Just recently, the European Commission set out its proposal for a new economic strategy for Europe, a successor to the failed Lisbon Strategy for Growth and Jobs. Again, the European Commission is going to try and plan the EU’s economic future.

The new strategy is called EU 2020 – A European strategy for smart, sustainable and inclusive growth and is portrayed as the answer to the current economic crisis, which has “exposed fundamental weaknesses and unsustainable trends” (according to the Commission’s President, Jose Manuel Barroso). The crisis is said to highlight the need for stronger economic co-ordination in Europe.

The strategy’s key aims are tackling a rising employment rate, encouraging higher investment in R&D, reducing greenhouse gas emissions, lowering poverty, improving energy efficiency and raising higher education standards. Annual reports submitted by member countries are part of the governance process, as it was for the Lisbon Strategy. This time, however, the European Commission will have the power to give a warning to a national government if it fails to fulfil the targets (this tool is provided by the Lisbon Treaty). That, it is believed by the Commission, will make the EU 2020 strategy more successful than the Lisbon Strategy.

I do not think so. Firstly, the EU 2020 strategy is likely to conflict with the Stability and Growth Pact. Countries may face the choice of whether to fulfil the EU 2020 strategy by increasing public spending or to fulfil the Stability and Growth Pact by reducing public spending. In my opinion, the Stability and Growth Pact should and will have priority after the Greek disaster.   

Secondly, it is generally questionable whether planned targets enhance growth. For example, the R&D expenditure target can be reached just by increasing public spending. However, growth-enhancing innovations do not come from inefficient policy-driven research, but from competitive markets!

Thirdly and most importantly, the EU 2020 strategy is a further attempt by the European Commission to plan economies and increase its centralised power. However, economic theory and historical experience show that central planning will not succeed but the market economy will. Hence, economic competition between EU countries is the key to more growth. Innovative countries will be imitated by other countries, leading to greater economic dynamism and improved welfare for the whole of Europe.  

So let’s hope that the heads of government will dump EU 2020.