Author: Vedran Obućina

Analyst, journalist specializing in the Western Balkans and Middle East domestic and foreign affairs

Assessment of Europe 2020 strategy

By the end of the 1990s, the EU focused on modern sources of economic growth, which were largely based on investments in R&D and education. The key motives came from the challenges of globalization processes and the new demands placed on national economies and integration.
Assessment of Europe 2020 strategy

(European Parliament, CC BY 2.0)

European Union is lagging in productivity, competitiveness and the implementation of the knowledge economy — basis for progress in modern economic conditions. So the EU has decided to face global challenges with development strategies and their main goal: to encourage the adequate structural changes needed to achieve international competitiveness and the leading position of the European economy in the global context. Development strategies and accompanying policies have been implemented since 2000 and the process, with varying degrees of success, has continued until this year. The Lisbon Strategy was the starting point for the EU’s new orientation towards long-term knowledge-based progress. It was defined in 2000 for ten years, focusing on three key objectives:

  1. Economic growth of 3 per cent based on knowledge and innovation,
  2. Social development and social cohesion, primarily through the achievement of employment levels of 70 per cent and new and better jobs and
  3. Environmental protection, which implies the harmonization of economic activities with the needs of environmental protection, thus placing the emphasis for the first time on the concept of sustainable development.

Although ambitious, the first revision of the Lisbon Strategy in 2004 shown disappointing achievements and lags, primarily due to overcrowded plans, lack of cooperation and lack of political support in member states, as well as poor coordination. The revision of the Lisbon Strategy has resulted in the creation of the EU knowledge triangle, which strengthens the link between education, R&D and innovation, to achieving long-term economic growth and employment. This approach laid the foundations for defining the Europe 2020 strategy, the implementation of which began in 2010. Europe 2020 bases its action on key priorities, quantitative goals and initiatives. Smart economic growth, sustainable economic growth and inclusive economic growth need to be highlighted as key priorities. The European Commission (EC) has divided the objectives into several key groups, including employment, R&D, climate change and energy sustainability, education, and the fight against poverty and social exclusion.

Setting new goals

Globalization trends also greatly affect European SMEs which are the drivers of the entire economy. According to the EC, in 2019, SMEs were 99.8 per cent of all European enterprises, employed 66.6 per cent of all employees and were responsible for 56.4 per cent of total European added value. In the context of globalization, SMEs are increasingly faced with demands in terms of continuous investment in R&D, education and training with the ultimate goal of increasing productivity and achieving international competitiveness. Such challenges result in an increasing need to modernize business processes, a skilled and adaptable workforce. Thus the share of low-skilled workers is declining and they are becoming the most vulnerable group on the labor market.

In ten years, the EU has increased the levels of investment in R&D, reaching a level of 2.12 per cent of GDP in 2018, which is the highest level in this period. Yet, with such values, the EU is still below the set target of 3 per cent of GDP by 2020. It is due to negative consequences of the global financial crisis that has hit the EU and the world and from which economies began to recover only in early 2012. Given the increase in innovation activity in the EU, it would be logical to expect significant improvements in the economic growth, productivity and the share of high-tech products in total exports. However, the data suggest that the progress, especially in terms of economic growth and productivity, has been slow and not very significant. In the observed period, the European economy grew by an average of 1.6 per cent, with more pronounced rates visible after 2015. This will certainly change again due to the COVID-19 pandemics and shutdown of economic activities.

As far as labor productivity is concerned it started to decrease after constant values from 2013 to 2015, which is certainly not a positive indicator and represents a challenge in the future realization of the strategy. In the observed period, the EU increased the share of high-tech products in total exports, which in 2018 amounted to 17.9 per cent. Such trends suggest that the European economy still manages, although only to a certain extent, to implement new solutions in production processes. After a period of stagnation in 2013 and 2014, the level of employment of the population aged 20-64 in the EU is continuously increasing and in 2018 it was 73.2 per cent. Thus, the EU is very close to achieving the target of 75 per cent of the total employment. Available data suggest that the EU is making progress in employment and other social aspects and, in line with new development paradigms, investment in R&D is increasing and human resources are advancing, through education, training, reducing early school leaving, etc. The values from 2019 indicate that 41.3 per cent of the population aged 30-34 have completed some form of tertiary education.

