European values in the globalised world

This report argues that Europe must reform and modernise its policies to preserve its values. Modernisation is essential to continue keep Europe’s historically high levels of prosperity, social cohesion, environmental protection and quality of life.

A Europe of dynamism, innovation and openness, exists alongside a Europe of 19 million unemployed, child poverty and slowing growth. Unless Europe is able to change, the forces of globalisation, competition, the impact of new technologies and an ageing population will increase the gap between these two Europes, and between Europe and the world. Economic success and the financial viability of social systems - pensions, welfare, health - is being called into question.

The report states that:

• current policies have not delivered social justice for everyone, poor economic performance is already today making it difficult for governments to meet people’s expectations
• 19 million unemployed is unacceptable. The combination of low employment rates and unacceptably high and persistent levels of unemployment in many Member States is the number one social problem being faced. Young people, women, migrants and older workers (between 55-64) are the hardest hit
• weakness in education, research, innovation and productivity are holding back labour markets and economic performance in some Member States. People do not have the skills that business need
• the gap between the rich and the poor in the EU is considerable, both within Member States and between them. Over 25% of EU citizens live in regions whose output is below 75% of the EU average

The report also argues that as global competition, particularly from Asia, intensifies, this confirms the need for well-functioning markets and policies that mitigate the negative impacts that global competitive pressures bring. It highlights as well the need for structural reforms to ensure that the EU can remain an attractive place to invest, particularly for research.

The report also looks at the effects of an ageing population. Under current trends the population of the current European Union will be both smaller and older in 2050, partly due to low birth rates. At the same time, the upward trend in life expectancy at birth will continue. The authors warn that a smaller workforce will drag down growth and lower growth will come at a time just when the costs of an ageing population start to peak.

The report presents Europe's possible responses to the challenges of ageing and globalisation:

• At the EU level:
  • complete the internal market for services, telecoms, energy, and financial services
  • promote free and fair trade which will benefit not just Europe but the poorest countries as well
  • improve European economic governance and strengthen the co-ordination of economic and social policies
• At the national level:
  • implement the agreed structural reforms and policies within the renewed Lisbon Strategy for growth and jobs
  • adapting pension, health and long-term care to meet changing needs, and implementing family friendly policies which address the low birth rates in the EU
• A new partnership of the EU and member states
  • create an environment that champions innovation
  • a long-term and coherent energy policy
  • Direct more resources (both public and private) to education, training and skills
  • renewal of the social dialogue and increased cooperation between Member States

The bottom line is that Europe will only meet the new challenge if people have a new attitude to work and social systems have a new attitude towards people. This can be achieved when modernisation of social systems accompanies economic reform.

This report was produced for the Informal meeting of Heads of State and Government at Hampton Court on 27 October 2005