Getting Down to Business

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The 15 leaders of the European Union gave family dynamics a whole new spin last week in Lisbon. At their special summit on economic reform they set new and ambitious goals for a concerted attack on unemployment and the rigid labor policies that cause it. They agreed, with varying degrees of enthusiasm, to the idea that the marketplace can't be too tightly harnessed by regulation if it is to flourish and provide the innovation and jobs that Europe needs. They endorsed the exalted goal of making the Union "the most competitive and dynamic knowledge-based economy in the world." Heady stuff. Just one problem: it was a diplomatic fiasco just getting these folks to pose for a family portrait.

The reason, of course, was Austria, the black sheep. In February the 14 other members of the Union imposed sanctions in a vain attempt to ward off the inclusion of Jörg Haider's far-right Freedom Party in the Austrian government. No way was French President Jacques Chirac going to have his picture taken with Wolfgang Schüssel, the conservative People's Party leader who turned to Haider to make it possible for him to become Chancellor. Schüssel even discarded his trademark bow tie, which had become an icon of his pariah status, but that was hardly enough to evince a welcome.

So he tried a little psychotherapy. In a dinner speech Thursday night, Schüssel brought a message from "the land of Freud" to his fellow government leaders--when there's a problem but no dialogue, neuroses can develop, he told them, expressing hope that Austria's continuing isolation would not become "a European neurosis." He got no more than a perfunctory thank you from his host, European Council President and Portuguese Prime Minister António Guterres. But while none of the leaders proposed lifting their self-imposed ban on formal bilateral meetings with the Austrian government, there were signs that emotions are cooling down.

Relations with Austria are a minor irritant compared to the bigger dysfunction the leaders gathered in Lisbon to address: Europe's vexing inability to find work for its 15 million unemployed. The leaders all agreed on the urgency of the problem, and they acknowledged in the summit's conclusions that the blistering pace of globalization amounts to a "quantum shift" that forces the Union to embark on "a radical transformation of the European economy." The rub is how, and when.

One path to that transformation is being limned by the U.S., which has dynamically embraced information technology amid booming growth and low unemployment. But would-be reformers who thought to follow that path got a bracing reminder at the summit's outset that many Europeans passionately fear any transformation led by markets alone. European Parliament President Nicole Fontaine, a French conservative, told the government heads that Europeans are "scandalized by untrammeled capitalism" and "the remorseless pursuit of profit at the expense of working men and women." Against that background, the leaders' subsequent progress seemed almost bold. Starting with a broad palette of proposed reforms to promote the Internet (see "Playing Internet Catch-up"), they vowed to implement a series of other reforms that will amount to what British Prime Minister Tony Blair called "a sea change" in Europe's economy.

In what they hoped was a bulwark against the cynicism that often greets such high-octane prose, the leaders linked many of these changes to concrete deadlines. By June, the Commission will start "benchmarking" how much time and money it costs in the various member states to set up a company; by then, they vowed, they will commit their governments to the principles of promoting small companies "as the main engines for job creation in Europe." By the end of the year, they want a strategy in place to eliminate the considerable barriers to trade in services between member states. And they pledged to bring more people into the workforce, raising the employment rate in Europe from 61% today to "as close as possible to 70% by 2010." That alone, claimed a British Treasury official, could mean 20 million new jobs.

The British government, who with the Spanish had pressed for a summit devoted to economic reforms, were pleased that liberalization in the telecommunications market has been put on the front burner, with crucial legal reforms to be completed by the end of the year. But in other key sectors--gas, electricity, postal services and transport--no date could be agreed on, largely due to French resistance. French Prime Minister Lionel Jospin defended his government's hesitation with a less-than-oblique jab at the U.K.'s continued resistance to tax harmonization. "We can't be asked to evolve in certain sectors when there is a blockage in others, such as fiscal coordination," he said.

The mixed message of noble intentions but fuzzy implementation was carried over into the European Union's most vexing foreign policy problem, the Western Balkans. Chris Patten and Javier Solana, the E.U.'s two top foreign policy authorities, persuaded the leaders to endorse a major reorganization of the E.U.'s efforts there, which they claimed currently suffer from poor coordination and excessive bureaucracy. But France and Germany blocked efforts to cut back E.U. budget allotments for agriculture to free the $5.3 billion the Union has pledged to the region between now and 2006. European Commission President Romano Prodi says the funds will be found, but questions persisted about just what other pot would have to be raided to do so.

Whatever its failings, though, the Lisbon summit did firmly inject the Council into a role of coordinating economic policies, a task it has exercised only fitfully in the past. "The Council is taking the reins for strategic guidance of economic reform in Europe," said an ebullient Guterres. Since leaders agreed to make a summit with that agenda an annual springtime feature, he said, "We'll be on the front line every year, setting out priorities for the European economy." The prospect was an exciting one for Prodi. "We won't be addressing these issues piecemeal, but developing a real strategy--just like governments do," he said. Just like, perhaps, but not quite: implementing the ambitious strategies laid out in Lisbon and future summits like it will depend on how tenaciously they fight for reform at home, now that they have left behind the warm intentions expressed at every family reunion.