Adviesgroep over toekomst EU presenteert rapport aan Europese Raad (en)

Challenges and Opportunities A report to the European Council by the Reflection  Group on the Future of the EU i 2030 May 2010 EN

FROM MEMBERS OF THE REFLECTION  GROUP TO THE EUROPEAN COUNCIL Dear President and Members of the European Council, We have the honour of submitting the report requested by the European Council, at its meeting in Brussels on 14 December 2007, on the challenges that are likely to face the EU in 2030 and how we might address them.  This Report reflects the work of a diverse group of individuals with diverse priorities and interests. It is the outcome of  lengthy debates and discussions, and as such it represents both consensus and compromise. Not all the proposals have  every Member's support, but every Member supports the majority of its contents.  The uncertainty which characterises our times has made the task entrusted to us particularly difficult. We were forced  to base our analysis only on those long-term trends that are easier to discern. 

Our findings are reassuring neither to the Union nor to our citizens: a global economic crisis; States coming  to the rescue of banks; ageing populations threatening the competitiveness of our economies and the sustainability  of our social models; downward pressure on costs and wages; the challenges of climate change and increasing energy dependence; and the Eastward shift in the global distribution of production and savings. And on top of this, the  threats of terrorism, organised crime and the proliferation of weapons of mass destruction hang over us. 

Will the EU be able to maintain and increase its level of prosperity in this changing world? Will it be able  to promote and defend Europe's values and interests? Our answer is positive. The EU can be an agent of change in the world, a trend-setter, and not just a passive witness. But this will only be possible if we work together; the challenges ahead are too large for any European  country to address on their own. Our ability to influence developments beyond our borders will in turn depend on our  capacity to secure solid growth and internal cohesion within the Union. This is the conclusion reached by our Reflection Group, following intensive deliberations and consultations with numerous experts and institutions. All our members agree on one fundamental issue: 

Europe is currently at a turning point in its history. We will  only overcome the challenges which lie ahead if all of us - politicians, citizens, employers and employees -  are able to pull together with a new common purpose defined by the needs of the current age. Since our group was established, Europe has seen a number of important developments, including the institutional crisis caused by the rejection of the Lisbon Treaty, and the recent financial crisis which has triggered a global recession. The successful ratification of the Lisbon Treaty allowed us to end a long period of introspection which had distracted  the Union from the major challenges affecting our future. Unfortunately, the financial crisis, which was the result of shortcomings in the functioning and supervision of our financial institutions, is still with us today. The situation within the Union, and therefore our own reflections, have been  deeply affected by the social, economic and political ramifications of the crisis.  

At this crucial juncture, the EU  needs to act decisively and together in   avoiding protectionist  temptations.

This crisis, whose origins lie on the other side of the Atlantic, has affected Europe more than any other region of the  world by uncovering structural weaknesses in the European economy that have long been diagnosed but too often  ignored. The crisis has therefore acted as a wake-up call for Europe to respond to the changing global order. As with all transformations, the emerging order will result in new winners and losers. If Europe does not want to be among the losers,  it needs to look outwards and embark on an ambitious long-term reform programme for the next twenty years.

EU leaders must continue adopting measures to overcome the current crisis but these must be connected  to the medium and long-term reforms which the Union needs. We speak of the Union because of our Single  Market, because of our common currency and our stability and growth pact which mean we are interdependent. Europeans must tackle the crisis together, or each see our respective initiatives fail. In order to exit fully from the crisis, we must continue the stimulus measures until our economies can function on their  own. If spending is cut too early, our recovery could slip into reverse. Our top priority must remain creating jobs and  growth. And those Member States that can no longer afford to spend, due to costly rescue operations, rising social  expenditure and declining sources of revenue, will have to rely on the EU and other Member States to take the lead in  setting up the conditions for economic recovery. 

Strengthening  economic governance in the EU is urgently needed if we are to avoid the asymmetric shocks  which derive from the co-existence of our monetary union and single market with divergent economic policies. The  origins of the crisis had little to do with the Euro and Stability and Growth Pact, but these mechanisms have not been  sufficient to ensure economic convergence during the crisis. The EU needs to find solutions to the existing imbalances  between Member States, by examining and  correcting the losses in competitiveness reflected in balance of  payments and current account deficits. These issues need to be included in the Union's convergence criteria and  an instrument for ensuring monetary stability is needed to confront unforeseen crises.

If the EU is to avoid a repeat of the crisis, it must urgently undertake reforms to the functioning and supervision of our financial institutions. Today, these financial institutions have changed few of the practices which  led to the crisis, except to significantly reduce their lending. It would be desirable for these reforms to be coordinated  among the G20, but until this happens, the EU must develop its own regulatory norms and mechanisms for control  and supervision. Our citizens will simply not tolerate another rescue operation on the scale we have witnessed.  Looking to the 2030 horizon,  Europeans will need a highly competitive and sustainable social market econ- omy in order to maintain social cohesion and fight against climate change. This will require an ambitious reform programme with clear priorities and much more effective enforcement mechanisms than the Open Method of Coordination can provide. In this context, we assume that the Commission's new Europe2020 strategy will form part of this major endeavour.   The EU must therefore implement without further delay the structural reforms that are still pending from the Lisbon  Agenda. This will require reforming the new strategy's implementation mechanisms, by means of a more effective system of incentives, to ensure that the objectives decided by the European Council and other European institutions are  actually met.

Human capital is the key strategic instrument for ensuring success in the global economy. And yet, Europe  has lost considerable ground in the race to a knowledge economy.  Catching up will require a coordinated effort. Member States must mobilise the resources they agreed to invest in R&D, with the help of the private sector,  and reform all aspects of education, including professional training. The Union must also act through its own revised  budgetary instruments, while making better use of the European Investment Bank and the European Investment Fund.  Finally, we need to consider the possibility of opening up new sources of revenue, for instance through the imposition  of a carbon tax.

The EU needs  to implement a common energy policy  with both internal and external dimensions that will allow  us to achieve greater energy efficiency  and savings of the kind advocated in the Europe2020 strategy, and diversify  our energy supplies from third countries. Europeans also need to embark on a serious discussion about the need for  safe nuclear energy in Europe, and to define the contours of a permanent system of incentives for the development of  alternative energy sources. The EU  must continue leading the fight against climate change.  Yet, in order to be more effective and relevant  in the emerging world order it must avoid repeating the mistakes we made in Copenhagen. It will be necessary to develop a truly common negotiation strategy which would allow us to defend our interests better. 

Europeans must tackle our demographic challenge.  If urgent measures are not taken, our ageing societies will  put unsustainable pressure on our pension, health and welfare systems, and undermine our economic competitiveness.  Priority measures must include increasing the proportion of women in the workforce; facilitating a better work-life balance; reforming our approach to retirement, so that it is seen as a right and not an obligation; and developing a more  pro-active immigration policy suited to our demographic and labour market needs. The EU must strengthen the Single Market against temptations of economic nationalism and complete it   to include services, the digital society and other sectors, which are likely to become the main drivers of growth and job  creation in a market of 500 million users and consumers.  The strengthening and completion of the Single Mar- ket should be accompanied by improved tax coordination. Europeans must reform the labour market and modernise our corporate governance practices.  If we are to  fully realise the potential of the technological revolution, we must make major changes to our labour market structures. Some Member States have already implemented successful reforms based on the model of flexicurity; we have  to learn from these experiences while adapting them to our different national circumstances. We must increase the  employability of our workers and the flexibility of our companies in an economy that is in constant flux. Improving  labour productivity must become a priority, and productivity gains must be made directly proportionate to levels of income. Addressing these challenges will not require changes to  the Treaty. Nor, in accordance with our mandate,  does the report rigorously distinguish between the different levels of power or at what level action has  to be taken.  We are not concerned about who should act, but rather which is the right course of action to take, and  without further delay. This also means that it is urgent to assess existing budgetary levels and priorities, including both  the funding earmarked by the Union and that assigned by the Member States in pursuit of priorities agreed at EU  level. When ambitious objectives are pursued with limited resources and weak implementation mechanisms, we have a  recipe for disappointment. 

If the EU is to achieve its goals,  the European Council and the Eurogroup will need to strengthen their leader- ship role, in coordination with the Commission and the European Parliament.  As we embark on these reforms, we must take full advantage of the new tools contained in the Treaty of Lisbon to  develop greater citizen participation in the Union; an effective internal and external security policy; more solid relationships with our neighbours; and the ability to represent our interests abroad. The EU project should also become a citizens' project.  Our citizens are convinced, often more than their leaders, as  surveys show, that it is in the interest of the Union and its Member States for the EU to become a more relevant and  effective global player, and to speak with one voice in its efforts to promote our common interests. Our citizens demand greater European coordination in the fight against organized crime and terrorism, because they  know this is the only way to address these challenges in an area where people are free to move across borders. Our citizens realize that our wellbeing, development and security are linked to those of our neighbours, with whom  we must develop especially close cooperation in pursuit of our common interests. Our citizens know that our foreign policies will be more powerful and effective if we are able to act together in defence of our interests, and not in a show of disunity where each Member State competes for a starring role in the style  of bygone years. Our citizens want the European Union to serve their interests, and therefore expect their social, civil, family and employment rights to accompany them wherever they may move within the Union. It is by guaranteeing the portability of  social rights that the Union will become more meaningful to our citizens.  All of this calls for a new compact between the European institutions and economic and social actors; and between  different levels of power ­ national, regional and local. Above all,  the situation calls for strong political leader- ship, a form of leadership marked by the capacity to sustain an honest and fruitful dialogue with citizens and to govern in partnership. Ensuring the support of our citizens will be vital, not only for the Union to withstand the social and  economic impact of the crisis but also for it to undertake the structural reforms needed if Europe is to emerge stronger  in the future. The EU is more than a common market. It is also a Union of values. With the support of the citizens of Europe the EU  can lead efforts to address major global challenges. Confronted by a crisis which they did not create, our citizens will  only renew their belief in the European project if their leaders are honest with them about the scale of the challenges  ahead, and if they are called upon to make efforts comparable to those that brought prosperity to Europe after the  Second World War.  Sincerely yours, Members of the Reflection Group 6 6

MEMBERS OF THE REFLECTION GROUP Felipe González Márquez, Chairman  Vaira Ve-Freiberga, Vice-Chair  Jorma Ollila, Vice-Chair Lykke Friis (until November 2009)  Rem Koolhaas  Richard Lambert Mario Monti  Rainer Münz  Kalypso Nicolaïdis   Nicole Notat  Wolfgang Schuster  Lech Walsa 7

