Tim Brinton

Europe’s Competitiveness Shell Game

Little more than a decade ago, EU leaders unveiled the “Lisbon Agenda,” a policy blueprint to make Europe “the most competitive, knowledge-based economy in the world.” Now, in a desperate effort to save the euro, France and Germany have proposed a “Competitiveness Pact,” which reprises the Lisbon Agenda's fatal flaws.

BRUSSELS – For seasoned observers of Europe’s economy, the most recent European Union summit delivered a bizarre sense of déjà vu. Little more than a decade ago, European leaders announced to great fanfare the “Lisbon Agenda,” a policy blueprint to make Europe “the most competitive, knowledge-based economy in the world.” The new “Competitiveness Pact,” proposed at the EU summit by France and Germany, did not make the same pretensions to global grandeur, but was instead sold as a step required to ensure the survival of the euro.

With the exception of what appears to be a covert effort to force EU countries to raise corporate taxes to French and German levels, there is ostensibly nothing unreasonable in the Competitiveness Pact. Raising the retirement age to 67, abolishing wage indexation, and compelling countries to enshrine a debt brake in their national constitutions are reasonable measures to enhance competitiveness and restore confidence in the euro.

Unfortunately, however, government leaders have apparently learned nothing from the lessons of the failed Lisbon Agenda. Indeed, the current plans seem doomed to fail for two reasons.

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