The Lisbon (2000–2010) and its successor, the Europe 2020 strategy (2011–2020), denote EU-wide exercises in economic policy coordination for economic and institutional modernization. They set an ample reform agenda with common targets to transform a host of common challenges facing the EU and its members (as varied as globalization, the paradigm shift to a knowledge economy, demographic aging, or climate change) into economic opportunities and quality growth. The economic and political economy arguments for EU-level coordination rested on positive spillovers from trade and peer pressure, respectively. The Europe 2020 strategy, a revised Lisbon rather than a new strategy, set a renewed vision of a European social market economy that also plays an important role in the global context (the 2030 Agenda for Sustainable Development).
Built on the Lisbon strategy’s governance framework, Europe 2020 inherited a problem-laden legacy with respect to governance and ownership of reforms and in addition faced the impact of large negative transnational spillovers, which put in sharp focus that there was an as-yet-unaccounted-for euro-area dimension to the reform agendas. The sovereign debt crisis (2010–2014) added urgency to dealing with the EU’s structural weaknesses and economic governance building. The European Semester was set up as the chief instrument to help overcome compliance and implementation problems, inserted within broadened economic policy coordination, of which structural reforms under the Europe 2020 strategy constitute one of three blocks.
The OMC method affords member states the possibility of finding their own consensual path toward agreed economic reform targets within the strategy’s adequate, 10-year timeframe. The central idea continues to be the promotion of reforms tailored to member states’ heterogeneous situations and preferences and that so are also politically sustainable. Without being framed and perceived in terms of desirable reforms in line with socioeconomic objectives and preferences, reforms carry potential for a political backlash. The Europe 2020 strategy also captures the fundamental and long-term issues for economic development and competitiveness, notably institution building, and outlines a forward-looking model of society with social and environmental dimensions. The European Commission came to base its assessment of the implementation of structural reforms on the broader objectives of the Europe 2020 strategy and also included the respect for the European social pillar in the European Semester.
Nonetheless, Europe 2020 results have been mixed. The OMC does not feature sanctions for non-compliance. The sovereign crisis context added compliance-enhancing mechanisms that were absent before (market and peer pressure, conditionality in countries subject to adjustment programs) although those came essentially to a halt when financial market pressure subsided, and ECB actions had the side effect of relieving pressure. Efforts undertaken to improve implementation include a structural reform support program to make country-specific recommendations more effective. Yet, close to the end of its term the Europe 2020 strategy continues to be held back by member states taking insufficient ownership of reforms and not prioritizing the relevant ones from an EU point of view, a lack of visibility and ultimately, governance (the unanimity requirement).
Distinguished Lecture on Economics in Government—Setting National Priorities: 1992