CONTENT THE EU HAS A CHOICE ..........................................................................................................................................11 RENEWING EUROPE'S ECONOMIC AND SOCIAL MODEL ........................................................................................15 GROWTH THROUGH KNOWLEDGE: EMPOWERING THE INDIVIDUAL .....................................................................19 THE CHALLENGE OF DEMOGRAPHY: AGEING, MIGRATION AND INTEGRATION .....................................................23 ENERGY SECURITY AND CLIMATE CHANGE: A NEW INDUSTRIAL REVOLUTION .....................................................27 INTERNAL AND EXTERNAL SECURITY: THE ETERNAL CHALLENGE...........................................................................31 EUROPE IN THE WORLD: BECOMING AN ASSERTIVE PLAYER .................................................................................35 THE EU AND ITS CITIZENS ......................................................................................................................................39 BUILDING ON THE EU'S STRENGTHS ......................................................................................................................43 ACKNOWLEDGEMENTS .........................................................................................................................................45 9 9

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THE EU HAS A CHOICE Since the end of the Cold War, the speed and scope of  change has been breathtaking. The last twenty years  have left nothing untouched: how we work, how we  consume, how we travel, how we relate to each other,  the reasons we empathise, the issues that scare us  have all been transformed. And most of these changes  have caught us by surprise. The global financial crisis is  only the latest in a series of events which have shaken  our convictions and belief systems. For the first time in  Europe's recent history there is widespread fear that  today's children will be less well off than their parents'  generation. Today, we live an age of insecurity. Facing up to the world's dramatic  transformations If the last twenty years have been disruptive, the next  twenty are likely to be even more unsettling. A new  multi-polar world is emerging where power is more diffuse and international dynamics more complex. With  slower growth than its main competitors, the EU's share  of global wealth is inevitably declining. The EU's human  capital has long underpinned its economy, based on  cutting-edge innovation and creativity. But other regions  are now moving ahead through higher levels of investment in research, technological development and innovation. By 2030 Asia is expected to be at the forefront  of scientific and technological developments, producing  high-value goods capable of transforming production  and overall quality of life. This situation poses an unprecedented challenge for the  European Union. During most of its existence, it constituted an anchor of internal stability, creating peace,  democracy and a fair share of prosperity on half of the  continent following the Second World War. In time, it  brought Europe's other half on board through a process  of unprecedented political and economic integration.  These successes allowed the EU to become the world's  largest economic power, encompassing a single market  and currency. And yet, as European citizens peer into  an ever more complex and uncertain future, they do so  without the common purpose which characterised the  post-war years.  As the emerging economies catch up with living standards in the advanced industrialised world, the global  consumption of energy is increasing. By 2030 world  energy requirements are likely to be 50 per cent higher  than today, with fossil fuels representing 80 per cent of  supply. Dependence on energy imports is set to increase,  with the EU importing nearly two thirds of its needs.  In addition, the availability of energy and other essential  resources is likely to be adversely affected by climate  change and many predict severe shortages by 2030.  Price volatility and supply uncertainties will also be exacerbated by political volatility in energy-rich countries.  Renewable energy will have grown more rapidly than  traditional energy sources, but by 2030 it will still only  represent a small part of world energy supply. Compounding this trend is our failure to curb losses in biodiversity, with serious implications for long-term economic  sustainability. The EU's past achievements were focussed on its own  corner of the world. During successive stages of integration, Europe's external environment remained relatively  stable. Today the situation could not be more different.  Rapid changes are sweeping across the world. In the  next twenty years, there will not only be several poles  of power, but the world's centre of gravity will also have  shifted ­ to Asia and the global south, to new public  and private actors, upwards to transnational institutions.  The challenges which Europe faces today stem as much  from developments outside its borders as they do from  the EU's timidity in responding to them. If the Union is  to secure its future, it will need to adjust its objectives  and policies to cope with this fast-changing world. All this is taking place against a background of sweeping societal transformations in our countries. In an ageing society with almost twice as many people over-65  per worker as today, EU Member States will have to  make considerable efforts to finance their social support  regimes and to retain older people in the workforce. As  11

the domestic supply of labour and skills declines, Europe  will need to attract more migrant workers, with consequences for our ability to manage societal integration.  Finally, a technological and communications revolution  is changing both our private and professional relationships, imposing new patterns of life and work which  many find too difficult to cope with. Embracing a global ambition should not result in scaling  back domestic reforms, far from it; external influence  cannot be achieved without solid growth and internal  cohesion throughout the European Union .  But our cur rent era has decisively become a global one, a transformation which is creating new winners and losers. If we  do not want to join the losing ranks, we have to take  bold action now.  The choice for the EU is clear: reform or decline Why the European Union? Many of these developments have been accelerated by  the current financial and economic crisis, the worst crisis  of its kind since the Great Depression, and one from  which the EU will take some years to fully recover. The  crisis has highlighted the structural weaknesses which  underlie most of the European economy: lower productivity, structural unemployment, inadequate labour market flexibility, outdated skills and poor growth. The challenges we face today are different to those of  the past and call for different responses. Whether we  look at relative demographic and economic decline, climate change or energy shortages  the challenges can only be properly understood and  tackled when situated in a regional and global context.  This is where the EU as an entity, which is much more  than the sum of its Member States, can demonstrate  its value. By combining multiple levels of power, from  the global to the local, the EU is more capable than any  Member State of meeting the major trials of the 21 At the same time, the softer impact of the crisis in  countries such as China and India and their much faster  recovery have led many to take a less benign view of  the rapid changes affecting the world economy. Today  there is concern that emerging economies might realise  their full economic potential while taking advantage of  Europe's structural weaknesses. In truth, current shifts in  economic output can be mutually beneficial, leading to  increased levels of investment, trade and consumption  on all sides. But the EU cannot assume that the "rise of  the rest" will necessarily result in a win-win situation. If  the EU does not adjust to the needs of the global economy, there is a real danger that Europe's relative decline  may become absolute. st   century.  This will not happen automatically. Even if the EU enjoys  the necessary structures and instruments, these need to  be harnessed by the Member States with determination  ­ and for the right purpose.  Fundamentally, the EU's common agenda boils down to  two overarching and integrated challenges: ensuring the  sustainability of our social and economic model; and developing the means to support and defend this model,  along with our common values and interests, in the global arena. The Commission's new `Europe2020' agenda  should therefore be supported, yet ultimately will need  to be embedded in a broader perspective. After 50 years of consolidation, through both deepening and widening, the EU faces a fundamental choice.  2010 could mark the beginning of a new phase for the  EU and the next 50 years could be about Europe's role  as an assertive global actor or, alternatively, the Union  and its Member States could slide into marginalisation,  becoming an increasingly irrelevant western peninsula of  the Asian continent. For the EU to become an effective and dynamic global  player, it will also need to shift solidarity to the heart of  the European project. Solidarity is not an unconditional  entitlement ­ it depends on individual and collective  responsibility. As such, it can and must inform EU policymaking and relations at all levels, between individuals    12

and generations and between localities, regions and  Member States. Yet European citizens are still hard-pressed to find answers to their problems in the EU. If our mission is to be  shared, politicians and citizens must take ownership of  the European venture. If governments continue as and  when it suits them to treat the EU and its institutions as  alien or hostile, there is little hope of creating the kind  of popular identification with the EU which is needed  for its success. On the contrary, renewing the support of  its citizens by enabling greater participation and transparency is what a successful EU requires. 13

RENEWING EUROPE'S ECONOMIC AND  SOCIAL MODEL At the heart of the European community is a distinctive  economic and social model, referred to as a `highly competitive Social Market Economy' in the Lisbon Treaty. A  number of variants of this model exist with qualitatively  varying performances, but they all fit broadly within a  common framework. Based on the idea that economic  growth should be pursued through the market for  social ends, the model enjoys wide public acceptance.  It helped transform Europe after the Second World War  into an area of powerful industries and services with  strong employment creation potential which, in turn, allowed for a fair system of social protection. A "virtuous  circle" was thus completed, binding together solidarity,  responsibility and competitiveness. The quest for growth and jobs A strong and globally competitive economy characterised by high productivity is a precondition for improving  living standards. Economic growth is increasingly based  on technological change and enhanced specialisation in  the context of deepening globalisation. These developments affect workers and companies as well as the operation of markets and the management of companies  through a process of structural change. Digitalisation is  increasing the scope for outsourcing, and the ICT-revolution may give ample scope for growth in productivity for  decades to come.  The EU can enhance the growth process by further developing the internal market, e.g. in the area of services,  as well as by fighting all forms of protectionism and ensuring a successful completion of the Doha round. Unnecessary burdens on labour and companies must not  stifle the growth of dynamic and innovative service production while entrepreneurship and risk taking should  be encouraged. Our shared vision is that technological  change, globalisation and ageing populations call for  urgent structural reforms with a view to enhancing flexibility, competitiveness and dynamism.    Yet against the background of new domestic and global pressures, this model needs to be re-defined and  adapted to a changing context. In the last two decades,  the EU's potential to generate growth  and jobs, and consequently to improve living standards,  has lagged behind that of its main trading partners.  Although some of its Member States have managed to  break this mould, overall the situation continues to this  day. By revealing structural weaknesses in the European  economy, the current financial and economic crisis has  acted as a wake-up call. Faced with the increasing competitiveness of the emerging and developed economies,  the EU must embark on a bold new reform programme  aimed at achieving higher economic efficiency. Reforming the labour market is central to creating more  and better jobs. Member States should aim at improving  three key aspects of their labour markets: the flexibility  and security of their workforce ("flexicurity"); labour  mobility; and the culture and management practices of  enterprises. Workforce participation rates must also be  increased (see section on demography below). At the same time, the consensus that exists around the  model depends on a continued balance between its  social and market dimensions. This balance has been  disrupted over time as social inequalities have increased.  For some EU citizens, social exclusion and poor working  conditions are still a reality. The answer to this problem  is not an end to economic reform. On the contrary, a  renewed emphasis on increasing economic efficiency  needs to go hand in hand with new social policies. In  other words, the sustainability of Europe's economic  and social model will depend on our ability to restore a  dynamic equilibrium between the economic, social and  environmental dimensions of development.   The capacity of the workforce to adapt to constant  shifts in production is a key element in maintaining  productivity. Labour flexibility needs to have its counterpart in labour security. In a fast-changing world it is not  jobs that need to be protected, but rather the person  who loses a job by enhancing his or her employability.  "Flexicurity" is the best way to provide this protection,  by allowing workers to take advantage of shifting labour  markets and make the transition to better jobs. Central  to this approach is the capacity to acquire and adapt  15

