Survey shows economic reform slowed in EU

There was a slowdown in reform in many EU member states as the economy took a turn for the worse in the second half of 2008, according to the European Reform Barometer.

The European Reform Barometer provides a comprehensive review of structural reform across EU member states based on a survey of BusinessEurope's national members.

BusinessEurope has 40 members from 34 countries, including Malta's Chamber of Commerce, Industry and Enterprise. Its members represent business organisations in the European Union and European Economic Area countries, as well as some central and eastern European countries.

Business federations from countries more severely exposed to the crisis evaluated reform efforts by their governments more negatively and have also significantly lowered their assessment compared with last year's survey.

Reform progress was assessed to be particularly weak during 2008 in Estonia, Spain and Germany, but also Slovenia, Hungary, Malta, UK and Greece. In Germany, in spite of good economic development in 2007 and at the beginning of 2008, the government did not prepare the country for the coming downturn, the survey shows.

Furthermore, the discussion about minimum wages or the withdrawal of labour market reforms (unemployment benefit for older people) was counterproductive, it says.

In Belgium, Austria, Latvia, Ireland, Norway, Luxembourg, Italy, Czech Republic and Portugal reform progress was close to the EU average, which is a level considered to be neither satisfactory nor unsatisfactory. In the Czech Republic, after the government had launched reforms in 2008, capacity to progress was lost at the end of the year as a result of the debacle in the autumn regional elections, loss of confidence among citizens, disregard impacts of the emerging economic recession and hesitation concerning anti-crisis initiatives.

On a more positive note, Denmark, Bulgaria, Poland, Finland, Sweden and Cyprus continue to make significant progress in most of the policy areas. Finally, the Netherlands ranks number one in the survey, with small but concrete steps reflected in satisfactory progress in almost all individual areas.

Compared with 2007, a reform slowdown was particularly visible in Slovenia, Hungary, Malta and Greece. For instance, the fact that the Greek government has not yet prioritised specific policies in the crisis was identified as the main cause behind a downgraded assessment in 2008. Ireland, which had the highest score in last year's Reform Barometer survey, has also been significantly downgraded this year.

Poor cyclical management and significant structural problems, together with virtually no progress on pensions and childcare can explain this significant shift. On the contrary, Italy's assessment of reform progress has been markedly upgraded in 2008, after having registered the weakest reform score in 2007.

According to the survey, BusinessEurope members have reassessed the list of reform priorities to be implemented in response to the crisis. Compared to the 2007 survey, there is an upward move of the better regulation agenda which now occupies the first position in the ranking of priorities. In addition, the focus of labour market reforms shifted from supply-side to demand-side considerations, by placing higher emphasis on labour adaptability than on improving incentives to work. To adapt skills to the needs of the market remains a key priority for the future. Finally, the importance of safeguarding the sustainability of social security systems becomes a high priority in the context of deteriorating public finances.

BusinessEurope says that in the context of the Lisbon Strategy, it regrets that the European Commission appears to be taking a softer stance on its evaluation of reform progress across the EU.

"In particular, it has abandoned its previous practice of providing an overall assessment of recent reforms undertaken in the various member states, while the business community has consistently argued that a real benchmarking culture is a necessary condition for the success of the Lisbon Strategy," it says.