Chapter 5: Lisbon, Finance and the European Social Model
John Grahl INTRODUCTION 5.1 The European Commission’s (2000a) contribution to the Lisbon Council opened with a self-congratulatory account of economic progress in the EU. The ‘best economic conditions for a generation’ were signalled in terms of disinflation, the stabilization of public finance and lower interest rates. However, weaknesses, ‘in spite of this positive outlook’, were acknowledged in growth and employment, especially in comparison with the US. The expression, ‘in spite of’ might be considered tendentious in that the severe monetary and fiscal stabilization measures of the 1990s are regarded by many as, at least, the proximate cause of slow growth and high unemployment. But the relative lack of employment and output dynamism in the EU was traced not to any macroeconomic circumstances but to inadequate technological progress. The ‘knowledge economy’, centred on information and communication technologies (ICT) and the Internet, was seen as the sphere in which Europe needed to catch up. Transformed financial relations were to be a key linkage in the catch-up strategy. Within a ‘sound macro-economic environment’, policies for social inclusion, investment in human capital, integrated research policies and so on were to promote a surge in innovation, while finance was essential to the successful introduction of innovation into the economic system. ‘An integrated capital market and a dynamic financial services industry’ would translate these more fertile and entrepreneurial conditions into success on EU and global markets by widening financial options for enterprises and driving down the cost of capital (Figure 5.1). Specific dimensions of this financial...
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