GORDON BROWN, NICOLAS SARKOZY and HANS EICHEL
EUROPE MUST REFORM IF IT WANTS TO SPEED UP GROWTH
As the Group of Seven leading economies meet to consider the world economy and express concern to the Organisation of Petroleum Exporting Countries about the impact of rising oil prices, we believe that economic reform must be right at the centre of the European agenda for growth. The European Union that this month completes its historic enlargement from 15 to 25 members has huge economic advantages – its stability, its social cohesion, its investments in infrastrutture, some of the greatest global companies, a skilled workforce, and the promise and as-yet-unfulfilled potential of the world's biggest single market.
But for years European growth has been too low – averaging an annua) 1.7 per cent since 2000 – and unemployment too high, with today 18m Europeans out of work. EU leaders have set ambitious productivity and economic reform targets for 2010, including the creation of 21.5m more jobs; Europe must do more to attain them.
Low growth is even more worrying because Europe faces intense global competition. Global products, companies and financial flows are increasingly challenging the EU to be more open, outward-looking and efficient. To create jobs and growth in the new global era Europe must now embrace a forward-looking economic reform agenda, at the core of which are four major policy issues.
First, a globally oriented Europe must pursue liberalisation in products and services to beneflt fully from the single market. Europe's investment in research and development is only 2 per cent of gross domestic product, compared with 2.7 per cent in the US and 3.1 per cent in Japan, so we will also make specific recommendations for enhancing R&D and practical innovation across Europe. We will bring forward proposals for stimulating Europe's venture capitai industry and do more to help companies innovate, by modernising the state aid rules to focus them efficiently on, among other things, addressing market failures.
We will also propose that a more outward-looking, globally oriented Europe can take the lead in delivering a successful outcome to the Doha round of trade talks, that benefÃts developihg and developed countries. We will, recommit Europe and our countries to a fruitful transatlantic dialogue, ori issues that include accounting and auditing standards.
In the international organisations, we will riemain vigilant about the need to tackle financial centres that do not co-operate, aiming to increase global transparency in financial markets, strengthen corporate governane and improve 'regulatory oversight. Wc can right money laundering, tackle harmful tax practices and, vital for the security of the world, tackle the flnancing of terrorism.
We wiil also continue to contribute to efforts to mobilise the additional resources needed to help to meet the Millennium Development Goals, including supporting the joint work of the International Monetary Fund and the World Bank on issues such as aid effectiveness, absorptive capacity, resultsbased measurement mechanisms, and various policy options and Fnancing mechanisms, such as an International Financing Facility.
Second, with high long-term unemployment that affects some of our fellow citizens – in some European countries up to 50 per cent of those out of work bave been unemployed for more than a year compared to just 10 per cent in America – Europe must combine policies that equip people with the skills they need for work (through education at school and wider life-long training) and policies that ensure greater labour flexibility. So, following the recommendations of Wim Kok's report on European employment, ali European governments should learn from each other, doing more for skills, job creation, and tax and benefit incentives to ensure the unemployed can return to work faster.
Third, effective regulation is essential to underpin stable and wellfunctioning markets. But we need to do more to reform and remove unnecessary regulation and lower its costs io encourage growth, enterprise and jobs. That is why regulatory reform is at the heart of the four EU presidencies through to 2005, and wc will ensure that each proposed regulation and the relevance of existing regulations are put to a cost-benefit analysis and a competitiveness test.
Finally, Europe must ensure that the framework for its economic policies enables it to deliver strong and sustainable growth.
The multilateral surveillance ensured by the EU's stability and growth pact has played a key role in enhancing the credibility of EU governments' commitment to fiscal discipline and has encouraged greater transparency of member states' fiscal positions. While ali certainly need rules to guide our public finances, it is crucial that EU member states continue to send a strong signal of budget discipline by refusing to return to the unsustafnable policies of the past.
In evaluating each country's national public finances situation, we also need to take into account the individua) cyclical and structural framework conditions and to focus on the long terni: debt levels; sustainable funding of pension and health commitments; and improving the quality of public finances. But common fragreworks are not enough. National governinents remain responsible for frscal policy and assume this responsibility vis-Ã -vis their fellow citizens.
In short, instead of squandering the moment when a reforming Europe can benefit from a world economie upturn, we should seize it to drive forward growth and job creation. So we ali need io continue strengthening sustainable finances; pushing forward the structural reforms needed to deliver more growth and more jobs; and ensuring a more outward-looking Europe is fully equipped to succeed in the global economy.
The writers are, respectively, Britain's chancellor of the exchequer, French finance minister and German mance minister