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Background

The financial crisis has diminished the EU's growth potential, and

made it clear just how interdependent its members' economies are, particularly inside the eurozone

The most important priority now is to restore growth and create effective mechanisms for regulating financial markets - in Europe and internationally

In strengthening its system of economic governance, Europe must learn from previous shortcomings which have put the financial stability of the whole eurozone at risk

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Background

Europe has already taken important measures to protect jobs,

support demand, and help business to withstand the impact of the crisis

Getting the banking system working responsibly at the service of the economy is the first prerequisite for boosting investment: we will therefore complete our overhaul of financial markets regulation and supervision

Getting public finances back into shape will not be painless, but it will stand us in good stead for the future

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...but we must also make our economy stronger for the future…

There is no way out of the crisis without growth and our strategy aims to achieve it by:

freeing up Europe's growth potential by removing obstacles in the internal market to increase mobility of people, services and investments

delivering on overdue structural reforms (rigid labour markets, ineffective social protection system, lagging productivity levels, etc.)

investing in key sectors that will create growth and jobs in the future and will bring a decisive competitive advantage

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Europe 2020 - a Strategy for Growth and Jobs

Europe 2020 is the EU's growth strategy for the coming decade

Its ultimate goal is to help the EU become a smart, sustainable and smart, sustainable and inclusiveinclusive economy

The Union has set five ambitious objectives to be reached by 2020 in the areas of:

- employment- innovation- education- social inclusion - climate/energy

Each Member State will adopt its own national targets in each one of these areas

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Main Priorities

Smart growth

Sustainable growth

Inclusive growth

Exiting the crisis

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The 5 targets for the EU in 2020

Employment 75% of the 20-64 year-olds to be employed

R&D / innovation

3% of the EU's GDP (public and private combined) to be invested in R&D/innovation

Climate change / energy greenhouse gas emissions 20% lower than 1990 20% of energy from renewables 20% increase in energy efficiency

Education Reducing school drop-out rates below 10% at least 40% of 30-34–year-olds completing third level education

Poverty / social exclusion at least 20 million fewer people in or at risk of poverty and social

exclusion

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Flagship Initiatives

The areas most in need of attention will be addressed

by 7 flagship initiatives at EU, national, local and regional level

Within each initiative, both the EU and national authorities will have to coordinate their efforts so they can be mutually reinforcing

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The 7 Flagship Initiatives Digital Agenda for Europe

Innovation Union

Youth on the move

Resource-efficient Europe

An industrial policy for the globalisation era

An agenda for new skills and jobs

European platform against poverty

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Smart Growth

“Smart growth” means improving the EU's performance in:

education

research/innovation (creating new products/services that generate growth and jobs and help address social challenges)

digital society (using information and communication technologies)

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Targets for smart growth

EU targets for smart growth include:

1) combined investment levels to reach 3% of EU's GDP

2) 75% employment rate for women and men aged 20-64 by 2020

3) better educational attainment, meaning in particular:

– reducing school drop-out rates below 10%

– at least 40% of 30-34–year-olds with 3rd level education

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How will smart growth be achieved?

The EU intends to boost smart growth through three flagship initiatives:

1) “Digital agenda for Europe” - creating a single digital market based on fast / ultrafast internet and interoperable

2) “Innovation Union” - refocusing R&D and innovation policy on major challenges for our

society & strengthening every link in the innovation chain

3) “Youth on the move”

- helping students and trainees study abroad

- equipping young people better for the job market

- enhancing performance/international attractiveness of EU’s universities

& improving all levels of education and training

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Sustainable Growth

“Sustainable growth” means:

building a competitive low-carbon economy that makes efficient, sustainable use of resources

protecting the environment and preventing biodiversity loss capitalising on Europe's leadership in developing new green

technologies and production methods introducing efficient smart electricity grids harnessing EU-scale networks to give our businesses an

additional competitive advantage helping consumers make well-informed green choices

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Targets for sustainable growth

EU targets for sustainable growth include:

1) reducing greenhouse gas emissions by 20% compared to 1990 levels by 2020

2) increasing the share of renewables in final energy consumption to 20%

3) moving towards a 20% increase in energy efficiency

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How will sustainable growth be achieved?

The EU will try to boost sustainable growth through two flagship initiatives:

1) “Resource-efficient Europe”- reducing CO2 emissions- promoting greater energy security- reducing the resource intensity of what we use and consume

2) “An industrial policy for the globalisation era”- supporting entrepreneurship- covering every part of the increasingly international value chain

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Inclusive Growth

“Inclusive growth” means:

raising Europe’s employment rate, especially with regard to women, young people and older workers

helping people of all ages anticipate and manage change through investment in skills & training

modernising labour markets and welfare systems

ensuring the benefits of growth reach all parts of the EU

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Targets for inclusive growth

EU targets for inclusive growth include:

1) 75% employment rate for women and men aged 20-64 by 2020

2) better educational attainment, meaning in particular:

– reducing school drop-out rates below 10%

– at least 40% of 30-34–year-olds completing third level education

3) at least 20 million fewer people in or at risk of poverty and social exclusion

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How will inclusive growth be achieved?

