COLLOQUIUM: Fifth Belgo-British Conference

"Ensuring Europe's prosperity - Building Bridges"

The Royal Institute for International Relations (IRRI-KIIB), Brussels
and British Council

25 Nov. 2004 Namur

When I saw that the theme of this Conference was "building bridges" I confess that the first thought that occurred to me was Nikita Khrushchev's maxim that "A politician is someone who will promise to build a bridge - even where there is no river".

Then sobriety kicked in and I remembered that, as new Chairman of the British Council, I am now an ex-politician and therefore capable of wider and even higher thoughts...

That led me instantly to recognising the full validity of the theme of this Conference. In modern Europe, there are great ravines of doubt and misunderstanding that need to be spanned, and disparate strengths and potentials that - if they are to manifest themselves properly - must be joined. Indeed, it occurred to me (as a former Transport Commissioner) that we don't just need bridges to ensure Europe's prosperity: If we are to achieve and maintain that purpose, we need multi-modal Trans-European networks of understanding, cooperation and coherent simultaneous effort.

The reason for that is plain: All of Europe, and each national component of our continent, faces a nexus of challenges which - with some quite small variations - are common in their severity and urgency:

All of our countries are ageing. All face increasing competition from large and small newly industrialising countries, and from the USA. All of the Member States in the Union before May 1st this year are experiencing slow down in productivity growth - and that even includes Belgium and the other 4 Member States which have productivity rates that are higher than the USA. That deceleration is unprecedented in the decades since the 1950s and, meanwhile, whilst the new Member States are sustaining significant productivity increases, they started from an abysmally low base and - understandably - will not close the gap for several years.

Among those realities of ageing, competition and sluggishness, the seriousness of the first - demographic shift - cannot be overstated: Whilst Europe's population is getting older, and will get older, it will also start to fall from 2020. That means that, at a time when the need for, and the cost of, pensions and health care is high and rising, the proportion of people in work and contributing will be shrinking. In those conditions, the gap between gross and net wage income would increase, and the impact of that on employment - and on the price of assets like houses - would be obvious and negative.

To put such prospects into context: Across Europe annual productivity increases of 0.6% are required simply to balance the effects of ageing alone. In the past 4 years, productivity growth in Europe averaged 0.9%. In other words, two thirds of our present productivity growth levels would be needed simply to maintain existing standards of living, even without the deflationary effects of reduced net wage income. Wim Kok's report three weeks ago made it clear that - on unchanged trends - population decline will, of itself, mean that Europe will experience a 1% loss in growth over the next 35 years.

The demographic facts of life and the productivity fundamentals call for profound remedial policy action across Europe. That requirement is plainly reinforced by a third and all pervading reality - globalisation. Industrial production and business services which can be operated at much lower unit costs in other places on the planet will continue to be transferred. In addition, since India, China and Brazil together will overtake the EU in terms of combined economic size by 2025, inability to innovate and to move into more high knowledge, high added value activities will be heavily penalised.

When I join others here and elsewhere in emphasizing that the realities of demographic shift and shrinkage are grievous and implacable I am not indulging in a sort of reverse Malthusianism. But I am putting a direct question to political leaderships and to the wider public: Faced with the realities of need and performance, will our generation simply let the gap widen until it becomes chronic and unbridgeable, or will we act now to ensure that we achieve high and durable levels of growth so that we can continue to enjoy sufficiency and our children and grandchildren can inherit abundance and not crisis?

The question - and the response which it gets - clearly has relevance which goes beyond our continent. If Europe takes the right course, the prosperity of our continent will be secured and that will subscribe to the advance of billions of people in the World who are now effectively shut out of markets and condemned to endure deep poverty. If the wrong course - the course of complacent indolence - is taken, European relegation is certain and the prospects of others will be ruinously retarded.

From parts of the Left we hear that globalisation must unconditionally be treated as evil and resisted. From parts of the Right we hear a nationalistic claim that individual countries can and should undertake unilateralist efforts to exploit global opportunities.

Those stances are common only in their myopia.

Globalisation is not an evil or a blessing - it is a fact. Its malevolence or benevolence will be determined by deliberate action, not by pious inaction.

In Europe unilateralism is a blind alley. There can be no autarky: European economies are so integrated that no State could achieve substantial sustained growth if others - its main and most accessible markets - did not also advance. The sustainable prosperity of each depends upon the mutually reinforcing prosperity of all.