skills over the course of a lifetime, combined with the  conditions for transporting skills between and within  Member States. in eliminating unfair situations which result from twotier labour markets in which groups of employees benefit from the protection of long-term contracts, whilst  others remain unprotected and under constant threat of  dismissal.  Today, it is still difficult for workers and entrepreneurs to  access and understand the rules and regulations which  apply to taking up employment or starting a new business. While "red tape" cannot be legislated out of existence, it should not be a barrier to mobility.  Most importantly, social security rights should, once and for all, be  readily transportable between Member States. The recognition of qualifications across the EU needs to be ensured, and multilingualism encouraged. The EU should  also develop a new "professional transition policy" in  order to encourage and facilitate transitions between  jobs as well as support the Union's social dimension. Likewise, Member States should dedicate adequate  resources to fighting against social exclusion, poverty,  and gender discrimination, by, for example, implementing existing EU legislation to ensure agreed minimum  standards. A crucial part of this endeavour will involve  empowering job-seekers and other social partners. The  improvement of the information available at the European Employment Service (EURES) and the extension of  the availability of e-infrastructure to houses, schools and  businesses, would mark a solid start. Finally, far-reaching changes are needed in the culture  and management practices of enterprises if efforts  to upgrade the skills of their workforce are to succeed. Companies will need to be more supportive of  workforce initiatives and open innovation to improve  competitiveness through new production processes and  technologies. They will also need to foster a culture of  ownership in the enterprise. By providing adequate coordination in the area of social  and tax policy, the EU can support the capacity of its  Member States to pursue social objectives in accordance with their individual preferences without causing  distortions of competition or undermining the Single  Market. The European Investment Bank and European  Social Fund should be fully harnessed in support of antipoverty and social cohesion goals agreed at EU level. The EU should also contribute to the objective of a  healthy European population ­ a crucial economic and  social asset ­ in particular through the development of  healthcare, well-being and age-related industries and  services.  Realising Europe's social ambitions through  new targeted policies This new push for economic reform must be accompanied by new targeted measures aimed at enhancing security and solidarity for the individual. Social support systems deserve robust protection against abuse or "moral  hazard". Rights and entitlements must be balanced with  responsibilities and obligations. In particular, social security systems should be adapted in favour of rapid reintegration into the labour market rather than long-term  support of people of working age.  Finally, in view of the crisis, the business community  should assume its responsibility by committing itself  to self-regulation in the areas of ethics, accountability,  social and ecological awareness, anti-discrimination, lifelong training and continuous improvement in working  conditions.   In light of the existing division of competences on social  policies, priority should be given to clearly defined and  commonly agreed targets, as recommended by the `Europe2020' agenda. Member States should take the lead  16

Creating a win-win situation: a new deal for  the Single Market to enhance social inclusion, particularly in relation to  education, employment, information, health and banking services.  The above social and economic measures need to be  flanked and supported by a fully functioning Single  Market. The development of the Single Market has  long been hampered by two simultaneous processes: a  resistance in some Member States to applying internal  market, competition and state aid rules; and a tendency  in other Member States to oppose even moderate initiatives of tax coordination that could improve the functioning of the Single Market and remove the concern  that the Single Market may hinder the pursuit of social  objectives.  Enhanced economic governance: in the interest  of stability and convergence The global financial crisis and growing economic divergences between Member States have also made the  case stronger for enhanced economic coordination in  the EU. Renewing the convergence  efforts undertaken in the 1990s ­ thus leading also  to the enlargement of the Eurozone  ­ is essential to  the economic success and unity of the EU in general,  especially for the Eurozone. These convergence efforts  should be based on the following measures: Left unattended, these trends would aggravate the bias  of tax systems against job-creation and the difficulties of  Member States in addressing inequalities. They would  also lead to a race to the bottom in social protection  and would exacerbate the opposition to integration. In  short, the economic and the social dimensions of development would enter into a lose-lose situation. ·  Giving leadership for economic coordination to the  European Council, while fully respecting the role of  the Commission and working closely with the European Parliament, the Commission itself and other relevant economic institutions; reinforcing and extending  the coordination responsibilities of the Eurogroup in  relation to both the internal and external management of the monetary Union. The current economic crisis has further underlined the  need for adherence to the rules of the Single Market.  Retrenchment into economic nationalism would only  make the exit from the crisis more difficult and the  European economy less competitive. And yet, in many  Member States, both at the level of public opinion and  amongst political leaders, protectionist reflexes are only  too prevalent.  ·  Reinforcing procedures for supervision of national  budgets to ensure transparency as well as the sustainability of public finances; encouraging Member States  to harmonise their budgetary processes and calendars. ·  Strengthening macro-economic co-ordination by ex Against this unfavourable background, a re-launch and  completion of the Single Market are unlikely to happen without a new strategy or deal. Such a tending it to private debt, to the balance of payments  and, more generally, to the conditions for ensuring  competitiveness.  deal should  consist of a commitment to extend ­ within specified  deadlines ­ the Single Market to those areas where it is  still lacking or where it is insufficiently developed, first  and foremost the area of services, including the financial sector. This should be matched by initiatives, if not  further integration, in the areas of cohesion, social and  tax policies, respecting the need for EU competitiveness.  At the same time, efforts to advance towards a lowcarbon economy must go hand in hand with measures  ·  Enhancing overall budgetary credibility by creating a  financial instrument aimed at combating unexpected  crises and asymmetric shocks while taking into account the risks of moral hazard.  ·  Strengthening the functioning and supervision of fi nancial institutions to counter excessive leverage and  risk-taking 17

·  Enhancing the EU's investment effort by defining a  required by the EU and Member States to make this a  reality. growth target for the investment component of Member States' public spending; increasing the resources  of the European Investment Bank and the European  Investment Fund; and adapting the European regulatory framework to attract more long-term investors  and to favour prudent banking that caters to the  needs of the real economy rather than to financial  speculation.  Avoiding the pitfalls of the Lisbon Strategy  If the EU is serious about reform it must make proper  adjustments to its governance structures and resources.  This was the lesson of the "Lisbon Strategy", whose  promise to deliver on European competitiveness became  mired in weak implementation mechanisms. Above all,  the link between common guidelines set down at Community level and their implementation at national level,  in accordance with each country's internal distribution  of power, should be strengthened through an effective  ` The challenge of environmental sustainability The task of redefining Europe's economic and social  model is further complicated by the challenge of environmental sustainability. It will not only require the EU to  rethink its spatial planning, cities and transport, education and consumption habits, but also its growth model.  A `New Industrial Strategy' is needed to champion new  green technologies and sustainable industrial processes.  In support of this, the EU should: name and shame' peer pressure mechanism, as well  as positive incentives, financial and other. Last but not  least, assessment procedures should focus on outcomes  rather than inputs or processes. All of this needs to be combined with more coherent  use of the EU's own financial resources, those of the  European Investment Bank and those in Member State  budgets, pooling together the funding destined to cover  agreed priorities. Above all, our focus must be on creating growth and jobs. Not just any kind of jobs, but those  adapted to the knowledge society; and not just any kind  of growth, but growth which is sustainable and defined  by more than just GDP. This is where Europe's future lies. ·  Pass a European Innovation Act simplifying funding  opportunities and empower the European Institute for  Innovation and Technology to set up innovative joint  programmes across the EU; ·  Establish a Small Business Research initiative giving in novative, young and small businesses access to public  procurement markets; ·  Improve the added value of the agriculture, farming  and food industries, whilst reducing their negative  environmental impacts by increasing access to new  technologies and strengthening consumer awareness;  ·  Create or label a series of European Research Centres  within the European Institute for Technology, focusing  on renewable energy, energy efficiency, ICT for sustainable development and transportation networks,  biotechnology and nanotechnologies;  ·  Adopt a low-carbon transition strategy to set a vision  for a low carbon economy in 2030, and the actions  18 18

GROWTH THROUGH KNOWLEDGE:  EMPOWERING THE INDIVIDUAL Knowledge-based and creative industries and services  have expanded significantly over the last two decades,  becoming the central pillars for employment and economic dynamism in Europe. The days when the EU's  competitive advantage could be measured in wage  costs are long gone. Today, intelligence, innovation and  creativity have become the relevant benchmarks. They  are Europe's insurance for future prosperity. We live in a  world which demands not only high value products and  markets, but also, increasingly, high value skills.  zens and third-country nationals living in Europe do not  have access to education systems of the highest quality.  Urgent action is needed to address this situation, including providing teachers with the professional recognition  they deserve; developing flexible and open curricula  capable of nurturing curiosity and creativity among children; and strengthening links between public education  systems, business and society. Similarly, there are not enough first-rate universities in  the EU, making Europe less attractive to top-qualified  graduates. The EU needs to remedy this situation by  building a network of top-level higher education establishments able to rival the best in the world. The quest  for excellence does not preclude a parallel effort to  promote greater access to university education with a  view to improving average education levels among the  wider population. Excellence requires critical mass and  competition, in effect a "common space" for students,  universities and academic research.  And yet, Europe is falling behind in the skills race. On  current investment trends, by 2025 Asia may be at the  forefront of scientific and technological developments at  the expense of the EU and United States. It is estimated  too that by that date nearly a million Chinese and Indian  students will study abroad, bringing a wealth of talent  and experience back to their Asian homelands. This  contrasts with the relatively small number of European  students studying outside Europe. In tertiary-level education, the EU is equally lagging behind, with only 27 universities amongst the world's top 100, compared to 57  in the United States. The EU is also poorly represented  in political, business and environmental debates taking  place beyond its borders. The administrative and financial autonomy of universities must also be encouraged, as this is the most effective way to increase private funding for higher education. As future beneficiaries, high income students  should contribute to the mounting cost of education  while a system of scholarships and student loans should  be made available to students who need financial support. Competition between universities must also be  promoted, as should governance models based on accountability and transparency.  The EU cannot afford to be complacent when confronted with this trend. A better use of human talent  will be the key strategic instrument for ensuring upward mobility for individuals and progress for European  society at large. If the EU is to realise the promise of  the knowledge society, it must deliver excellence at all  stages of the education process; continuously upgrade  the skills base of its population according to need; and  create a University systems characterised by clientelism and  corporatism must be thoroughly challenged. The focus  must shift to ensuring that universities have greater exposure to the real economy in  Europe and the rest of the world. This reform process  should include measures to increase student mobility, by encouraging greater up-take of the ERASMUS  programme and by providing advantages to students  holding diplomas from more than one country. Universities must do more to provide graduates with the skills  needed by industry.   social, economic and regulatory environment in  which research, creativity and innovation can flourish. The quest for excellence and relevance:  upgrading education and skills A solid educational foundation at primary and secondary school level can have a huge influence on a person's  ability to progress through life. Too many European citi 19 19

