Not implementing economic reforms 'costs EU billions'

Failure to implement economic reform could cost the EU around 800 billion euro, according to a new report unveiled by the European Commission.

A "staff working document" on "the economic costs of non-Lisbon" [the EU's economic reform agenda] concludes that the combined effects of various reforms could be a growth increase of 0.75 percent per year, resulting in between seven and eight percent over ten years - or between 700 and 800 billion euro at current rates.

And the report adds that this "may even underestimate the costs of failing to implement the strategy, as they tend to ignore the complementarities that have already emerged between reforms undertaken in different domains".

Even if the reforms are carried out, Europe faces a mounting challenge to its growth rate due to demographic pressures, the survey says.

European Commission projections estimate that ageing populations will reduce the potential growth rate in the EU by nearly half by 2040.

The report breaks down the economic reforms associated with the Lisbon agenda into five subcategories - product and capital market reforms, investments in the knowledge-based economy, labour market reforms, social policy reforms and environmental reforms.

However, the document admits that its estimates are only very approximate and that the assessment of the costs of not implementing the Lisbon Strategy is "admittedly partial".

Upping the ante
The report is likely to increase pressure on EU leaders to agree a series of package of economic reforms when they meet in Brussels next week.

Heads of state and government will discuss the Commission's attempt to relaunch the Lisbon Strategy - its ambitious goal to become the world's most competitive economy.

But fears are beginning to emerge that the focus may be shifting away from discussions on economic reform towards a row on how best to reform the rules underpinning the euro.

Ann Mettler, executive director of the Lisbon Council, a Brussels-based pro-reform think-tank, said, "instead of implementing important and much needed reforms to make our economy healthy, elected leaders are squandering valuable time on fiscal policy".

"The debate over the Lisbon process has been put off too often and it is our children who will suffer", she continued.

"Furthermore, this report demonstrates that European citizens are suffering at the hands of a weak and opportunistic political class. Europe's people deserve better", she concluded.