That precondition of economic strength appears to be understood by the political leadership of the European Union. There is also clear comprehension that, whilst there are differences in performance, the essential necessity of achieving higher and sustained growth, improved competitiveness and greater, more efficient employment are basically and compellingly the same everywhere.

It is good that such facts of life are recognised by all EU Governments.

It is very bad that little that they have done goes beyond that elementary recognition.

Next year is midway between the Lisbon Council of EU heads of Government in 2000 and the target year of 2010 by which the European Union was intended by the Lisbon Summiteers to be "the most dynamic and competitive knowledge-based economy in the World". Efforts to that end were to have brought an annual European growth rate of 3% by now. Instead average annual growth since 2001 has been 1.4%. Clearly, and to manifest my gift for British understatement, European pre-eminence in World competitiveness and dynamism is not going to be achieved by 2010.

That depressing reality should not - must not - however, diminish the reality that something very like that objective still has to be achieved in the reachable future.

Globalisation means that any failure to advance is a decline. That, together with the massive economic and social challenges of an ageing population, and the need to ensure survival of the European social model in a recognisable form, all require major and consistent resumption across Europe of greater productivity growth. Crucial to that achievement are higher and broader skill standards, much more investment in technological innovation, and radically improved physical and intellectual infrastructure.

Without such regeneration, the social and environmental effects of inertia and obsolescence will be appalling, and our continent will be punished by globalisation instead of prospering from it.

All of that and much more must command fresh urgency about implementation of the essentials of the Lisbon strategy within and between EU Member State governments, simply because the means of propelling and guiding change cannot systematically be provided, with the focus and rapidity that is crucial, by any other economic, social or political source of power.

Recognising that reality, EU Governments must first, and immediately, take much stronger and more cogent ownership of the Lisbon Strategy; second, communicate the purpose and method of Lisbon more clearly and convincingly; third, identify and transmit the huge costs of not implementing the Strategy and achieving its objectives; and fourth - with urgency - firmly refocus words and - above all - deeds on the original and basic competitiveness, growth and employment purposes of Lisbon.

That discipline is essential: in successive Councils of Heads of Government over the last four years, a list of 120 policy objectives has been accumulated. As a result, the Lisbon Agenda now looks more like a political Christmas tree than a Strategy. That approach must quickly be replaced by one that strips the objectives to achievable essentials and establishes a route plan with clearly defined instruments, progress indicators, and timetables for implementation over the next five years and then the five years following that.

Clearly, insistent pressure for a substantial and sustained change of gear and trajectory must come from outside as well as inside governments, particularly from the European Commission and from business.

The incoming European Commission has specified its mission of fostering further opening of markets - notably in services, of sustaining current proposals for leveraging greater investment in R&D and innovation, and of maintaining and intensifying the efforts to ensure that European and national legislation is burden reducing and competitiveness promoting.

All that needs help. It is therefore essential that people in business and in wider civil society adopt a similarly systematic approach because:

" The route plan will not come or be operational without advocacy;
" Member State governments will not properly subscribe to performance-promoting scoreboards and progress indicators without pressure from manufacturers and service industries;
" Without explicit demands for ownership and commitment, the governance of the Lisbon Agenda will be left to the so-called Open Method of Coordination. That means Ministerial chatter which produces vague commitments to voluntary actions that are usually synchronised with national election calendars.

I would be the last person to be contemptuous of electoral realities, and all of my experience has instructed me about the difficulties of making large scale systemic change. That is why I so strongly emphasise the need for non-governmental pressure to be applied to all sides of political divides. A multi-faceted, multinational enterprise like the implementation of the Lisbon Agenda will not become potent unless it is propelled by consensus and unless it carries the strength of convention.

But if it does not gain that vitality - and speedily - underperformance and weakened competitiveness will remain, the economic division of Europe with all of its attendant potential political dangers will persist, this interdependent continent - including the most developed parts - will endure increased insecurity instead of flourishing through unprecedented security.

Political and other extremisms can prosper in such conditions. Little else will. If the practical, vividly self-evident case for application of the essentials of the Lisbon Agenda does not propel rapid implementation, proper understanding of the monstrous risks from stagnation and alienation must surely do so.

The opportunities are perishable and receding. Inaction has much higher risks and costs than action. Those realities must be made so clear, so compelling, that no political leadership can afford to neglect them or fail to act upon them.

Educators and enterprises, commerce and culture, civil servants and political schemers - the components of creative Europe - have met here to design bridges to prosperity. All of us have common need to make common cause in the common interest of putting life into Lisbon.

So let us do it.