Lessons and Policy Implications for the Lisbon Strategy
INFER Advances in Economic Research series
Chapter 2: Economic Growth in Europe: Pursuing the Lisbon Strategy
Adriaan Dierx and Fabienne Ilzkovitz* 2.1 INTRODUCTION The European Union witnessed a slowdown in its real growth from mid-2000 onwards. The main feature of this economic slowdown was not its sharpness but its duration. There was a gradual but steady widening of the output gap over the four years from 2000 to 2004. In contrast, over the same period the US saw a sharp deterioration in the output gap for the first two years but an improvement thereafter. This discrepancy suggests that the European Union’s relatively weak growth performance is not solely attributable to cyclical factors but that supply factors have played an important role as well. From this perspective, making a success of the Lisbon strategy, which aims to transform the European Union into the most competitive and dynamic knowledge-based economy in the world while preserving the European social model, becomes all the more important. The aim of this chapter is to assess whether the Lisbon strategy is an effective tool to revive economic growth in the European Union. The chapter first examines the rationale for the Lisbon strategy, which is to increase population welfare by raising the growth potential of the European economy in a sustainable way. The next section explains how a comprehensive strategy of structural reforms can contribute to stimulating growth but why possible tensions may exist between the economic, social and environmental objectives of this strategy. Section 2.4 addresses the question of how to best implement such a strategy of structural reforms. This touches on...
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