Indeed, correcting the mismatch between the supply  and demand for expertise must become one of the top  priorities of the educational system. This will require a  strong emphasis on skills upgrading in order to prepare  individuals for employment transitions as well as the use  of new technologies and skills. The necessary precondition, in turn, will be the realisation of a flexible, life-long  learning culture, where individuals are able to return to  education at any point in their careers under conditions  similar to the young. "Learning to learn" must become  a guiding principle throughout the education system. Excellence must be the main criterion for granting public  aid both at national and EU levels. The role of the European Research Council must be expanded and strengthened, with funds allocated strictly on the basis of peer  reviewed excellence, actual or potential.  Likewise, the  EU must encourage the development of "European  poles of excellence" while ensuring that this process of  concentration would not lead to the creation of "intellectual deserts". Last but not least, the European Research Area must  become a reality ­ an area without borders where all  scientific potential, wherever it is, can be fully tapped  thanks to the free movement of researchers, ideas, technologies and capital. This process of "Europeanization"  must itself be part of a more general openness to the  world. Transfers of knowledge have now become the  indispensable complement to the traditional drivers of  globalisation based on material and capital flows.  Towards a European Research Area: raising the  stakes for R&D spending Despite numerous calls for substantial increases in R&D  spending, the last decade saw relatively little change ­  the EU's expenditure remains at 1.8 per cent of GDP. A  concerted effort is needed in Europe to reach the `Europe2020' target of 3 per cent expenditure on R&D and  the creation of an "Innovation Union". This must include budgetary reallocations and greater private sector  funding. EU centres for pre-competitive applied research  should be developed (public-private partnerships between states, regions and private industry) together with  increased support for investigator-driven free research  through the European Research Council. A regulatory framework for unleashing  innovation and creativity Europe often finds it difficult to translate scientific  research into  new products, new patents, new entrepre neurial activities and new jobs. A lack of competition in  service markets inhibits innovation, raises costs and  limits growth. Financial services, next generation digital services, energy solutions and services to promote  health and learning have all huge potential. The EU is  well placed to become a leader in the new service industries, but only if service providers are supported by a  Europe-wide market and a new regulatory environment  where innovation and creativity can actually flourish.  To this end, it will be crucial to simplify the procedures  for accessing public funding , including EU funds. This  would above all benefit small dynamic businesses, which  are often the driving force for forward-looking innovations. Today, SMEs account for half of the EU's GDP  although they benefit from only 15 per cent of R&D  programmes. New forms of partnership are needed between researchers at publicly-financed universities and  researchers at privately-financed companies to ensure a  continuous pooling of knowledge throughout the process of research and innovation. In particular, more funding is needed for applied research that would benefit  SMEs.  Free global markets that respect intellectual property  rights are the essential breeding ground for innovation.  It is therefore important that Europe remains committed to improving market access both inside and outside  Europe, most effectively through the completion of  the Single Market, both in regard to services and new  technologies. At the same time, the EU must reform the  rules on intellectual property, for instance through the  20

creation of a straightforward European patent system  that is affordable, quick and reasonable, and offers effective protection on a European scale.  In this context, it will equally be important to put in  place the measures needed to reinforce risk capital  markets and the availability of seed capital. In particular,  SMEs ­ which are very often at the forefront of innovation ­ need more adequate support mechanisms, including access to risk capital, to help them compete in the  global marketplace.    The creative economy will continue to evolve faster than  the political processes intended to support or regulate it.  Every day it reveals new horizons and revolutionary prospects. Flexibility and responsiveness must therefore be  the backbone of any regulatory framework in this field.  Facilitating a culture of risk-taking and entrepreneurship  is even more important. Only this will allow the EU to  fully reap the rewards of research and experimentation,  and with it to create new jobs. 21

THE CHALLENGE OF DEMOGRAPHY:  AGEING, MIGRATION AND INTEGRATION The combination of ageing populations and a contracting domestic labour force is set to have drastic consequences for Europe. Left unchecked, it will translate into  unsustainable pressure on pension, health and welfare  systems, and into negative outcomes for economic  growth and taxation. If Europe is serious about moving  towards a knowledge society, efforts to enhance economic efficiency and upgrade the skills of the existing  population must be complemented with active measures  to address this demographic challenge. Not least, it  must include a concerted effort to make the EU an attractive destination for immigrants. Without migration,  the EU will not be able to meet future labour and skills  shortages. It will also see a reduction in cultural diversity  and experimentation, prerequisites for creativity and innovation. could help fill the increasing gap between pension receivers and contributors. But with European demographic patterns becoming entrenched, the impact of these measures will not be sufficient. In the end, the European Union's demographic  challenge will only be addressed through two sets of  complementary actions: boosting labour market participation rates; and implementing a balanced, fair and proactive immigration policy. Expanding labour market participation: a sine  qua non  Devising and implementing effective work-life balance  strategies (leave arrangements, tele-working, etc.) is  the first step to increase labour force participation. The  objective must be to provide the conditions in which  people, in particular women with young children, and  older workers, can remain in the workforce. Despite  a higher life expectancy, Europe's demographic trends are becoming  entrenched Europe combines the demographic extremes of very  high life expectancy and very low fertility. In most EU  Member States, life expectancy - currently 75 years for  men and 82 for women on average ­ is set to increase  by an additional 15 to 20 years in the course of this  century. With women giving birth to 1.5 children on  average, and more and more women foregoing children  altogether, Europe's population is ageing and its nativeborn labour force declining. Bearing in mind Europe's  current average retirement age (62 years for men and  just over 60 for women), in the absence of compensatory policies, in the next 40 years Europe's support ratio  will deteriorate sharply, leaving four contributing workers to support every three retired people. Urgent action  is needed to counterbalance these negative trends.   women are retiring early and  their overall employment rates are lower than those of  men ­ 58.3 per cent as against 72.5 per cent.  Responding to this will require an increased focus on equal opportunities and non-discrimination, as well as child care  programmes and school systems supporting working  parents.  The second step will involve removing the legal, administrative and cultural barriers to promote greater intra-EU  labour mobility. Key instruments in this regard include  the full portability of welfare and pension rights, improved language training, full recognition of academic  degrees as well as professional skills throughout the EU  and the development at all political levels of a truly nondiscriminatory environment.  To begin with, family-friendly policies aimed at stabilising or increasing fertility levels should be put in place.  Additionally, the impact of reduced domestic labour  forces, including the related issues of financing healthcare and pension schemes could be partly offset by  increased productivity. Steady growth in productivity  would allow for a revised allocation of resources that  Last but not least a major shift is required in our approach to retirement. Current early retirement practices  should be discouraged. Retirement should become an  option for individuals rather than an obligation. Working life should be prolonged through an increase in the  actual as well as the statutory pension age. Adult educa 23

tion and training programmes, salary schemes, working  conditions and pension systems should be adapted to  create a labour market for 50-70 year-olds by making  recruitment and employment of older workers more attractive. grants (a points-based or assessment system), while taking account of particular needs in Member States.    Yet Europe will only become an attractive destination for  skilled immigrants if the latter feel accepted, have full  access to formal labour markets and the possibility to set  up their own businesses. Wide-ranging integration initiatives are needed at EU and Member State levels, but  particularly at the local level, which is often best-placed  to identify and meet the needs of immigrant and nonimmigrant populations. Immigration policies: towards a pro-active  approach Even if internal measures aimed at boosting labour market participation could be fully realised, they will not be  sufficient to compensate fully for the consequences of  demographic change on future labour supply. The reality  is that by 2050, in the unlikely absence of immigration,  and at constant labour force participation, the EU labour force would decline by around 68 million workers.  Since not all immigrants become economically active, a  net gain of some 100 million people would eventually  be needed to fill the gap.  Realistically such a large net  intake over the next 40 years is neither likely nor necessarily desirable. Nevertheless, migrant labour will be  part of the solution to Europe's future labour and skills  shortages and the EU will need to develop a pro-active  approach to immigration.  Once established legally in the EU, immigrants should  enjoy the same social rights as EU nationals. The potential within existing immigrant populations to boost  labour force participation should be tapped through  investment in language, vocational training and general  education, combined with determined anti-discrimination strategies. All forms of discrimination against immigrant workers and their families should be removed.  People on the move: exercising control and  responsibility As it applies to a space largely without internal frontiers,  the proper functioning of a common European immigration policy needs a credible system of managing the  EU's external borders, including a co-ordinated system of  issuing visas to third-country nationals ­ also addressed  further below in the context of the EU's external and  internal security.  In general there is a need in Europe for a shift in attitudes. Too often, immigration is perceived as a burden  to be shouldered rather than an opportunity to be  seized.  Europe has much to learn in this regard from  Australia, Canada and the United States, with which it  is in direct competition for talented and skilled immigrants. Drawing on the experience of these countries,  the EU needs to develop a common immigration policy  with the aim of attracting the most qualified, talented  and motivated immigrants while taking measures to prevent the loss of human capital in sending countries. As tens of millions of third-country nationals lawfully  cross the EU's external borders every year, it is also essential to enhance control and verification mechanisms  inside the EU. This would ensure that the burden of  migration control  is not unilaterally shifted towards the  A common immigration policy for the EU should set out  a specific medium- to long-term strategy for targeting  skilled immigrants. Clear information promoting the  advantages of setting up in Europe should be readily  accessible. There is also a need for an agreed approach  around common criteria for the acceptance of immi- EU´s external borders and the countries securing them.  There is also a need for a common approach to irregular  immigrants. The EU needs to iron out inconsistencies  between Member State policies and behaviour towards  persons without legal access to the labour market. This  24

should include harmonising the rights of irregular immigrants across the EU to avoid specific "call effects" in  one Member State that may affect another.  of return migration and two-way mobility between  sending and receiving countries. Permanent residence  status in the EU, for instance by way of a "blue card",  could encourage the circular migration of those who  want to return to their countries of origin for an extended period of time.  Addressing irregular migration should also include combating the culture of employing irregular immigrants, in  particular in the building and agriculture sectors as well  as in private households,  still evident in several Member  Finally, the EU should invest in the higher education  systems of sending countries in order to build up skills  which can later be shared. In a nutshell, the aim should  be training, not draining. States. This will require, among other measures, enhancing internal controls on work and residency permits in  those countries with high numbers of irregular immigrants.  Maintaining credible external and internal controls  should not, however, undermine the EU's determination  to remain a place of safety for refugees, in line with its  core values. European asylum policies need to ensure  that political refugees enjoy the right to seek asylum and  have their claims processed fairly within the EU27.  Efforts to stem illegal immigration and people trafficking must also include measures to protect vulnerable  individuals and communities from exploitation through  unacceptable labour practices or other forms of abuse,  including human trafficking. This calls for a permanent  dialogue between countries of origin and the EU which  is consistent in its application and which complements  the EU's development policy. Furthermore, the EU needs to acknowledge the linkages  between migration and development and formulate  policy responses that take full advantage of the synergies which exist between them. A successful recruitment  policy will inevitably lead to a brain drain which could  undermine the development process in sending countries. The EU should do its utmost to avoid this, helping  them to build up the human capital needed for their  development.  Bi-lateral development agreements should include efforts to promote orderly immigration  through mobility  partnerships as well as recruitment and readmission  agreements. The elaboration of such policies should  take account of the potential benefits for development  25

