Annual Report 2004

exclusively from structural improvements.
Under the stability program,
the tax ratio of 40% of GDP is to
be attained already in 2006.
Along with a new fiscal sharing
scheme for the years 2005 through
2008, a new Austrian stability pact
was adopted to support budget coordination.
Within the framework of
fiscal sharing, further improvements
(aboveallforlocalgovernment)and
simplification measures as well as
the further procedure for the second
stage of the administrative reform
package were agreed. Moreover, the
three levels of government agreed
on introducing additional revenueraising
measures worth 0.12% of
GDP to finance the health care deficit
(posted by the social security and
hospital sectors) and on drawing up
an expenditure cut package of the
same magnitude.
The debt ratio is projected to decline
by 5.1 percentage points from
2004 and thus fall below the limit
of 60% of GDP by 2008, among
other things thanks to rebounding
primary surpluses and contracting
positive interest rate/growth differentials.
Mid-Term Review —
Further Massive Reforms
RequiredtoImplement
Lisbon Strategy
In 2004, a high-level group headed by
Wim Kok performed a mid-term
review of the Lisbon strategy, 3 the
reform program aimed at making
Europe the most dynamic and competitive
knowledge-based economy
in the world. The strategy defines
employment, research, internal market,
environmental sustainability and
social goals to be reached by 2010.
The Kok report 4 criticizes the disappointing
delivery of the Lisbon goals
of growth and employment. While
some progress was observable and
EuropeÕs social model had a much
better record than its U.S. counterpart
in important areas (poverty, infant
mortality rates, life expectancy),
productivity growth in Europe had
declined and so far, the political will
to implement reforms was lacking.
Overall, there was little improvement
in many areas, such as employment
or research. Some areas in
some countries represented exceptions,
e.g. achievements toward the
knowledge society in Finland and
Sweden, the reduction of unemployment
in Italy and productivity gains
in Ireland. The unfavorable framework
conditions of economic stagnation
and global political uncertainty
represented obstacles to reaching
the Lisbon goals. Moreover, the EUÕs
focus was on enlargement and the
Constitution for Europe.
The EU scored some progress in
reaching the employment rate target
of 70%. Despite economic stagnation,
Italy succeeded in lowering
unemployment from nearly 12% to
8%; the employment rate for Europe
as a whole advanced by 1 percentage
point to just under 65% from 2000.
Liberalization has made strides in
most European network industries,
such as telecommunications, energy
(gas and electricity), the postal serv-
3 The 32 nd Economics Conference of the OeNB on May 27 and 28, 2004, also dealt with this topic: ÒGrowth and
Stability in the EU: Perspectives from the Lisbon Agenda.Ó (The conference proceedings may be found on the
OeNBÕs website at www.oenb.at.)
4 See: Facing the challenge. The Lisbon strategy for growth and employment. Report from the High Level Group
chaired by Wim Kok. Luxembourg: Office for Official Publications of the European Communities. November
2004.
The Eurosystem Secures Price Stability
Kok Report is critical
Progress in employment,
network industries
and financial
services
Annual Report 2004 ×
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