The Week in Europe 20/05-26/05/02

30.05.2002 | Euroskop

EU news in brief

Commission adopts the 2002 Convergence Report on Sweden

The European Commission adopted its 2002 Convergence Report, in which convergence progress made by Sweden is examined in accordance with Article 122(2) of the Treaty. As the other two Member States not participating in the euro area, Denmark and the United Kingdom, negotiated opt-out clauses before the adoption of the Maastricht Treaty, this year's Report deals only with Sweden. In order to participate in the euro area, Member States must fulfil legal convergence and the convergence criteria on price stability, government budgetary position, exchange rate and interest rate. The report concludes that Sweden fulfils three of the convergence criteria (on price stability, the government budgetary position and convergence of interest rates) but does not fulfil the exchange rate criterion. Moreover, central bank legislation in Sweden is assessed not to be compatible with the Treaty and the Statute of the ESCB. In the light of this assessment the Commission concludes that there should be no change in the status of Sweden as a Member State with derogation. The report is available on:

http://europa.eu.int/comm/economy_finance/publications/convergence/report2002_en.htm

[Background paper IP/02/743]

Commission proposes a far-reaching overhaul of the European Union

In its first paper to the Convention on the Future of Europe, the Commission calls for more effective EU structures that can respond better to citizens' demands and expectations. The role of the Union should be substantially strengthened in three major areas. The introduction of the euro requires better mechanisms to steer the European economy. There has to be a genuine European capacity to enhance security and freedom of citizens. The Union must have a forceful foreign and security policy in order to make a difference in the world. In order to achieve this, the Commission wants stronger economic policy coordination. It proposes common border controls with a common immigration and asylum policy. It wants to integrate gradually the function of the High Representative for Common Foreign and Security Policy in the Commission. Decision-making should be simplified within a single institutional framework, putting the European Union firmly on the road towards a Constitution.

[Background paper IP/02/750]

EU needs to Improve Productivity to Meet Lisbon Goal of Greater Competitiveness

The European Commission published its 2002 Competitiveness Report. The annual competitiveness reports identify trends and key factors behind growth and productivity developments in the EU. This year's Report focuses on three special themes: human capital; productivity performance of EU services; and sustainable development in EU manufacturing. Also, and for the first time, the Commission has analysed the relationship between competition policy and enterprise policy. The report makes comparisons across the Member States and with the EU's most important competitors. One of the main conclusions of this year's report is that recent trends in EU productivity growth are not sufficient to attain the economic, social and employment objectives set in the Lisbon strategy in the remaining years to 2010. Erkki Liikanen, European Commissioner responsible for Enterprise and Information Society said, "at their meeting in Lisbon a little over two years ago, the EU leaders agreed on a strategic goal. The recent productivity and growth performance suggests that this strategic goal will be missed, unless the Member States and the Commission show more determination in pursuing economic reforms."The Competitiveness Report is an annual publication. The 2002 report as well as earlier issues can be downloaded from the website:

http://europa.eu.int/comm/enterprise/enterprise_policy

[Background paper IP/02/753]

Commission publishes latest EU Scoreboard on State aid

The European Commission published the spring 2002 update of the State aid Scoreboard. The Scoreboard seeks to further increase transparency and raise awareness of the need to control State aid which amounted to €82 billion in the European Union in 2000. Available on the Internet site of the Commission's Directorate General for Competition, the Scoreboard looks at the extent to which Member States have reduced their State aid levels and to which sectors and objectives aid is directed. It also includes information on State aid control procedures and has a special focus on State aid for small and medium-sized enterprises.

[Background paper IP/02/754]

Some of the achievements of Media Plus in 2001

Viviane Reding, Member of the European Commission responsible for Education and Culture, will be in Cannes to award the Media Prize 2002 and announce a new Commission scheme to support European cinema. Meanwhile, the Media Plus programme (2001-2005) continues to give valuable support to audiovisual professionals in the fields of development, distribution and promotion. With a budget of EUR 350 million (and an additional EUR 50 million for Media Training), Media Plus enhances national efforts to support the cinema.

