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Friday, 15 March, 2002, 09:32 GMT
Barcelona's reform agenda
Electricity pylons
Energy deregulation is a key summit goal
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By Eleonore Dresch
BBC News' European Affairs analyst

European leaders meeting in Barcelona this weekend are considering an ambitious agenda for economic reform.

But in the two years since they first set concrete goals at the Lisbon summit - which aimed at making the European Union the most competitive and dynamic economy in the world by 2010 - progress has been slow.

Barcelona summit goals
Open up energy markets
More flexible labour markets
Portable pensions and benefits
Single financial market
Increased business start-ups
The Lisbon targets included creating 20 million new jobs and boosting productivity, in order to overcome the 50% gap in average income per head in Europe compared to the United States.

So far, 5 million new jobs have been created - but the EU unemployment rate is still around 10%.

Telecommunications have been liberalised and the use of internet is widely developed.

But there is still a long way to go before other markets are opened up.

And the downturn of the global economy is not playing in favour of further reform.

Energy market tussle

Now a row between France and other EU members over opening up of energy markets may threaten to overshadow progress at the summit.

With the presidential election due in six weeks, the French government has already warned that it won't take important decisions on sensitive issues.

It said it would allow French businesses to choose between energy suppliers but it is still refusing to give the same freedom to French consumers, warning that job losses could result.

The Germans seemed to agree with this last year at the Stockholm summit.

But now, all EU countries have agreed that France should be forced to open its market to foreign companies, partly because its giant state-owned company EDF (Electricité de France) has moved aggressively to exploit the liberalisation of energy markets in the rest of Europe.

How far to go?

As well as energy deregulation, Spain, which holds the EU presidency, has put employment flexibility and the creation of a single financial market at the top of the summit agenda.

They are backed by the UK and Italy, who also want more measures to encourage small business start-ups.

But Germany, which is also facing an election this autumn, has been reluctant to agree to measures to make it easier to take over companies, blocking a reform measure in the European Parliament.

There may be more success in integrating financial markets.

At the moment, European stock markets are smaller and less efficient than their American counterparts.

It costs much more for a European company to invest in the EU area than in the United States, and it is harder to raise venture capital.

The European Union is hoping to integrate European securities markets by 2003 and to join stock markets across Europe together by 2005.

Labour mobility

As unemployment is rising again in countries like France and Germany, the Barcelona summit will place great emphasis on the importance of the mobility of the work force and a more flexible labour market.

At the moment, only 0.4% of EU workers move across borders each year to find jobs.

In order to enhance job seekers mobility, the European Union is trying to simplify the pension system and increase mutual recognition of qualifications.

The UK attaches particular importance to labour mobility, and the ending of barriers that make it expensive for companies to hire and fire workers.

But some countries are also pushing for a social agenda to protect employees rights.

Other economic issues could also cause controversy at the summit.

Following the successful launch of the euro, the head of the European Central Bank, Wim Duisenberg, has announced he is stepping down.

The French are hoping to gain endorsement for their candidate, Jean-Claude Trichet, governor of the Banque de France, as his successor.

And the EU President, Romano Prodi, wants eurozone countries to consider closer cooperation on fiscal policy and taxes to make economic policy more consistent and effective, now that interest rates are set centrally by the ECB.

But such a move would be anathema to the UK and Sweden, whose doubts about joining the euro centre around their loss of economic sovereignty.

See also:

12 Mar 02 | Business
Eurozone growth 'set to recover'
07 Mar 02 | Business
Eurozone interest rates kept on hold
07 Feb 02 | Business
Duisenberg to quit ECB
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