EU hails reforms as productivity growth overtakes US

Nov 5, 2007, 16:45 GMT

Brussels - European Union officials hailed the 27-member bloc's economic reforms on Monday as they announced that its growth in industrial productivity had outstripped that of the United States for the first time in years.

'In 2006, productivity grew more strongly in the EU than in the US,' a statement from the EU's executive, the Commission, said before adding that 'the Commission hopes this will be the start of a long-term trend.'

'The reforms under the revised Lisbon strategy for growth and jobs are starting to bear fruit. European industries have managed to maintain their positions on global markets, contrary to American and Japanese producers,' EU Commissioner Guenter Verheugen added.

According to the EU's annual competitiveness report, released on Monday, worker productivity in the bloc increased by 1.5 per cent in 2006 - the highest level so far this millennium, and a tenth of a point better than the rate in the US over the same period.

The EU's share of world trading markets stayed roughly level, while US and Japanese shares both fell, the report added.

In 2000, the EU launched its ambitious 'Lisbon agenda' to become the most competitive economy in the world by 2010.

Hampered by sluggish domestic growth, a slow pace of reforms and an apparent unwillingness among member states and businesses to invest in innovation and education, the Lisbon goals were quickly written off by economists.

However, in recent years member states have begun to implement some reforms, cutting back on red tape and calling on business and academic institutions to pursue more innovation-friendly agendas.

'Research, innovation, training and education policies have strong impacts on competitiveness. Economic reforms that enhance the general business environment and facilitate structural change and reallocation of resources are also crucial,' the report said.

The EU still has a long way to go to become the world's leading economy, however. US industry is still far more efficient, especially in retail and financial services, experts said.

And a report published a month ago pointed out that the EU's top 1,000 investors into research and development spent only half as much on it as the top 1,000 investors in the rest of the world, with the gap continuing to grow.