[Background paper MEMO/02/104]

Commission approves the creation of the inreon online reinsurance exchange

The Commission has approved a joint venture called inreon, an online business-to-business (B2B) reinsurance trading platform, which will enable insurers and insurance brokers to obtain bids from reinsurers on big property and catastrophic risks and conclude reinsurance contracts online. Inreon's parent companies, which include world reinsurance giants Swiss Re and Munich Re, notified the deal to seek reassurance that it would not violate competition rules in the European Union. The Commission has concluded that the notified operation does not currently restrict competition within the meaning of Article 81(1) of the EU treaty. The Commission's approach is also summarised in the paper "Competition issues in e-commerce" (Competition Policy Roundtable, October 2000), issued by the Committee on Competition Law and Policy of the OECD, published in January 2001, and available on

http://www.oecd.org/pdf/M000015000/M00015207.pdf

[Background paper IP/02/761]

Work is good for you: new research shows link between unemployment and health

The Commission has published a study "Unemployment and public health". The purpose of the study is to assess the impact of unemployment and employment rates on mortality patterns in the European Union countries and the United States. The report, prepared for the Commission by independent experts, has found that principal factors influencing mortality patterns and life expectation since the Second World War relate to economic trends, especially employment and unemployment rates as well as economic growth.

[Background paper IP/02/760]

Long-lasting effects of re-unification still burdening Germany's growth potential

Since the short reunification boom, the German economy registered very low growth rates, which are substantially below those of other EU countries. A research paper published by the Directorate General of Economic and Financial Affairs of the European Commission, analyses the underlying reasons for this under-performance. Up to two thirds of the growth gap between Germany and its European partners since the mid-1990s can be ascribed to direct or indirect effects of reunification in combination with developments in the West-German construction sector. Structural factors including rigidities in the labour market can explain a significant portion of the remaining part. The first chapter of the report describes the short and long-run macro-economic developments during the 1990s, pointing in particular to the growth shortfall in the East and the decline in the construction sector. The second chapter finds that monetary and fiscal stance of the economy played only a minor role in reducing growth. Instead, as is shown in the third chapter, the root of the problem is that the economic challenges of unification were not addressed fully due to structural rigidities, which persist mostly in the labour market. Full document available on:

http://europa.eu.int/comm/economy_finance/publications/economic_papers/economicpapers170_en.htm

The European Commission launches European Cinema Heritage Week

Organised for the first time and running between 15 and 23 November 2002, European Cinema Heritage Week consisted of a programme of major European cinema films in cinemas and film libraries, with special showings organised, particularly for schools. The renowned Spanish director Pedro Almodovar has agreed to be sponsor for the Week, which will have a dual aim: to raise the awareness of Europeans, and particularly young people, of the great wealth of European cinema cultures, with the hope of encouraging them to go and see more non-national European films, but also to promote discussion of the visual image and approaches to education in the visual image

[Background paper IP/02/757]

Eurostat news releases

Employment in the EU: Impact of children on women's employment varies between Member States

The impact of children on employment in couples varies between Member States. The two-earner situation was actually more common in couples with children than in those without in five Member States, with the largest differences found in Belgium (+11%) and Portugal (+9%). The percentage of couples with both partners in work was the same for both groups in Italy. Two-earner couples were less common among those with children than without in six Member States, with the greatest differences recorded in Ireland (-10%), Germany (-10%) and the United Kingdom (-9%). The variation in the pattern of employment between Member States seems to be more pronounced than the variation between households with children than without.

In 2000, the majority of dual participant couples was made up of two full-time workers, except for couples with children in Germany, the Netherlands and the United Kingdom. However, one partner was more likely to be working part-time among couples with children than those without in all Member States covered except Portugal. The woman was the partner most likely to be working part-time in all Member States.

[Background paper STAT/02/60]

Enlargement news

Interpret candidates' budgetary positions in light of their difficulties

Any interpretation of the budgetary positions of the candidate countries must take adequate account the "tremendous structural and institutional changes underway" there, according to Pedro Solbes, European Commissioner responsible for Economic and Monetary Affairs. He told the European Parliament plenary session debate on the Commission's 2002 report on public finances in economic and monetary union that these changes are not only driven by the completion of a move from a command to a market economy, but also by the effects of liberalisation which EU membership will entail. Due consideration must be given to the constraints imposed by the higher degree of volatility in output levels that on average characterises the candidate countries, compared with EU member states. These are small open economies which rely heavily on foreign capital to finance catching up, he pointed out.