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ENERGY SECURITY AND CLIMATE CHANGE:  A NEW INDUSTRIAL REVOLUTION If left unaddressed, by 2030 the energy situation in Europe will be one of increasing need and declining supply.  Dependency on high priced imports of oil, gas and coal  from third countries will increase from its current 50 per  cent to about 60 per cent while fossil fuels could represent up to 80 per cent of Europe's energy mix. On top  of this, supplies will be drawn from some of the world's  most politically volatile areas. Given the sheer energy intensity of our economies, the scope for vulnerability and  turbulence is immense. ure to act is estimated to cost at least 5 per cent of the  GDP each year. At the same time, the development of a  sustainable green economy provides wide-ranging technological, business and commercial opportunities which  need to be grasped. There is a real opportunity for the  EU to exercise moral and political leadership in this debate without losing sight of the tangible economic and  industrial benefits. But it must do so swiftly, before others race ahead. Likewise, there are important gains to be made from the  implementation of a coherent European Energy policy,  including: the completion of a genuine, liberalised Single  Market in the energy sector, a strong European investment policy in new technologies and in major common  energy infrastructures, a common external position,  and a common fiscal approach contributing to fund  this investment policy. This would end the practice of  defending national champions, paving the way for the  emergence of European champions and the separation  of transmission networks of companies which generate  and/or distribute electricity or gas ("unbundling"). The  remaining bottlenecks in this area must be removed,  linking "energy islands" once and for all to the European network As if this were not enough, the impact of climate  change on the global economy could dwarf the impact  of the current financial and economic crisis. Failure to  take adequate measures could result in a significant rise  in the planet's temperature by the end of the century,  leading to the disappearance of whole regions, huge  flows of climate refugees and to billions being left without water. At best, we would face changing patterns  of desertification, rising sea levels, severe drought and  higher temperatures ­ with all their respective consequences. The challenges we face are enormous and call for an  urgent response along with a huge mobilisation of resources. For instance, carbon productivity (how much  GDP we get for every tonne of carbon we emit) will  need to increase ten-fold to meet existing carbon emission targets; and we need to achieve this in "only" 40  years. The potential for social, economic and political  destabilisation is therefore real. Yet to tackle these Herculean tasks, we cannot simply rely on the market. Instead, wide ranging public interventions and support are  needed to initiate a "new industrial revolution". The EU  must transform this challenge into a real opportunity.   . The main winners from these changes would be European consumers. High energy prices remain a significant  burden on individual households, making up 15 percent  of their total expenditure. Similarly, in certain energy  dependent sectors, high energy prices undermine the  fundamental competitiveness of European industry. The  EU cannot remain complacent in the face of these challenges. It must come to the assistance of its Member  States by developing  a truly common and integrated  energy policy,  targeting energy efficiency, diversification,  dependency and the fight against climate change. The societal and commercial benefits of a new  industrial revolution Starting with the `low-hanging fruits':  revolutionising energy efficiency The industrial and behavioural change needed to bring  this about will not be easy. But the rationale is clear. The  annual cost of reducing greenhouse gas emissions is  estimated at about 2 per cent of world GDP Achieving energy savings in industry, transport and construction as well as in domestic appliances is the most   while fail 27

effective way to reduce carbon emissions and external  dependency. It is also the quickest way that the EU can  achieve tangible results. Obviously, the cheapest and  cleanest form of energy is energy that is not consumed.  Whilst there is nothing new about enhancing energy efficiency, it nonetheless needs to be expanded and solidified as a key objective for all Member States.  The search for a more viable energy mix must also involve recourse to nuclear energy. Europe cannot afford  to relinquish this important source of power, but unlocking investments in nuclear energy requires a greater level  of regulatory certainty, as well as the further development of safety standards. Finally, significant R&D efforts  and innovative public-private partnerships are needed  to develop next generation energy technologies. The EU  urgently needs a few headline projects in this context,  such as the installation of solar power centres in Northern Africa and the creation of wind power farms in the  North Sea. To this end, the headline target for energy efficiency  should be raised to 50 per cent by 2030, from the currently agreed 20 per cent by 2020. The EU can advance  this objective by applying stricter efficiency standards  for domestic appliances and new buildings, along with  more ambitious vehicle emission targets. It should also  encourage innovative public-private partnerships for energy-efficient investments while setting and monitoring  Member State compliance with efficiency targets.  Reducing the EU's external energy dependency The era of cheap oil seems to be over with new supplies  increasingly remote, difficult to access and more expensive to exploit. At the same time, the EU  will continue  The quest for more sustainable power  generation  to  depend on external sources for its energy supply for  a considerable time. Today this is the case for 90 per  cent of its oil supplies; 80 per cent of its gas; and 50 per  cent of its coal The search for viable  renewable energy sources has  . Of its gas imports alone, 42 per cent are  to be stepped up. There are a range of promising options available, including wind power, solar power and  biomass. Europe should also move away from oil as the  primary source of fuel for transport by encouraging biofuel standards and electric and hybrid vehicles. Yet for  all this to happen, the EU needs vast investments to upgrade its energy grid and to develop intelligent energy  networks currently from Russia. There is no chance of becoming  energy independent, but the EU must strive to increase  its energy security by all possible means. To begin with, there is still considerable scope for increasing gas production within Europe. The EU should  support and grow its domestic gas production by opening new frontiers of potential gas resources, by removing licensing barriers and by allowing investments in  frontier areas, such as the Arctic. In addition, there is  significant potential to develop unconventional energy  sources such as tight gas and shale oil, for instance in  Central and Northern Europe.   (smart grids) which can handle future power  sources and minimise power losses, finally leading to a  fully integrated system of energy supplies.  The development of carbon capture and storage  (CCS)  systems needs to be backed up by firm decisions on  a range of issues which can no longer be delayed.  These include the appropriate level of subsidies, a legal  framework, and a roadmap for developing CCS beyond  the demonstration phase. In order to move from the  experimental to the operational stage, the EU needs to  research, develop and test new technologies and processes for capturing and storing CO2 safely underground.  These strategies must subsequently be backed up by  new endeavours to mitigate the EU's vulnerability to  external shocks. This means establishing reliable and  lasting relations with its principal suppliers, Russia in particular, while diversifying  the supply routes and methods,  including alternative gas pipelines and developing liquefied natural gas imports. To this end, the EU needs a  28

common strategy and an assertive external policy to better defend its interests in the international arena. these fiscal measures in order to avoid market distortions. Furthermore, the EU needs to seize the economic opportunities of a transition to a low carbon, resource-efficient, climate-resilient economy. This must include providing additional support, incentives and an appropriate  infrastructure to facilitate the creation of green industry  leaders. In a low carbon economy, many new industry  segments will emerge, such as electric vehicles, energy  efficiency solutions, water effectiveness services, biomass generators, carbon capture and storage providers.  Leading the fight against climate change Climate change can only be addressed effectively at the  global level. The outcome of the UN summit in Copenhagen was therefore a bitter disappointment as its nonbinding agreement is unlikely to be sufficient to fend off  dangerous global warming. Additionally, Copenhagen  has demonstrated that the EU still falls short of being  accepted as an indispensible interlocutor and player at  the global level ­ and this despite its efforts to lead by  example by committing itself to an ambitious objective:  reducing by 2020 its emissions by 20 per cent while  increasing both its energy efficiency and its share of renewables by 20 per cent as well.  Representing 1 per cent of global GDP redistribution,  there are important economic gains to be made in this  new economic area. While the EU continues to be the  global leader with 40 per cent market share in renewable technology exports, the allocation of both R&D  resources and financing into these technologies is clearly  faster in China and the United States. The EU needs to  make sure that it can consolidate its lead through appropriate increases in the reallocation of resources and  funding. This must not mean that the EU should downgrade its  efforts to become a leader in the fight against climate  change. On the contrary, in the follow-up negotiations  the EU should push for an agreement to make sure  that the pledges given at Copenhagen by developed  and developing countries are realised. In doing so, the  EU should defend its legitimate interests, ensuring that  the outcome of any new agreement helps sustain the  objectives of Europe's economic and social model, for  instance through a targeted strategy of conditionality.  Finally, the agriculture sector, accounting for around 14  per cent of global greenhouse gas emissions, cannot be  spared. Forests and soils act as natural sinks for carbon.  Halting ongoing tropical deforestation, reforesting marginal areas of land and sequestering more CO2 in soils  through changing agricultural practices would increase  carbon sequestration. The EU should therefore redirect  CAP resources towards environmentally-friendly agriculture and stockbreeding, taking an active part in reforestation efforts both at the EU and the international level. However, for this to happen, the EU must also do more  work at home. This includes improving the functioning  of its carbon market, the largest such market in existence. It is now generally accepted that the carbon price  at the heart of this market is problematic and the emissions trading system lacks the clarity and predictability  required by industry. Eventually, a price must be established at a level which has the dual effect of dissuading  carbon emissions while encouraging investment in the  development of viable, new, clean technologies. This  should go hand in hand with supplementing the market  mechanism with CO2 taxes. As some Member States  have already done, the EU must urgently coordinate  29

INTERNAL AND EXTERNAL SECURITY:   THE ETERNAL CHALLENGE Over the last twenty years, we have witnessed a shift  from a bipolar world order, followed by a brief "unipolar  moment" dominated by the US, to a gradually unfolding multi-polar system. In this new world order different  centres of power coexist in a more unstable environment. Old threats, including nuclear weapons, persist  in new forms (proliferation), while new threats have  emerged. These new forms of insecurity ­ which include  financial instability, environmental degradation, energy  dependence, organised crime and terrorism ­ are more  diverse, less visible and less predictable than ever before.  We now need to take decisive action and implement a  new `European Security Model'. Drawing on the vision  and objectives contained in the recently adopted `Internal Security Strategy', the model must prioritise the interests of European citizens while addressing the rapidly  evolving challenges of the 21 st  century. It must protect  individual rights and freedoms; improve cooperation and  solidarity between Member States; focus on the causes  of insecurity and not just the effects; prioritise prevention; engage with citizens; and recognise the interdependence between the internal and external dimensions  of security in establishing a 'global security' approach  with third countries. Globalisation has also increased our sense of vulnerability by dissolving the boundaries between internal and  external forms of security. Armed conflicts in a distant  continent can threaten Europe's internal stability by  causing large inflows of refugees. Likewise, weak cooperation on law-enforcement in European countries can  jeopardise efforts to combat terrorism abroad. All security risks are in turn interlocked, with poverty and instability in failing states becoming a breeding ground for  terrorism and other types of criminal activity. Addressing  21st century security challenges therefore requires global and anticipatory responses, which only an actor the  size of the EU can provide.  To date joint action in this field has been hampered by  Member State resistance to sharing information and  coordinating policies in relation to law and order, which  remains one of the most political sensitive issues in  domestic politics. However, this resistance flies against  the wishes of European citizens, who want the EU to  become a more relevant security actor. It also ignores  the substantial instruments and resources that the EU  has acquired over time in the field of security, not least  through the recently adopted Lisbon Treaty.  Building a culture of cooperation: security as a  trans-national public good Towards a European Security Model The EU has long committed itself to maintaining and  developing an "area of justice, freedom and security"  aimed at facilitating the everyday life of its citizens.  However, the terrorist attacks in the US in September  2001, Madrid in March 2004 and London in July 2005  clearly demonstrated the need for more effective and  coordinated action at EU level to tackle terrorism and  other cross-border security problems. These include  human trafficking, the smuggling of persons and illegal substances, money laundering, the exploitation of  women and children, natural and man-made disaster,  cyber-crime, intellectual piracy and, of course, corruption.  The security challenges we are facing require a genuine  EU-wide approach, huge cooperation efforts, common institutions and proper funding. A new culture  of cooperation is needed in numerous fields, including  judicial cooperation, law-enforcement, border control  and health, social and civil protection. This will require  increasing the powers of existing agencies and instruments, such as Europol, Eurojust, the Situation Centre,  Frontex and the Counter-Terrorism Coordinator. It will  also require setting up new bodies, such as a European  centre of good police practices.  In addition, the following issues should be prioritised: 31

