EU warns reform too slow to achieve economic goals

The European Union's ambition of having the world's most dynamic and competitive economy by 2010 looks increasingly hard to achieve, a European Commission report showed on Thursday. Germany came in for some rare praise for labour market reforms, but performance across the 25-member bloc is patchy enough to jeopardise its broad-ranging economic ambitions, named after the 2000 Lisbon summit at which they were fixed.
The reality check came in a report on how countries were doing in meeting the broad economic policy guidelines (BEPGs) which also highlighted the risks to the short- and long-term health of public finances.
"It is clear that with the current reform pace, full implementation of the 2003-2005 BEPGs will not be secured, making it difficult to fulfil the Lisbon ambitions," the Commission report said.
Among the goals that are unlikely to be achieved at the current pace of economic reform is the aim of ensuring an average EU employment rate of 70 percent by 2010.
The EU also risks missing its target drawing more older workers into the labour market - a failure which could have dire consequences for budgets in the long term as ageing populations place a growing burden on public finances.
"Recent progress notwithstanding, it is increasingly unlikely that the Union will reach the Lisbon and Stockholm employment targets, possibly with the exception of the female employment rate target, unless further and more comprehensive reforms are swiftly implemented by all member states."
Spending on research and development is falling short of the EU target of 3 percent of gross domestic product, and many of the EU's member states were failing to ensure that EU laws were translated into changes in national legislation.
However, there were some glimmers of hope - for example, in Germany, the EU's biggest economy.
"Good progress has been made in addressing the challenge of promoting job creation and adaptability and mobilising unutilised employment potential," the Commission said.
"Significant action was taken to reform the tax benefit system to strengthen incentives to take up work, notably through implementing the Hartz labour market reforms, which have started to show first measurable results."
Still, Germany had made only limited progress in improving the business environment, it added.
France got lower marks for the way it has addressed the challenge of getting more people working, but has made good progress in tackling the long-term sustainability of its public finances.
By contrast, Italy, the eurozone's third biggest economy, has made only limited progress in all of the policy areas identified as needing change, particularly in the field of budget policy.
In particular, the Commission said the tax cut plans for 2005 and 2006 were not fully financed through structural reductions in current spending.
"Progress in addressing the long-term sustainability challenge of public finances was also limited. Specifically, the efforts made to ensure a satisfactory pace of debt reduction proved insufficient in 2004."