The Commission's report examines the budgetary challenges facing the candidate countries, and in particular the countries of central and eastern Europe, which are now completing the transition to market economies. Once they join the EU, the full acquis on budgetary policies will apply and they will be expected to submit convergence programmes, Solbes confirmed. But in the run up to accession, candidate countries are required to comply with the Copenhagen criteria - covering accession eligibility - rather than fulfilling the Maastricht nominal convergence criteria - which relate to eligibility to adopt the euro. "The primary concern in the pre-accession period is medium-term macroeconomic stability, rather than achieving any particular target for the budget balance," said Solbes.

Medium-term budgetary policy should also pursue a structure of expenditure and revenues that effectively supports economic growth, he went on. And the emphasis on structural and institutional reform should not hide the importance of sound fiscal policies. The candidates' vulnerability to economic shocks and the external constraints they face underline the need for prudent policies, he stressed.

EBRD sees steady growth in central and Eastern Europe

GDP growth in central and eastern Europe was 2.6% in 2001, according to the European Bank for Reconstruction and Development's latest Transition Report Update - behind the 4.8 % in south-east Europe and the 5.0 % in the countries of the former Soviet Union, but ahead of the EU average. And in 2002, growth is predicted to continue, at around the same level as 2001 for central and eastern Europe, again trailing the rest of the other transition economies.

In the candidate countries in the region, growth in domestic demand is likely to be sustained, while exports may benefit from a recovery in EU growth in the course of 2002. Most foreign direct investment is directed to countries that are in the vanguard of EU accession and have favourable investment climates, the EBRD notes. But net portfolio investment, which depends heavily on the legal protection of creditor and minority shareholder rights, remains limited and concentrated in the government securities markets of the Czech Republic, Hungary and Poland, it says.

Highlights from the Czech Republic analysis of the remaining challenges in the candidates include: Key reform challenges include fiscal restraint and reform of social welfare expenditures, including pension reform, to avoid a rapid growth in public debt. A reduction of the inefficiencies of the state administration and an improvement in the complex legal and regulatory framework for enterprises are needed to give more space for enterprise development and the creation of new jobs, particularly in small and medium-sized enterprises. And while financial sector privatisation has been completed, the workout of bad loans transferred to the Consolidation Agency and the restructuring of troubled enterprises, including a number in the steel sector, continue to pose problems.

Parliament's budget for 2003 takes account of enlargement

The European Parliament plenary session last week adopted the report from Per Stenmarck on the estimates of revenue and expenditure of Parliament for the financial year 2003, with its special allocation for the costs of enlargement. It agreed that € 32.3 million of the total € 1.05 billion should be devoted to enlargement, including provision for 114 posts for the candidate countries. There is also to be a reserve of some € 51 million on the understanding that if the first of the new countries join in January 2004, there will be a need to bring forward enlargement related expenditure to 2003.

Wallström celebrates enlargement of European Environment Agency

Environment Commissioner Margot Wallström visited Copenhagen on 16 and 17 May to discuss plans with the incoming Danish Presidency of the EU - which takes over in July - and to speak at a high-level conference celebrating the enlargement of the Agency, which was attended by several environment ministers from the candidate countries. Most of the candidate countries have now joined the Agency, and are able to start co-operation in practical terms with the Agency's work. With negotiations almost completed with candidate countries (only Bulgaria, Romania and Malta have not yet provisionally closed this chapter), the focus on building administrative capacity to manage requirements from EU legislation is now vital, Wallström insisted. She congratulated Denmark for being the most important single country contributor to the "Environment for Europe" process with € multimillion programmes of assistance to central and eastern Europe, as well as the former Soviet Union. She said she expected Denmark to continue to play an active role in promoting a high level of environmental protection in the candidate countries.

EU backing for Danube clearance

The EU's General Affairs Council gave its full support to initiatives to clear the obstacles to navigation on the Danube when it met in Brussels on 13 May. It welcomed the convening by Austria, Romania, the European Commission and the Stability Pact of a Ministerial meeting of the countries of the Danube basin in Vienna on 27 May, launching the Danube Co-operation Process. This should give further impetus to the work of the Danube Commission's project to clear the Danube at Novi Sad, where the restoration of free navigation is now expected by September 2002. The EU has already provided financial support, as well as technical and political efforts, as have several EU Member States - notably Austria, which holds the Presidency of the Danube Commission.