The European Parliament,

–   having regard to the Presidency conclusions of the Lisbon European Council of 23 and 24 March 2000, the Gothenborg European Council of 15 and 16 June 2001 and the Barcelona European Council of 15 and 16 March 2003,

–   having regard to the Commission Recommendation on the Broad Guidelines of the Economic Policies of the Member States and the Community (for the 2003 - 2005 period), (COM(2003) 170),

–   having regard to the Presidency conclusions of the Brussels European Councils of 20 and 21 March and of 16 and 17 October 2003,

–   having regard to the Communication from the Commission "A European Initiative for Growth, Investing in Networks and Knowledge for Growth and Jobs" Final Report to the European Council, (COM(2003) 690),

–   having regard to the conclusions of the Council for Economic and Financial Affairs of 25 November 2003,

–   having regard to the hearing on the Report of an Independent High-Level Study Group established on the initiative of the President of the Commission and chaired by André Sapir in the Economic and Monetary Committee on 4 November 2003,

–   having regard to the Final report of the Centre for European Policy Studies of 27 November 2003,

–   having regard to the Economic Forecasts Autumn 2003(1),

–   having regard to the Communication from the Commission "Investing in research: an action plan for Europe" (COM(2003) 226),

–   having regard to the Communication from the Commission "More Research for Europe, towards 3% of GDP" (COM(2002) 499),

–   having regard to the Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions on "Innovation policy: updating the Union's approach in the context of the Lisbon strategy" (COM(2003) 112),

–   having regard to the Proposal for a Decision of the European Parliament and of the Council amending Decision No 1692/96/EC on Community guidelines for the development of the trans-European transport network (COM(2003) 564),

–   having regard to its resolutions of 12 March 2003 on the state of the European economy - preparatory report with a view to the Commission recommendation on Broad Economic Policy Guidelines(2) and of 15 May 2003 on the Commission recommendation on the Broad Guidelines of the Economic Policies of the Member States and the Community (for the 2003-2005 period)(3) and to its resolution of 23 October 2003 on the outcome of the European Council meeting held in Brussels on 16-17 October 2003(4),

–   having regard to the opinion of the European Economic and Social Committee on the Assessment of the experiences gathered by the EESC to evaluate the economic, social and employment impact of structural reforms in the EU (ECO/109, CESE 1406/2003),

–   having regard to the report from Commission to the Spring European Council "Delivering Lisbon, Reforms for the Enlarged Union" (COM(2004) 29),

–   having regard to the Communication from the Commission to the Council "Joint Employment Report 2003/2004" (COM(2004) 24),

–   having regard to Rule 163 of its Rules of Procedure,

–   having regard to the report of the Committee on Economic and Monetary Affairs (A5-0045/2004),

A.   whereas, due to the lack of structural reforms in most Member States, the GDP growth rate for the euro zone has been continuously decreasing, leaving Europe's economy on the brink of stagnation (from 3.5% of GDP in 2000 to 1.5% in 2001, 0.9% in 2002 and 0.4% in 2003),

B.   whereas an upturn in the European economy is to be expected in 2004,

C.   whereas employment prospects have deteriorated in 2003, increasing the unemployment rate to 8.9% in the euro area and to 8,1% in the EU as a whole, about 0,5 pps higher than in 2002,

D.   whereas the percentage of persons at risk of poverty at EU level remains at a very high level of 15%, and would amount to 23% without social transfers and to as much as 27% in the accession countries; whereas income inequalities will drastically increase with enlargement,

E.   whereas, due to the economic stagnation, social expenditure has increased on average by 1.5% of GDP in the EU since 2000, resulting in greater pressure on public finances; whereas tax on labour accounts for more than 50% of total tax revenues creating an impediment to employment growth,

F.   whereas both public and private investment across the European Union have fallen in recent years, with this downward trend persisting in 2003, and whereas better background conditions for increased competitiveness are necessary in order to stimulate private investment;

G.   whereas the dramatic decline of venture capital investments relative to GDP from 0.07% to 0.029% in 2002 is causing major difficulties for research-intensive SMEs, and whereas there is a growing concentration of transnational R&D expenditures of EU firms in the US, combined with an increase in the 'brain drain' phenomenon,

H.   whereas Europe is far behind its main competitors in investments in the future, such as research and development and human resources, and is under-performing in innovation; whereas R&D spending for acceding countries averages well below 1% of GDP and represents an obstacle to real convergence and integration into a knowledge-based economy,

I.   whereas there are no signs of any substantial increase in overall investment in human resources and whereas human capital accounts for 22% of observed productivity growth; whereas raising the average level of education of the population by one year represents a 5% increase in growth in the short term and a further 2.5% in the long run,

J.   whereas Europe shows a gap with the US of 13% of population to have completed higher education, and whereas the EU invests only 1.1% of GDP in tertiary education as compared to 3% in the US, with more than half coming from the private sector,

