellor.
 
The EU Commission also welcomed the results of the study: "It's good to see independent observers starting to acknowledge that the revised Strategy for Growth and Jobs is starting to bear fruit, said EU Economic and Monetary Affairs Commissioner Joaquin Alumina. The results are measurable and provide encouragement to continue on the path of reforms. This is the only way to deliver a better and brighter future for Europe."

A key issue now is the extent to which the current growth is the result of a short cycle or a long-term change in trend. Heise perceives structural improvements in the restructuring operations being carried out by companies and the first steps toward political reform. These "have contributed to growth and are at least signaling a change in trend". Stagnation of investments in research, development and education remains unsatisfactory, as Ifo President Hans-Werner Sinn stated on the same day in Brussels.

Despite an additional anticipated increase in interest rates by the European Central Bank, Sinn and Heise continue to believe that the conditions for ongoing European growth have been met. "The policy of stability being pursued by the European Central Bank has contributed to ensuring that the key long-term interest rates remain at a low level," according to Heise.

Heise maintains that it is appropriate to allow employees to benefit from growth in productivity. In the same way as policy on interest rates, it is important that pay policy be reasonable in order to consolidate the positive trend: "Carefully considered steps undertaken year by year are better than going for broke in the short term.

"The study will continue to keep a critical eye on development within the EU until the target year of 2010. "During the past year, Europe has demonstrated that it is able to achieve ambitious goals," commented Allianz Chief Economist Michael Heise, "but we need to take concrete steps at the spring summit of the EU to exploit this trend and further the cause of reform. This will enable us to achieve the position of leadership and then stabilize the situation over the long term. Lisbon is by no means guaranteed to be a sure-fire success."


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