The European Union summit in Barcelona will test the credibility of its economic-reform programme

WHAT could be more pleasant than Barcelona in spring, with a stroll down the Ramblas or tapas by the port? Sadly, what awaits the EU's leaders heading for their summit in Barcelona on March 15th and 16th is a lengthy discussion of electricity liberalisation in an airless conference room. And if that is not a gloomy enough prospect, there is more to cloud out any sunny optimism: the ten-year rolling programme of economic reforms that they unveiled with great fanfare in Lisbon two years ago is in deep trouble.

The “Lisbon process” was launched in large part because the EU's countries recognised they were falling behind the United States economically. In 1991 America's GDP per person was 42% greater than the EU average; by the end of 2001 the gap had widened to 54%. At Lisbon, Europeans were promised a programme of economic reforms that would make the EU the “most competitive and dynamic knowledge-based economy in the world” by 2010. Yet recently Frits Bolkestein, the EU's commissioner for the internal market, declared that “most of the key reforms announced at Lisbon are still on paper, waiting to be approved and implemented. The credibility of all community institutions is at stake. We can't keep on saying the cheque is in the mail.” Two years on, says the frustrated Mr Bolkestein, there is still “more poetry than motion”.

He highlights two reforms that were meant to have been wrapped up by the end of last year but which remain stuck. Efforts to create an EU-wide system of patent law, called a “community patent”, have foundered on arguments about which languages patents can be filed in. This issue is so sensitive and so bound up with national pride that the Barcelona summiteers will not even try to solve it. And plans to simplify EU rules on public procurement, which accounts for some 15% of the countries' aggregate GDP, have stalled. These were meant to have been approved last year. Efforts to create a pan-European code for corporate takeovers likewise came to grief last year, after 12 years, when they ran into opposition in Germany and in the European Parliament. The European Commission has appointed some “wise men” to try to find a way forward—to little effect so far.



Even genuine advances for economic liberalisation threaten to be offset by a new wave of labour-market regulation


But the outlook is not entirely bleak. A bundle of measures to liberalise telecoms markets was pushed through last year; limited liberalisation of Europe's postal services has been agreed on; and a financial-services “action plan” is making progress, raising hopes that European companies will soon have better access to more capital (see article). Meanwhile the commission remains pretty strict in upholding the existing laws of the EU's internal market. It started investigations this week of possible illegal state aid from Greece to Olympic Airways. A thumbs-down from the commission could bankrupt the Greek national carrier.

Yet even genuine advances for economic liberalisation threaten to be offset by a new wave of labour-market regulation which runs counter to Lisbon's professed desire to cut unemployment. The EU is working on a new directive to ensure that temporary workers hired through agencies receive the same pay and conditions as equivalent full-time workers.

If the Barcelona summit fails to give liberalisation a boost, then it is likely that the outside world will stop listening to the high-sounding promises made in Lisbon two years ago. For that reason, if no other, European leaders will want to come up with something they can point to as an achievement.



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Hence their concentration on electricity liberalisation. This issue has assumed a totemic significance because of France's stubborn refusal to free its markets and expose EDF, its state-owned national champion, to competition. Just ten days before the summit, France blocked a draft deal on electricity that was acceptable to all the other 14 EU countries. But a compromise may be possible in Barcelona, whereby France would agree to open up its market for business users of electricity, while allowing EDF to continue to overcharge householders. Hardly a victory for ordinary Europeans, but liberalisers desperate for any good news will doubtless talk up any such deal.

Meanwhile, events many miles from Barcelona may deepen the gloom at the summit. Europeans have long been urged to look to the United States for lessons in the benefits of liberalisation. America's decision to impose tariffs on steel imports, including those from Europe, will encourage Europe's powerful anti-globalisation movement to believe that the tide of the argument is now turning its way.