The French and Dutch rejections of the EU Constitutional Treaty were in part a reflection of the real concerns about how the economy of Europe faces up to the challenges of globalisation. Large parts of Europe are not competitive and are stuck in a cycle of low growth. People know that the European economy faces a difficult and uncertain future.
One of the key barriers to Europe’s competitiveness, as identified by European leaders meeting in Lisbon in 2000 and restated in the Wim Kok report 2004, is the lack of flexibility of Europe’s labour markets compared with its competitors. This has contributed to the poor growth and high unemployment that we have seen in some of the member states in the past few years.
At every Spring Council since 2000, EU leaders and institutions have signed up to and restated the need to make Europe’s labour markets more, not less, flexible. They identify solutions that range from tackling the structural rigidities by reforming tax and social protection systems to improving the mobility and employability of Europe’s citizens. There is endless talk, but little action.
Some European governments have been reluctant to embark on reforms, being only too happy to be distracted by events. This has been compounded by the EU institutions proposing measures that will check and even undo any progress made. Indeed, to propose, for example, to make temporary agency workers more difficult to hire or, as the European Parliament recently agreed, to limit working hours, flies in the face of economic reality.
We believe the UK government should use its presidency of the EU to keep the spotlight on the need for reform. But to make its voice heard and win the arguments, it needs to do two things. First, it must encourage our allies, particularly the new member states, to act on their strong words. They have much in common with the UK. Second, it needs to dispel the illusion, strongly held in some parts of the EU and its institutions, that the UK is a bad place in which to work.
The UK has high employment, the number of hours worked continues to fall, and we have an excellent health and safety record. Further, we have seen the introduction of some of the most progressive family-friendly policies in the world.
Europe must implement the structural reforms agreed in Lisbon, as we risk being marginalised – squeezed by the low-cost countries in Asia and the innovative, technology-driven US.
David Frost is Director general of British Chambers of Commerce