The EU intends to boost inclusive growth through two flagship initiatives:

1) “Agenda for new skills and jobs” – helping people acquire new skills, adapt to a changing labour market and make successful career shifts

– modernising labour markets

2) “European platform against poverty”

– ensuring economic, social and territorial cohesion

– guaranteeing respect for the fundamental rights of people experiencing poverty and social exclusion

– helping people integrate in the communities where they live, get training and help to find a job and have access to social benefits

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National Targets The 5 EU-level targets are being translated into national targets,

to reflect the level of ambition each Member State and the contribution individual member countries are able to make to the wider EU effort

This will happen in a dialogue with the Commission in order to check consistency with the EU headline targets

Each country will then set its final national targets in its national reform programme (NRP) later in 2010

Member States may opt for a medium-term revision of their respective targets later on

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National Reform Programmes(NRPs)

NRPs are the key delivery tool for the Europe 2020 Strategy at

national level

NRPs should be multiannual (covering at least 3 years) and should be updated and submitted annually along with Stability or Convergence Programmes (SCPs)

Their main purposes will be:- to identify how Member States have translated EU headline targets into national targets - to set out how Member States aim to meet these targets, ex. which measures will be implemented by when, by whom and with which budgetary consequences

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Main elements of NRPs

The NRPs should include the following components:

Macroeconomic scenario

Macroeconomic surveillance

Thematic coordination

Participation, communication and identification of good practice

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Implementation and Monitoring of NRPs

At EU level, monitoring of reforms will be carried out by the

Commission and the Council the Commission in particular will issue an Annual Growth

Survey as part of the European Semester (beginning in January 2011) which will take into account progress towards the Europe 2020 targets

A transparent assessment and working framework will be establish to track progress towards the EU-level headline targets

A “scoreboard” will also be put in place illustrating progress towards the Europe 2020 objectives on the basis of a set of pre-agreed indicators

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Country-specific recommendations In June of each year, the Commission will propose a single set of

country-specific recommendations and/or drafts opinions

These will be attached a single country report and an overall report for the euro zone and issued under separate legal instruments:

- Council Opinions on fiscal policies- Recommendations on other elements of macro-economic surveillance- Recommendations on thematic issues

Failure to follow up the recommendations sufficiently may result in the Commission issuing policy warnings and adopting appropriate incentives and sanctions in the context of excessive imbalances procedures

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Contents of the Annual Growth Survey

The annual review will focus on:

Fiscal and macroeconomic developments in the EU and the Euro area

Thematic developments in the EU, esp. overall progress achieved on the EU headline targets, as well as progress on the flagship initiatives

Fiscal stance and overall progress towards fiscal targets

Horizontal issues related to developments in intra-euro-area imbalances and competitiveness

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Contents of the Annual Growth Survey

The forward-looking part will describe:

The main challenges for fiscal and macroeconomic policies

Policies to address these challenges Priorities for action in the area of structural reforms to

advance the thematic part of the strategy The Commission’s draft Joint Employment Report will

constitute a part of the survey addressing employment policies

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Governance of the Europe 2020Strategy

Economic policy coordination under the Stability and Growth

Pact and Europe 2020 should be aligned closely in the framework of the European Semester, an integrated economic surveillance structure which aims to provide more timely policy advice to Member States

Governance of the Europe 2020 Strategy will be based on 3 integrated strands:

- Macroeconomic surveillance - Thematic coordination - Fiscal surveillance under the Stability and Growth Pact

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Macro-economic surveillance

Main goal: ensuring a stable macroeconomic environment conducive to growth and employment creation

It will cover macroeconomic and structural policies with a view to addressing:

- macroeconomic imbalances- macrofinancial vulnerabilities- competitiveness issues with a macroeconomic dimension

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Thematic coordination

Monitoring of growth-enhancing reforms

Focus on structural reforms in the following fields:- innovation and R&D- resource-efficiency- business environment - employment - education- social inclusion

Focus on removing obstacles to achieving the objectives set in the Integrated Guidelines

Progress to be monitored through the five Europe 2020 headline targets as well as the national targets that underpin them

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Fiscal surveillance under the Stability and Growth Pact (SGP)

Fiscal surveillance will be enhanced to strengthen fiscal consolidation and foster sustainable public finances

This will help ensure the overall consistency of EU policy advice by identifying the fiscal constraints within which Member States’ actions are to be developed

Member States have direct responsibility for the policy initiatives to be undertaken under the Europe 2020 Strategy

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Addressing the crisis

Euro-area finance ministers agreed on the establishment of the future European Stability Mechanism (ESM) as of mid-2013. This will involve a change to the TEU (Lisbon) Treaty

The ESM will safeguard financial stability in the Euro area and will build on the existing temporary European Financial Stability Facility (EFSF), which is due to expire in 2013, and also complement the new framework for reinforced economic surveillance in the EU

This stability mechanism will assist Euro area Member States in financial distress in combination with a strict economic and fiscal adjustment

The new framework, which includes in particular a stronger focus on debt sustainability and more effective enforcement measures, focuses on prevention and will substantially reduce the likelihood of a crisis emerging in the future

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Financial Supervision Reform

The supervision of the European financial system will be strengthened by the creation of a number of bodies:

European Systemic Risk Board (ESRB)

European Banking Authority (EBA)

European Insurance and Occupational Pensions Authority

European Securities and Market Authority