·  Improve systems for exchanging information in rela- External security: overcoming the structural  limitations tion to network funding, trafficking routes for weapons of mass destruction (WMD), recovery after terrorist attacks and long-term preventive measures. For over ten years now the EU has developed important  instruments under the concept of a Common Security  and Defence Policy (CSDP). These include a Military  Committee and Military Staff, performing early warning and strategy planning functions, and a European  Defence Agency. It also has access to an array of civilian  personnel trained to provide assistance to local populations in conflict-torn areas of the world. These civilian  capabilities are increasingly important for addressing  what is now widely known as `human security' ­ the  notion that national and global security cannot be separated from the well being of individuals and the communities where they live.  ·  Create a European civil reserve team of specially  trained units ready to be deployed at short notice,  shaped along the lines of the military component. ·  Develop a more integrated external border manage ment system by reinforcing Frontex with a European  body of specialised personnel available to support the  Member States. ·  Iron out inconsistencies in Europe's Asylum System in  particular by standardising the definition of a refugee. ·  Create a unified visa policy and a European consular  So far, the EU has launched 22 observation, peacekeeping and stabilisation missions worldwide. These  missions, frequently carried out in cooperation with  NATO, the UN and other international organisations,  have enjoyed the backing of a majority of European  citizens. However, when the total military spending of  EU Member States (about 50 per cent of the US military budget) is compared to output (EU overseas force  projecting capabilities amount to only 10-15 per cent  of US capabilities), the system is clearly found wanting.  EU Member States fail to maximise the scale effect and  synergies which are needed to ensure the best global  performance.  service within the European External Action Service  (EEAS).  Too often, policy formulation in this area is driven by  events, so a balance has to be found between advancing security and protecting individual freedoms and human rights. Where to strike the balance between these  two inseparable elements will vary over time, depending on circumstances, thus requiring on-going political  debate across the EU. Even in cases where security risks  are at stake, clear limits to accessing personal data and  constraints on exchanging them should be strictly respected.  Overall, the EU suffers from one overarching structural  limitation: the fundamentally national nature of European defence systems. Without military resources of its  own, the EU depends on the voluntary contributions  of its Member States and these are often inadequate.  National military resources are still often based on territorial defence against a land invasion, even in Member  States where such an invasion is improbable. In general,  there is insufficient investment in the type of capabilities needed to respond to new security situations (rapid  deployment forces, strategic air transport, helicopters,  communications, military police). Above all EU Member States need to acknowledge that  internal security depends to a large extent on securing  a safe external environment. Cross-border security challenges do not stop at the frontiers of the EU. Enhancing  the security and freedom of European citizens will therefore require taking complementary action beyond the  EU's borders.  32

With 1.8 million soldiers under arms ­ half a million  more than the US ­ the EU is not capable of deploying  a 60,000-strong rapid intervention force and it finds  it hard to deliver a 5,000-strong force for a Common  Security and Defence Policy (CSDP) mission. In fact, 70  per cent of European land forces are unfit to operate  abroad, when nowadays conflicts require deployable  and sustainable expeditionary forces.  A European vision of collective defence  The Lisbon Treaty has provided a number of important  tools to help Member States resolve these challenges.  Through its innovative system of permanent structured  co-operation, the Treaty allows Member States to advance in parallel and at different speeds in order to  achieve specific aims, depending on their willingness  and capacity. Pioneer groups of states will now be able  to increase their ambition level in terms of the deployability, interoperability and sustainability of their forces,  allowing them to field more capabilities for CSDP, NATO,  UN and other missions.  In general, the nature and scope of CSDP missions have  tended to be piecemeal and forced by exigencies rather  than responding to an overarching plan or strategy.  Furthermore, the EU has no common funding for its  missions. Among the Member States there is no fair  burden-sharing, leading to disincentives against participating in military missions.  The Lisbon Treaty should also enable Member States to  overcome shortcomings relating to the CSDP's funding  by calling for the deployment of an `initial fund' to support common missions, which would then be supported  by the payment of `urgent funds' during the planning of  operations. This is also true of the civilian dimension of EU missions,  where less than half of the personnel committed by  Member States tends to be deployed, leaving missions  without sufficient stand-by specialised teams and experience on the ground. To remedy this, the EU must encourage its Member States to respect their commitments  and create truly operative civilian rosters of judges, policemen, engineers and other experts. This would imply  a truly operational and well-staffed European Operations Headquarters tasked with planning, deploying and  monitoring civilian/military operations abroad. However, whether one talks about increasing common  funding for CSDP missions, encouraging Member States  to volunteer more troops or fill the vacuum in EU strategic planning, the main shortcoming facing the EU in the  defence field is the divergent strategic outlooks which  exist among and between Member States. There is still  no consensus in European capitals about the overall purpose of increasing EU defence capabilities..  The EU also has an economy of scale problem in relation  to its industrial and technological arms market: it costs  Europe much more to produce far fewer products than  other arms suppliers like the US. The EU must therefore  develop a single European defence market and joint  procurement. The success of the EU's Single Market can  and should be extended to the defence field through  the enhancement of the European Defence Agency and  by lessening the barriers still protecting national markets. The EU needs to agree on a long-term vision of EU defence, which could be laid out in a White Paper with  clearly defined priorities in terms of threats, engagement  criteria and earmarked resources. This vision must spell  out a coherent division of responsibilities between NATO  and the EU, based on an objective assessment of the  comparative advantages of each. Unless EU Member  States are able to agree on a workable strategic concept  for the EU, the latter will be unable to fill the existing  gap between the expectations of CSDP and its operational capabilities and resources. 33

EUROPE IN THE WORLD: BECOMING AN  ASSERTIVE PLAYER If the EU is to deliver on its ambitious agenda, it will  need to become a much more assertive player on the  international scene. From increasing Europe's economic  competitiveness to racing ahead in the knowledge economy and providing its citizens with freedom and security, the challenges at stake are global in nature and only  international strategies will be able to address them.  for the benefits of multilateralism are not always apparent to states that did not play a role in shaping the  institutional architecture set up after the Second World  War. A new grand bargain therefore needs to be struck  that takes into account the concerns of emerging and  existing powers about the existing rules, while insisting on the importance of multilateralism, inclusiveness,  equity, sustainable development, collective security, respect for human rights and the rule of law and fair trade  practices.   Furthermore, as power shifts away from Europe and the  United States, the rules of international engagement are  themselves being redefined. In this turbulent landscape,  the EU can no longer afford to muddle through. It needs  to become a driving force in shaping the new rules of  global governance, or risk being left behind. To advance  purposively, it will also need to champion an international environment that will enable the EU to promote  its agenda. Finally, Europe will only thrive in a competitive world if  it promotes the key elements of a renewed European  growth model, based on competitiveness, inclusion,  social responsibility and environmental sustainability.  Other global players, in particular emerging economies,  will follow their own trajectories, making it all the more  important for the EU to identify shared interests and  common modes of operation through multilateral and  bilateral discussions.  Defending European interests in a changing  world order   Over the last two decades, European countries have  made important gains from increasing global interdependence. However, the financial crisis and instability  affecting food and energy prices have highlighted the  dangers of asymmetric dependence, particularly in relation to suppliers of scarce resources. Interdependence is  not just a fact, but our chosen way of life in a EU dedicated to facilitate exchanges of all sorts.  In this context, the EU must build a global economic  strategy that takes into account the euro as the world's  second reserve currency and deals with the negative  impact of global economic imbalances on Europe's  competitiveness. The EU should work with its partners  towards more balanced and flexible monetary relations  and consider the possibility of a global partnership in  which countries wishing to peg their currency would do  so against a basket of currencies rather than the dollar  alone.  Yet interdependence cannot be taken for granted. As  countries respond to the financial and economic crisis by  asserting their autonomy on a range of issues, the risk  of de-globalisation may become real. The EU must forestall this eventuality by proactively defending an ideal of  responsible interdependence whereby the various actors  uphold their commitment to the sustainability of the  system.  In the short term, the EU agenda should prioritise the  promotion of ILO initiatives, such as the Global Social  Floor or the Decent Work Agenda, while ensuring that  they are in line with the principle of open markets.  It should also build on its solid commitment to "Fair  Trade" to encourage other parts of the world to do the  same as an important contribution to international solidarity. Defending responsible interdependence will in turn  require a world where the major players support and  agree to work within a system of multilateral governance. But this objective is based on a fragile consensus,  35