K.   whereas levels of school failure and of social exclusion are excessively high, with almost 20% of young people aged 18 - 24 in the EU prematurely dropping out of school in 2002, and whereas the quality and attractiveness of vocational training and life-long learning are not up to the new requirements of the knowledge-based economy and the urgent need to increase labour market participation in view of our ageing society,

L.   whereas investment needs in acceding countries, especially in the area of transport networks and environment, remain high considering the poor quality of public infrastructure which is often ill-suited to the needs and standards of market economies,

M.   whereas at the Lisbon European Council, the Union has set itself the goal of becoming the most competitive and dynamic knowledge-based economy in the world by 2010, capable of sustainable economic growth with more and better jobs and greater social cohesion; whereas four years will soon have elapsed without any remarkable progress having been made before the 2004 Spring European Council,

Improving economic governance

1.  Regrets that the impetus given by the Lisbon European Council in achieving sustainable growth, full employment and social inclusion, has been lost due to delays in the implementation of the Lisbon strategy which remains the Union's most comprehensive strategy to undertake economic and structural reforms, growth-oriented strategies for achieving greater competitiveness and promoting full employment, and to respond to environmental challenges and guarantee the viability of the European social model;

2.  Endorses the calls made in its abovementioned resolution of 12 March 2003, and in particular its calls for a reformed labour market, with a balance between flexibility and security, the swift introduction of structural reforms and responsible management of the Stability and Growth Pact;

3.  Recalls the democratic deficit in economic policy governance and therefore calls on the 2004 Spring European Council to include not only the European Parliament, but all national parliaments in the Lisbon Strategy process, and for debates on this matter in all national parliaments before the Spring European Council; calls for the involvement of social partners and civil society at all levels of the Lisbon strategy to increase political involvement and commitment to the strategy;

4.  Calls upon Member States and accession countries to engage in a coordinated strategy for structural reforms, as laid down in the Lisbon agenda;

5.  Encourages improvements in economic policy coordination such as a more active display of the moral authority of the Commission, giving an early warning when Member States risk failing to provide for a budget surplus, or even jeopardising their budgetary stability, in periods of strong growth;

6.  Expresses its concern about the growing gap between the aims and targets set at the Lisbon European Council and the existing broad economic policy guidelines (BEPGs); insists on an increase in the coherence and consistency between the Lisbon strategy, the Growth Initiative, the 2003 - 2005 BEPGs, as well as the 2003 - 2005 European employment guidelines (EEGs), and asks for these instruments to be fully and promptly implemented at national and local level;

7.  Notes with regret the lack of cooperation and coordination in all fields of the Lisbon strategy; calls for greater streamlining of the different instruments so as to aim for innovation, growth, sustainability and social cohesion; stresses, in this connection, the importance of an integrated strategy to improve competitiveness;

8.  Calls on the Member States to implement the requisite structural reforms and political measures with a view to creating, in line with the principle of better law-making, a business climate conducive to entrepreneurial enterprise, innovation and industrial competitiveness, and endorses in this connection the conclusions of the Competitiveness Council of 26 to 27 November 2003;

9.  Calls on the Commission to further improve its methods of applying prospective impact analysis to draft legislation and, in particular, to examine the repercussions of legislative proposals which in a number of cases may impede competitiveness of the European economy; notes, in this context, that over-regulation is an obstacle to the European economy making up lost ground and can lead to further below-average productivity growth;

10.  Stresses that a functioning internal market is a prerequisite for economic success and social wellbeing in Europe; calls on the Member States to implement consistently the European legislation intended to remove obstacles in the internal market as well as fiscal obstacles;

11.  Welcomes the growth initiative as a long-expected signal of economic governance in order to boost confidence and express commitment to the Lisbon strategy, establishing a partnership for investment in networks, research and innovation; however, regrets the lack of initiatives in the field of environmentally friendly technologies and renewable energy, and notes with great concern that investment measures in human capital have been omitted;

12.  Stresses that coordinated measures are needed to fight tax fraud and unfair tax competition; suggests, as an additional means to finance investments in growth, to improve the collection of public revenues, focusing on the widespread problem of tax fraud, which deprives Member States of considerable fiscal resources; calls on the Commission to work with Member States to establish a cooperation and benchmarking system to combat tax fraud, particularly in areas such as VAT (in trade between Member States);

Investments in the Future: employment policy, human resources, skills strategy, research and development and social service society

13.  Considers investment in human capital to be a determining factor for growth, productivity and competitiveness, and a precondition for the knowledge-based society and its economy; in addition, believes that it is crucial for technological change and innovation, a key instrument to increase employment participation and the quality of jobs, equal opportunities and social cohesion; encourages more emphasis to be given to improving quality in work which goes hand in hand with progress towards full employment, higher productivity growth and better social cohesion and is one of the three overarching objectives in the Employment Guidelines for the period 2003 -2005 and points at the relevance of the ten specific guidelines supporting these objectives, notably those on lifelong learning, gender equality, adaptability, making work pay, inclusion and undeclared work;

