Traditionally, the Spring European Council is the time when we review the Lisbon Strategy for growth and jobs, and this meeting will be more important than most. Whatever other messages come out of the European Council this week, one is clear: the Lisbon strategy is working. No fewer than 6.5 million jobs have been created in the EU in the last two years. Unemployment is at its lowest for 25 years. The employment rate stands at 66%, getting close to the Lisbon target of 70%. What's more, job creation has gone hand in hand with productivity improvements. Productivity is now growing faster in the EU than in the US. These are no mean achievements.
Of course, Lisbon cannot shield us from negative economic developments whose origin lies outside of Europe. In today's inter-connected economy, that is impossible.
So we have had to trim our growth forecasts slightly for this year. But we are still predicting growth of 2% - a very respectable performance.
The reforms already carried out have made our economies more resilient and flexible. This has left us better able to cope with external shocks.
Of course, when conditions deteriorate, it becomes the more important to reassure those that feel threatened by an economic downturn. Europe needs to protect - but it must avoid the temptation of becoming protectionist.
A retreat into protectionism would be madness. Europe has been a huge winner from globalisation: With just 7% of the world's population, Europe accounts for 30% of economic output. We account for seven of the ten most competitive nations in the world, and despite the rise of China and India, remain the world's largest trading power.
So Europe has every reason to approach the future with confidence. At the same time, we have to remain vigilant and cautious as to the further developments.
This is what has inspired our reaction to the financial turmoil and our policy papers on the financial situation and on Sovereign Wealth Funds which are also on the table of the European Council.
When I say that the Lisbon strategy is working, this does not mean that all is rosy and that we can rest on our laurels. A lot has to be done. In many regions, unemployment remains a serious problem, and rising energy and food prices are fuelling inflation, eating into the purchasing power, especially of those depending on salaries and pensions for their income. So we need to continue our efforts.
The Lisbon Strategy is not a static process. Far from it. The Commission's Strategic Report sets out a series of new policy initiatives to make Europe even more resilient to economic turmoil, and to reinforce European efforts to shape, and fully benefit from, globalisation.
First, the most important area: people. The key to overcoming poverty and inequality is by driving up standards of education and training throughout the Union, making sure they are available to all. We have chosen to focus on one of the most vulnerable groups: early school leavers. Today in Europe, one in six young people still leave school without qualifications. One in five 15-year olds does not have adequate reading skills. We cannot afford to allow their talents to go to waste. We must give young people the skills they need to realise their potential.
Another key pillar of the Lisbon Strategy we have returned to is research and innovation. To keep investment coming in, Europe must increase its relative attractiveness.
We need a fifth freedom in Europe – the free movement of knowledge – to complement the other four freedoms on which the Single Market rests.
We need to support open innovation, but at the same time, we need to ensure that knowledge is suitably protected by a European patent and copyrights.
And here I would like to welcome the adoption of the European Institute of Innovation and Technology yesterday – this is a crucial moment for Europe, and I would like to congratulate the European Parliament on this achievement and to thank you for the support you have given to my proposal.
The third priority we have looked at is the business environment. We need a Single Market that works for Europe. And in particular for SMEs which are the backbone of our economy and the place where most jobs are created. That is why I will be asking the European Council tomorrow to endorse the idea of a Small Business Act to remove the impediments to the creation and the growth of SMEs.
The final Lisbon pillar we have revisited in our Strategic Report is energy and climate change, the defining challenge of our generation. It may be early days for the energy and climate package. But as this House knows well, the momentum cannot be allowed to slip. The timing of an agreement is critical to its success. The earlier it comes, the lower the cost of adjustment, the bigger the benefits for early movers. And it is key to our number one goal, agreeing a comprehensive international agreement at Copenhagen next year. The more countries are involved, and the closer their ambitions are to ours, the more we will have a level playing field. Nothing will bring this closer than the EU showing that it means business, by agreeing by the end of this year.
Closely linked to this is the task of realising an internal market for energy. We all know this is essential for our vision of competitive, secure and sustainable energy for Europe. I have been glad to see this dossier accelerating over the past weeks, and we are committed to finding ways to ensure that the genuine market opening targeted in our original proposals is realised. The Commission remains fully committed to the realisation of ownership unbundling or its functional equivalent. The efforts of this House to be ready for a first reading by June are central.
Ladies and gentlemen,
Reform is not about rolling back valuable social advances nor our social market economy, it is about equipping people to succeed in times of change. Giving them the chance to take control of their own lives.
It is about modernising our social systems and securing their sustainability. Access, opportunity, and solidarity must be the watchwords, and will be at the heart of the renewed social agenda that the Commission will present before the summer.
It is about a dynamic business environment where entrepreneurs are spending their time and resources on producing high-quality goods and services that people from all over the world want to buy. Not filling in unnecessary forms.
It is about transforming Europe into a low carbon economy that is good for the environment and good for business. An economy that provides rising living standards but which doesn't cost the earth.
I am glad to see that the hard work of the last few years on the revamped Lisbon agenda has helped foster a broad consensus on where we stand and where we want to go. This House has been a consistent source of critical support, and I wanted to thank you for this.
I was pleased to note the large degree of support to the Lisbon strategy expressed in the European Parliament's resolution of 20 February on the input for the 2008 Spring Council.
I have also seen the amendments that this House voted the same day to the Broad Economic Policy Guidelines. I agree with the issues you emphasise, and indeed they are already part and parcel of EU policies, on the basis of proposals from the European Commission: social inclusion, sustainability of public finance, the need to fight inflation, R&D, improved economic policy coordination, the promotion of entrepreneurship and innovation, the external dimension of the internal market, and climate change and energy.
I would like to reassure this House of the utmost importance that the Commission attaches to setting the right framework for Member States to deliver on our shared priorities: growth and jobs. Growth that is sustainable from a social and environmental point of view. And jobs that are not only increasing in numbers but also in quality. Because the renewed Lisbon strategy focusing on jobs and growth, with its commitment to competitiveness and inclusiveness, is Europe's best response to the challenges of globalisation.