Enhancing the EU's toolbox economic and legal instruments at the EU's disposal, its  military and political instruments are much weaker.   European citizens have expressed their desire for the EU  to take on more responsibility for their interests and values on the global stage. But what sources of power can  the EU lean on in order to carry out this mission? Member States should increasingly understand and rely on  the EU as a power multiplier, which helps them achieve  goals which they otherwise could not.  The EU as a continental hub: maximising the  power of attraction For many people around the world, the EU remains a  critical reference point, an alternative model for traditional inter-state relations and a transnational community of law which has brought prosperity and cohesion  to a region formerly torn apart by hot and cold wars.  This `soft power' is the EU's greatest asset. The EU must  become a continental hub through strategies of inclusiveness and engagement. These strategies were used  with great success in the EU's successive rounds of enlargement.  Yet a Union of 27 Member States pooling their sovereignty in order to reach common decisions is not an obvious global powerhouse. The fact that EU decisions on  foreign policy are taken unianimously is widely seen as a  handicap. The EU's power to influence depends on our  ability to overcome divergent national interests through  the shaping of common positions. The European Union  must therefore persist in our efforts to achieve greater  coordination in order to speak with one voice, or at least  orchestrate our polyphony. In a coherent way.   The EU must stay open to potential new members from  Europe, assessing every candidacy on its own merits  and compliance with the membership criteria. These  are in fact the "true limits of Europe". In line with this  policy of engagement and inclusiveness, the Union must  honour its commitments with regard to the current official candidates, including Turkey, and carry on with the  negotiation process. At the same time, it should offer  far-reaching agreements to potential future candidates  as an intermediate stage prior to the launch of accession  negociations.  This process will take time, but must start by improving  the linkage between national and EU policies and by  Member States increasing their participation in collective  actions. Through the sharing of national perspectives  and experiences, these exchanges should make diversity  a strength for EU foreign policy, not a weakness.  The Lisbon Treaty has helped in a number of ways to  strengthen the EU's foreign policy toolbox. For instance,  the enhanced cooperation procedure, if used in moderation, can work as a palliative where divergences remain  on important issues. The new European External Action  Service (EEAS) should be fully developed and staffed  with a view to helping the EU identify its common interests and work out joint policies, after due coordination  of the national positions.  The EU's power of attraction must also remain the  centre-piece of its evolving neighbourhood policy. It  must develop an enhanced role in stabilising its immediate surroundings by building on the existing `European  Neighbourhood Policy', `Eastern Partnership' and `Union  for the Mediterranean'. These partnerships should be  used to create a regional space of democracy, human  rights, development and free trade. They should also offer fair access to the EU market and ultimately a space  for the free movement of people to the benefit of the  EU and its partners. Moreover, the EU should manage a  strategic co-existence, modernisation and region-building policy with Russia.   Nevertheless, the root of the problem remains: the  gap between the EU's capacities  in the areas where it  is entitled to act (economy, trade, development aid,  competition policy) and its lack of real common instruments in the area where its original remit has expanded:  foreign and security policy. Compared to the panoply of  36

An open and inclusive approach must also be extended  to the EU's cross-border cooperation with other regions,  including ASEAN, MERCOSUR or SADC. In these and  other relationships, the EU and its Member States must  take into account the perceptions, expectations and  concerns of the rest of the world. While the EU is widely  seen as an attractive example of regional integration, it  often squanders this potential by adopting a patronising  tone. We must use our reputation wisely and bolster our  credibility as a negotiating power. Only by developing such a strategic approach to its  external affairs will the EU be able to translate its huge  financial effort (the world's largest by far) more effectively into political leverage. It should use its structural  advantage to pursue smart development and trade policies. For instance, the EU should pursue climate change  mitigation support in the poorest regions, which climate  change hits the hardest and which have contributed the  least to global warming. It should also continue its effort  to "trade away poverty", especially through agricultural  imports. This will require politically difficult decisions by  European leaders, including bringing the Doha round to  a conclusion. Translating strategies into action The impact of the EU's external action will in large  measure depend on its ability to adapt to the many challenges it will face in the run up to 2030. Securing the  EU's economic strength and internal cohesion will therefore be an indispensable condition for the EU to be able  to project its power externally. But when devising its  external position, the process of policy formulation must  not only be driven by events. There is an urgent need for  a common European strategic concept. The strategic use of the EU's varied tool-kit should also  allow it to become a more effective promoter of democracy, the rule of law and human rights. A policy of  conditionality that empowers democratic actors and discourages the abuse of power by authoritarian regimes  must be used more wisely. This will require holding  discussions with civil society partners, including associations of women and minorities, and not only government interlocutors; bottom-up interventions to bolster  the rule of law around the world; and a more consistent  approach to election monitoring. In the next two decades, this governance agenda must become multilateral  to the greatest extent possible.  This concept should pull the EU's diplomatic, military,  trade, and development policies together with the external dimensions of its common economic policies (EMU,  energy, transport, etc). Only by merging all its available  tools will the Union be able to act as a transformative  power and contribute to reshaping the rules of global  governance. By means of a White Paper, which would  be regularly updated, the strategic concept would help  to define the Union's long-term priorities and become  the reference framework for day-to-day external action. Last but not least, it will be necessary to develop an EU  approach to global governance reform. The EU should  lead the reform effort to make international institutions  more legitimate and conducive to shared responsibility, while promoting its own interests in the process.  This should include simplifying and bundling together  its representation, especially in international economic  fora. As long as single EU representation is not achieved,  EU members represented in international organizations  should previously coordinate their positions and defend  them unanimously.  This could be done by setting up a European forecasting  and analytical unit, as part of the European External Action Service and working in close cooperation with national centres under the principle of shared intelligence.  Such a unit would help focus attention on the need to  continuously revisit current policies. In addition, a European diplomatic academy would contribute to a sense  of common diplomatic culture.  37

THE EU AND ITS CITIZENS Throughout the history of European integration, the relationship between the Union and its citizens was mostly  characterised by a "passive consensus". However, in  recent years this relationship has begun to change. Europeans have become more demanding of the EU and also  more critical of its performance, casting doubts on the  legitimacy of the European project. This was illustrated  with a bang in the negative referenda which took place  in France and the Netherlands, and subsequently in Ireland. Public ownership of the EU will only return when  our populations are confident that their values and  interests are better served by the Union. Strengthening  this sense of ownership must become the driving force  of all our collective action. ercises its powers according to its respective statutory  responsibility. As such, the system is designed to create  the conditions in which Member States ­ irrespective of  their size, population or economic weight - can grow  together, while respecting their national cultures, languages, religions and regional and local characteristics.  At the same time, the system respects the sovereign  right of Member States to decide on the modalities for  the devolution of power within their own borders.  The availability of multiple entry points through which  citizens can engage with the legislative process should  provide the EU with the legitimacy and flexibility it needs  to address the challenges arising from globalisation in  a digital, interdependent, network-oriented and open  society. However, multi-level governance will not provide  the public with a sense of ownership automatically. It is  a complex system, which needs to be harnessed, nurtured and above all communicated to the public. Taking good governance seriously: sharing,  explaining and delivering  Delivering "good governance" is by far the EU's most  powerful means of ensuring the continuous commitment and engagement of its citizens. Underpinned by  the principles of openness, participation, power sharing, accountability, partnership and effectiveness, good  governance must also conform to the principle of "subsidiarity" ­ the notion that decisions should be taken at  the most effective level and as close as possible to the  citizen.  There is consequently a strong need for more transparency and accuracy in the way we communicate EU policy-making. The image of the EU which is conveyed to  the public must be balanced, reflecting both strengths  and weaknesses, rather than an idealised or overly pessimistic account. Instead of focusing on a communication  policy which sometimes verges on propaganda, it would  be preferable to  communicate on policies, explaining  frankly what is at stake and the different options available. Not least, Member States must be accountable for  what they do in Brussels and for what they do to implement EU decisions.  The EU endeavours to deliver on these principles  through a system of `multi-level governance', where  competences are shared ­ rather than split ­ between  various levels of authority. In practice, multi-level governance is a system of agreed, binding and cross-cutting  networks that operate between localities, regions, national authorities and EU institutions, as well as between  labour and business associations and other non-governmental organisations. By working through these  networks, and within their own communities and municipalities, European citizens can have a say in areas of  importance for the future of the EU. Yet, at the end of the day, good governance will be  judged by its results. The EU has already brought numerous benefits to the lives of its citizens ­ for instance  through the Euro, cohesion policy, common agricultural  policy, Schengen ­ even if the credit for these achievements is not always attributed to the EU. But there is  still a lot of work to be done. Surveys consistently show  that the public has high expectations of the EU in such  sensitive policy areas as security, terrorism, energy and  climate change as well as foreign policy. The EU should  rise to this challenge by developing new objectives and  In a multi-level governance system, each level of authority ­ the European, national, regional and local ­ ex 39

a more results-oriented rationale. In short, it must avoid  rhetoric and explain in plain language how it adds value  to its citizens' lives. have more knowledge about EU policies; above all  they must be able to identify with European politicians. For future European parliamentary elections,  the EU's political parties should present truly European  programmes and choose candidates for the post of  Commission president. Using Lisbon's new tools: political citizenship in  practice ·  Ensure more publicity and more transparency. This is  Good governance and a stronger focus on output are  sine qua non needed  both in relation to high-level decisions, such   for citizens to support the EU.  Yet on their  as the appointment of the permanent President of the  European Council and the High Representative, and  in the day-to-day work of the EU. There are numerous  ways of achieving this, including more systematic use  of digital resources (e-governance); the introduction of  a European dimension in public media; and providing  incentives for private media to broadcast programmes  on the EU.  own they might not suffice. In spite of all the EU's past  achievements there is a worrying indifference, if not  disenchantment, towards the European project. We can  no longer ignore this challenge. We need to refresh the  pact between the EU and its citizens by making use of  the entire range of tools provided by the Lisbon Treaty  to galvanise the public's support and participation. The Treaty of Lisbon reinforces the concept of `political  citizenship' by opening up the possibility of a popular  initiative on legislative matters and increasing the role  of national parliaments. Time will show the extent to  which these innovations contribute to the emergence  of a European public space, increase political awareness  and strengthen the legitimacy of the Union. Today, there  is no true European political arena and politics is likely to  remain an essentially national pursuit. But if the Union  is to increase its legitimacy, it must do its utmost to enhance European political citizenship. To this end, the EU  should: ·  Encourage greater European participatory democracy.  Civil society should be consulted as a matter of course  and on an ongoing basis in the legislative process. To  this end, the Economic and Social Committee and the  Committee of Regions should be consulted more systematically by the Commission and the Council. Fostering ownership and identification: a  bottom-up approach If we want citizens to take full ownership of the European project, the EU needs a shared understanding  of its history, its day-to-day realities and its future. The  historical origins of the EU, born out of the ashes of the  Second World War, are well known. This knowledge  must be nurtured and promoted, not only to prevent a  return to the brutality of the past, but also to provide a  reference for the rest of the world.  ·  Develop political rights.  The Lisbon Treaty's current  provisions should be enhanced: firstly, by encouraging  Member States to grant voting rights in national  elec tions to nationals of other Member States after a certain period of residence and tax payments; secondly,  by "Europeanising" European Parliament elections  through the introduction of cross-border lists; and finally, by using national parliaments as conduits for the  public to engage in European political debates. The Lisbon Treaty also provides a comprehensive set of  rights and benefits  for citizens to enjoy in their day-to day life. Based on the principle of non-discrimination,  this `social' dimension of European citizenship includes,  among others, the right to move, reside and work freely  ·  Make elections more meaningful for citizens. Euro pean elections have until now failed to engage the  interest of citizens. If this is to change, citizens must  40