14.  Encourages Member States to cut down the drop-out rate at school, to improve the quality and attractiveness of vocational training and to increase the share of the population to have completed secondary, post-secondary and tertiary education by 2010; calls on Member States to create incentives for the private sector to invest in the life-long learning for their employees, with particular attention to the possibilities and needs of SMEs; stresses, in this connection, the shared responsibility of, and the need for greater commitment to be demonstrated by, Member States, employers and employees themselves, in order to translate the concept of life-long learning into reality; emphasises that the recognition of informally acquired skills must be improved in the case of small businesses;

15.  Calls upon the Union to integrate a skills strategy into the growth initiative and calls for the establishment of a European area of knowledge and skills, identifying best practice in matching education, life-long learning and pension systems; calls for the establishment of a common European references framework (Europass) with principles, criteria and key indicators for quality assurance and validation of formal and informal learning to improve quality and mobility;

16.  Agrees on the need to remove the existing legal and administrative obstacles to mobility, but stresses again the need for the Commission to initiate a dialogue with the social partners including those of the new Member States, in order to avoid unfair competition in wages and conditions;

17.  Recommends focusing the skills and employment strategy particularly on women - to increase the proportion of women specialising in science and technology - older workers, immigrants and new entrants to the labour market; encourages investment in, and development of, a social service society to increase employment participation and better to reconcile working and family life for men and women; calls on Member States to speed up the realisation of the target set at the Barcelona European Council of 15 and 16 March 2003 to provide childcare by 2010 to at least 90% of children between 3 years of age and the mandatory school age, and at least 33% of children under 3 years of age in order to react to the challenge of the ageing and knowledge-based society and economy;

18.  Notes with great concern the decline in investment in the knowledge-based economy, the increase in the R&D investment gap between the EU and the US, in the 'brain drain' phenomenon and in the concentration of EU firms' transnational R&D expenditure in the USA, indicating that the EU is becoming less attractive as a location for R&D for industry, and the dramatic decline of risk capital activity; calls on the Member States to increase the number and attractiveness of research positions and improve the career development for researchers in order to prevent the 'brain drain' to the US;

19.  Calls for an urgent mobilisation of private-sector investment for R&D with a special focus on seed and start-up venture capital for microenterprises and SMEs;

20.  Encourages the improvement of framework conditions for R&D in Europe such as more research and innovation-friendly state aid and public procurement rules, the setting-up of a legal framework for public - private partnerships, adequate intellectual property rights systems and highly qualified, adaptable and mobile human resources; calls for a strong public research base with links with industry in the context of EU regional and cohesion policies and of the financial instruments targeted particularly at the accession countries; calls for the realisation of a European research area; encourages the opening-up of national R&D systems and programmes to transnational collaboration;

21.  Notes with concern that Europe has lost its advance in environmentally friendly technologies and renewable energies in the past years; recalls the strategy for sustainable development set at the Gothenburg European Council of 15 and 16 June 2001 and demands that it be put at the centre of a coherent industrial policy, favouring the introduction of new and environmentally friendly technologies such as nano- and bio- communication, and other clean technologies, in particular in the field of energy, investments in greenhouse mitigation measures and transport; supports, in particular, their wider use and those projects aimed at transforming research into economically viable innovation, acknowledging their growth potential;

22.  Stresses the importance of reducing Europe's dependence on oil imports, which constitutes a heavy burden from the political and price volatility point of view; welcomes technology platforms such as the European Partnership for a Hydrogen Economy; encourages further investment in the most cost-effective forms of renewable energy, which will reduce the volatility of the cost per unit of energy, increase the security of energy supply, be less harmful to the environment, and potentially trigger an industrial revolution similar to the IT-led industrial revolution in the US;

23.  Calls for an intensified public-private partnership with particular support for SMEs, and the development of a coherent industrial policy; supports measures to establish and keep the R&D centres of industry within the EU; encourages an increase of public financial support to business R&D; calls for intensified co-operation between public research institutions and industry, with a special focus on SMEs, a stronger participation of industry in the determination of priorities for public research, but also a substantial increase of private sector financial contribution thereto; supports the promotion of technology transfer of publicly-funded or public-privately funded research to industry and spin-off creation; strongly welcomes networks of excellence, public-private R&D partnerships, business incubators and clusters leading to knowledge transfer and commercialisation of R&D results; calls on the EIB to develop new funding arrangements to foster the development and market introduction of new technologies, including grouped loans for specific research activities, technology platforms, and simplified lending procedures for midsized firms;

24.  Welcomes the increased role and proposed initiatives of the EIB and EIF in this context and calls for the full use of the loan facilities of the EIB institutions;

25.  Recommends, in particular, that the existing margin for manoeuvre offered within the current Financial Perspectives be used now, by taking full advantage of the EU budget and European funds, in particular structural funds, to better reflect and implement the Lisbon strategy;

26.  Instructs its President to forward this resolution to the Council and the Commission, the European Economic and Social Committee and the governments and parliaments of the Member States and the social partners.

(1) To be published as European Economy n° 5/2003 (2) P5_TA(2003)0089. (3) P5_TA(2003)0222. (4) P5_TA(2003)0459.