The EU is increasing the level of renewable energy use in the economy. According to the latest available data, in 2018, 17.9 per cent of total energy consumption is generated from renewable sources. However, with such values, the EU is still below the prescribed target of 20 per cent. Also the EU is moving towards natural resources efficiency and sustainable development, by reducing greenhouse gas emissions and increasing the use of renewable energy sources.

EU is still behind its main competitors

It’s obvious that the EU is taking significant steps towards closing the gap with its most important competitors globally. Nevertheless, this general and broad picture of the European economy should be evaluated with a certain amount of caution. The key objectives are not unified, i.e. they do not apply equally and in equal amounts to all EU member states. The specific national level of an individual indicator (TARGET) is determined by the overall economic and social position of each country. The 2020 Eurostat data indicate that the highest achieved levels of individual indicators, especially those related to innovation, have been in the richest countries (Sweden, Germany, Finland and Belgium), which also have set maximum TARGET values.

On the other hand, there are lags in the new Member States with lower targets (Romania and Bulgaria) and in the small countries (Cyprus and Malta). This indicates that the development of the EU is not going smoothly. Therefore, the EU should ensure equal development opportunities for all member states, initiate structural changes and continuous convergence processes.

The EU is facing growing challenges in all areas of the economy, politics and society, which question the survival and future of European integration. The further progress and the achievement of modern development goals will depend on the ability and willingness of the EU and its members to continue on the set paths and on the mutual cooperation of the member states.

The global financial crisis and its consequences have unequivocally highlighted the EU’s vulnerability to global challenges and identified weaknesses in its entire economic system. It was the basis for the formation in 2015 of the Report of the Five Presidents which identified the key stages of deepening economic and monetary union and achieving long-term economic stability. The implementation of the key developments identified by the Report was planned through three key phases. The first phase (empowerment by action), which was to be completed by 2017, included the achievement of convergence and competitiveness, the completion of the financial union and fiscal responsibility. The second phase (completion of EMU) emphasized the convergence process and the establishment of the Eurozone treasury. The final phase should be ready by 2025 when economic and monetary union should become a stable and fast-growing area, resistant to the negative consequences of global economic trends.

Europe 2030 strategy 

Taking into account the challenges of sustainable development, the EU has also defined the Europe 2030 strategy, which focuses on the need to ensure secure, affordable and environmentally friendly energy by 2030. This strategy builds on the key objectives of the Europe 2020 climate and energy targets and advocates a 40 per cent reduction in greenhouse gas emissions compared to 1990 levels, an increase in renewable energy consumption to 27 per cent and a focus on green industries and 27 per cent energy savings.

Furthermore, with the completion of the financial perspective 2014-2020, the structure of the European budget for the next period, i.e. 2021-2027, will change. In general, the fundamental objective of the European budget is to „achieve the objectives of European policies” and therefore its structure should maintain the current needs and requirements of the European economy. The structure of the „new” budget shows that the EU will continue to focus on key areas of smart, sustainable and inclusive growth in the next budget period. However, taking into account contemporary challenges, a larger share of funds is earmarked for security, defense, protection of external borders and citizenship. One of the key challenges for the EU in the future is to deepen and expand European integration through the accession of the candidate and potential candidate countries, united under the common name of the Western Balkans. The global migrant crisis and distrust in European integration processes are part of the challenges too. Of course, the current situation and the likely economic crisis caused by COVID-19 will further test the functionality of European integration and the strength of its strongest instrument — the internal market.

The future of the EU will be largely determined by the joint action of member states in key areas and the existence of political and national will to define and implement accepted strategies. Their ultimate goal is to foster fundamental structural change and ensure the further progress of the European economy. Future economic research should focus on the analysis of the achievement of the objectives of the Europe 2020 strategy at the national level, in accordance with certain target values. Also, future research should focus on in-depth research (using appropriate econometric models and tools) on the effects of strategy implementation on the economic growth, productivity and other key macroeconomic indicators of the European economy.

(European Parliament, CC BY 2.0)