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Competitiveness and structural policies:where does the EU stand?

25/09/2006
Lisbon Strategy - Growth and Jobs
Average EU growth performance has been disappointing over recent decades.This picture is not uniform across countries, however, some having done betterthan others. We argue that EU policy debate, rather than focusing oncompetitiveness, ought to address the reasons for disappointing aggregategrowth outcomes as well as intra-EU heterogeneity. On the whole, weaknessesin growth performance can to a large extent be ascribed to inadequacies in thestructural policy framework. The policy shortcomings that we identify based on asubstantial body of OECD evidence are not really surprising. Rather, they havebeen around for a considerable period of time, which raises the question whyreform has been insufficient. Based on the emerging empirical literatureconcerning the political economy of structural reform, we suggest a number ofactions governments can take to facilitate the reform process. For example,structural reform may be helped by having scope for macroeconomicaccommodation of any negative short-term impacts, which is an addedargument for establishing more sound fiscal positions. As well, the tendency forstructural reforms to have ripple effects across different markets suggests thattrade liberalisation, which is desirable in itself, could help reform in other areas.Finally, we also emphasise the role that analysis by institutions seen asindependent and credible can have in terms of unblocking the reform process.