The EU faces the music. They ain't gonna catch us. The truth is, they will fall further behind.
Brussels to set out why EU is trailing US
By George Parker in Brussels
Published: January 21 2004 4:00 Financial Times
Europe's apparently doomed attempt to overtake the US as the world's leading economy by 2010 will today be laid bare in a strongly worded critique by the European Commission.
The Commission's spring report, the focal point of the March European Union economic summit, sets out in stark terms the reasons for the widening economic gap between Europe and the US.
It cites Europe's low investment, low productivity, weak public finances and low employment rates as among the many reasons for its sluggish performance.
The draft report, to be published by the Commission today, warns that without substantial improvements "the Union cannot catch up on the United States, as our per capita GDP is 72 per cent of our American partner's".
It was four years ago in Lisbon that EU leaders, enthralled by the technology boom, proclaimed their intention to overhaul the US as the world's "most competitive, knowledge-based economy" by 2010.
The Commission's report suggests that such a goal now looks hopelessly ambitious, and will make sobering reading for EU leaders as they prepare for their annual update on progress in meeting the targets set at Lisbon.
In many cases the promises made at Lisbon have not been put into national law by member states, with France, Germany, Belgium and Luxembourg - the biggest enthusiasts for deeper European integration - the worst offenders.
The EU's productivity growth rate has been going down since the mid-1990s and is now fluctuating between 0.5 and 1 per cent, compared with 2 per cent in the US.
The report blames low overall European productivity on a lack of investment and poor use of information technology, and warns that China and India are becoming key competitors.
Europe's low employment rate, especially among workers aged over 55, is described as "worrying indeed", while it is deemed unlikely that the EU will meet its employment rate target of 67 per cent by 2005.
"At the same time, several strategic measures to increase our competitiveness have not got off the ground because of a lack of political will," the report says.
It cites failure to agree basic reforms, such as the introduction of a single community patent or the recognition of professional qualifications across the EU.
Ireland, the holder of the rotating EU presidency, wants to use the spring summit to revive the Lisbon process - an annual ritual which usually fails to deliver the promised results.
The Commission argues that 2004 must see a sharp improvement in EU investment, productivity and competitiveness and reforms to social security systems to bring older people back into the workplace.
"It is not too late, but unless we act decisively now we will not meet our targets," said one official.
The report identifies Austria, Luxembourg, Denmark, the Netherlands, Sweden and the UK as the best overall performers in terms of meeting the Lisbon targets.
France and Germany come in amiddle band, while Greece, Spain, Italy and Portugal are rated as the worst overall performers.
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