within the territory of the Member States, and the mutual recognition of qualifications. designed and implemented in coordination with Member States, could also offer young people a platform  to contribute to missions of general interest inside and  outside the EU. Unfortunately, protectionist or corporatist reflexes within  Member States still regularly prevent EU citizens from  enjoying these rights. Action should be taken on four  fronts in order to address this problem: We all have multiple identities which include local, regional and national elements. There is no doubt that  these primary forms of identity will remain the key reference points for citizens for a long time to come. But  these elements have to go hand in hand with an emerging `European' identity based on shared understandings  of EU's history, the practical benefits deriving from EU  citizenship, and a common vision of Europe's future and  place in the world. It is only by clearly spelling out the  EU's common agenda and purpose in the 21 ·  Strengthen information services provided by local  authorities to raise public awareness of the rights and  benefits associated with EU citizenship.  ·  Create a specific administrative instrument that would  provide proof of European citizenship for individuals  to use on a voluntary basis in order to access residence, employment and social security rights. st  century  that our citizens will develop a stronger sense of ownership of the European project. ·  Provide citizens with the option of resorting to a Eu ropean legal status (the "28th regime") which would  apply to contractual relations in certain areas of civil  or commercial law alongside the current 27 national  regimes.  ·  Establish a system for evaluating the impact of EU law,  making full use of the Commission's powers in this  respect, and develop measures to strengthen the enforcement and application of EU law at national level.   The European Parliament and national parliaments  should play a leading role in this process.  If properly implemented, these measures will enhance  the public's appreciation for European law and institutions, but they will not in themselves create a "sense of  belonging" to the EU. This can only develop over time,  in particular among Europe's younger generations.  Schools can play a crucial role in fostering identification  with Europe among children, by providing instruction in  European languages, using text books on Europe's common cultural heritage, and offering courses on European  citizenship. Exchange programmes, based on the hugely  successful example of ERASMUS for university students,  should be extended to include primary and secondary  school exchanges as well. A "European civilian service",  41

BUILDING ON THE EU'S STRENGTHS Many people still see 2030 as a date far into the future  and dismiss the validity of predictions. But we should be  under no illusion. The world is experiencing a period of  rapid and far-ranging global transformations which will  continue to have a significant impact on the lives of our  citizens. The last twenty years may have only provided  a hint of what the future has in store. The next twenty  years are bound to accelerate and exacerbate many of  the trends we are witnessing. Think long-term but act  with determination now ­ this message must shape European policy-making in the current age of insecurity. costs and implications of standing still. In short, it needs  to communicate a common vision of how Europe can  secure its future. The choice we face is therefore clear:  build on the strengths of the EU and use its collective  weight to become an assertive and relevant player in the  world, or cultivate fragmentation and contemplate the  possibility of absolute decline in a world where the rules  are defined by those who matter.   In the interest of our citizens! In the coming years, the EU will need to pursue an ambitious agenda. It will need to bring the EU, its Member  States and its citizens closer together; renew Europe's  economic and social model at a time when internal and  external forces challenge its sustainability; create the  knowledge society by empowering the individual; make  the most of changing demographic patterns and immigration; turn energy scarcity and climate change into  opportunities for societal and economic development;  strike the right balance between freedom and security;  and contribute to shaping the world so that Europe's  values and interests are safely taken care of.  Europe's strengths are real. With the biggest market on  earth, a quarter of the world's trade and the donor of  two thirds of development aid, the EU matters. It offers  a joint infrastructure providing citizens with a wide array of rights, services and opportunities. EU policies and  programmes have helped to create an interconnected  policy area spanning communications, transport, social  questions, research and education. By organising and  regulating these so called "common spaces", the EU  acts as an enabler of activities for its citizens, companies  and governments. The EU also inspires positive perceptions. The Union is  one which many aspire to join, either by accession or  immigration. It boasts an excellent quality of life, reflected in some of the highest life expectancy figures in  the world. The EU governance model ­ "governing in  partnership" ­ is an example of effective regionalism:  a common public space with pooled sovereignty and  capacity to define common interests, strong institutions  and the primacy of the rule of law. It has sound underlying strengths: political stability, solid legal foundations,  achievements in social and economic cohesion and rich  cultural and ethnic diversity. A common agenda and vision for Europe's  future These goals and ambitions will require a step change in  the approach of national governments to the EU. Too  often they fail to realise that, in an increasingly interdependent and multi-polar world, their long-term interests  are best served by pursuing them at the European rather  than national level. They have failed to mobilise the support and participation of citizens which is essential to  the legitimacy of the project. More often than not Member States have withdrawn into themselves, focussing  only on their national interests, to the detriment of the  wider European interest. The EU is more than a common market. It is also a union  of values, embodied in a commitment to human rights,  peace, freedom and solidarity. These values have universal significance. With the support of European citizens,  scientists and politicians at all levels, the EU can lead  international efforts to address major global challenges,  The EU urgently needs a shared understanding of how  to realise its ambitious agenda.  It needs to identify the  measures required to adapt to the global era, and the  43

including social cohesion, climate change, sustainable  development, and peace between nations.   Last but not least, the EU has the capacity to think and  act in the long-term interests of European citizens.  Member states are frequently constrained in their actions by day-to-day political realities which militate  against long-term planning. European policy-making is  less prone to these short-term pressures, and thus has  more scope for introducing new proposals. With the  adoption of the Lisbon Treaty, the EU now also has the  tools it needs to put its proposals into action, including  enhanced cooperation and simplified revision procedures. Now more than ever, the EU is able to focus on  the long-term interests and needs of its citizens. So the question before us is this: can we build on the  strengths of the Union to our common advantage? Globalisation and the re-balancing of power in the world  provide an important new rationale for joint EU action.  But only on solid foundations can the EU become an  actor to be reckoned with on the global scene. This  mission requires political courage and collective ambition, solid pragmatism and a clear sense of ideals worth  fighting for. At home and abroad. Let us pave the way.  Together. Now.  44

ACKNOWLEDGEMENTS We, the Members of the Reflection Group, would like to  thank all the individuals and institutions who, in different ways, lent us their invaluable assistance in carrying  out the mission entrusted to us. We should especially  like to thank: The Innaxis Foundation and its Chairman, Carlos Álvarez  Pereira, who kindly provided us with an intranet system  for document consultation and for communication  within the Group. The University of Ljubljana , Chair of Consturction Informatics, for hosting the Goup's Public website.  The Secretariat of the Reflection Group, without whose  dedication and efficient work it would not have been  possible to conduct our proceedings: Ziga Turk, Secretary General; Max Keller-Noëllet, Special Adviser; Nicolás  Pascual de la Parte, Noel White, Eija Kaskimo and Gwen  McLean. Our colleague, Wolfgang Schuster, who, with the assistance of his collaborators in the  city of Stuttgart, generously illustrated our work. Equally important was the collective and individual  support we received from a whole range of non-profit  organisations and associations, think tanks and political  analysts, all specialists in subjects covered by our study:  the BEPA at the European Commission (Brussels), Berkeley University, Bruegel, the Brussels European and Global  Economic Laboratory, the Centre for European Policy  Studies (CEPS) (Brussels), Chatham House (Royal Institute of International Affairs) (London), the Committee  of the Regions, Confrontation Europe (Brussels), Digital  Europe, Brussels, The European Centre at Sciences-Po  (Paris), European Climate Foundation, European Internet  Foundation, European Movement, the European Parliament Committee on Constitutional Affairs, Committee  on Foreign Affairs and Special Committee on the Financial, Economic and Social Crisis, the European Studies  Centre at Oxford University, the European Economic and  Social Committee, the Elcano Royal Institute for International and Strategic Studies (Madrid), ETNO, Brussels,  Eurobarometer at the European Commission (Brussels),  EuropaNova (Paris), the European Council on Foreign Relations, the European Policy Centre (EPC) (Brussels), the  European Union Institute for Security Studies (Paris), the  European Union Stagiaires Programme, Filis (Athens),  the Finnish Institute of International Affairs (Helsinki),  Friends of Europe (Brussels), Fundación Alternativas (Madrid), Fundación CIDOB (Barcelona), Harvard University,  Institute of International Relations (IDIS) (Athens), the  Jean Monnet Network, the Navarino Initiative (Thessaloniki), Notre Europe (Paris), the Lisbon Council (Brussels),  the Andreas Papandreou Institute of Strategic and Development Studies (ISTAME) (Athens), Princeton Univer Our advisers and assistants for their committed and  tireless work: Carlos Westendorp y Cabeza, Special  Adviser to the Chairman, Felipe González Márquez;  Rolands Lappuke, Adviser to the Vice-Chair, Vaira VieFreiberga; Nina Hyvärinen, Adviser to the Vice-Chair,  Jorma Ollila; Jean Ellermann-Kingombe, Adviser to Lykke  Friis; Stephan Petermann, Adviser to Rem Koolhaas;  Elin Burns, Adviser to Richard Lambert; Stefano Grassi,  Adviser to Mario Monti; Gregor Woschnagg, Adviser  to Mr. Rainer Münz; Lars Hoffman, Adviser to Kalypso  Nicolaïdis; Guillaume Klossa, Adviser to Nicole Notat; Alexander Kreher, Adviser to Wolfgang Schuster; Andrzej  Gulczynski, Adviser to Lech Walesa.  All the dignitaries and experts who attended our meetings and generously shared with us their experience  and knowledge: José Manuel Barroso, Ivo Bozon,  Etienne Davignon, Jacques Delors, Nikiforos Diamandouros, Gérard Dumont, Joschka Fischer, Valéry Giscard d'Estaing, Jean Dominique Giuliani, Wim Kok,  Alain Lamassoure, Pascal Lamy, Stephan Leibfried, Lenny  Mendonca, Geoff Mulgan, Jean Pisani-Ferry , Maria João  Rodrigues, André Sapir, Andreas Schleicher, Luc Soete,   Gerhard Stahl, Peter Sutherland, Antonio Vitorino, Nick  Whitney and Jean-Pascal van Ypersele de Strihout.  Olaf Cramme and Elena Jurado from Policy Network in  London, who so diligently drafted and edited the final  Report. 45

sity, Trans-European Policy Studies Association (Brussels),  the University Association for Contemporary European  Studies (UACES) (London).    We would also like to thank our other contributors :  Aymeric Bourdin, Guillaume Borie, Patricia Cadeiras,  Pavlos Eleftheriadis, Jean-François Jamet,  Thomas Klau,  Christian Mandl, Hartmut Mayer, Joaquin Munoz and  Claudia Schrag.  These acknowledgements would not be complete without expressing our gratitude to Javier Solana, former  Secretary General/High Representative for the CFSP,  Pierre de Boissieu, Secretary-General of the Council  of the EU, David Galloway, Head of his Private Office,  Marc Lepoivre, Director-General at the Council of the  EU and the interpreters, translators and other staff of  the Council who did so much to facilitate our work. 46