The Lisbon Review 2010 - Towards A More Competitive Europe - May 2010 - World Economic Forum

The Lisbon Review 2010
Towards a More Competitive Europe?

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ISBN-13: 978-92-95044-82-1
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The Lisbon Review 2010 © 2010 World Economic Forum

The Lisbon Review 2010: Towards a More Competitive Europe?
Preface

Ten years ago, Europe’s leaders set an ambitious goal I wish to thank the authors of The Lisbon Review 2010,
of becoming “the most competitive and dynamic Jennifer Blanke and Stephen Kinnock, for their energy and
knowledge-based economy in the world” by 2010 commitment to producing this study. Appreciation also
through a programme of policy initiatives known as the goes to Robert Greenhill, Managing Director and Chief
Lisbon Strategy. This included competitiveness-enhancing Business Officer at the Forum, and members of the Global
measures such as the creation of an information society Competitiveness Network and Europe and Central Asia
for all, reinforcing European research and development Teams: Thomas Berglund, Carl Björkman, Ciara Browne,
activities, developing a business-friendly start-up Sebastian Bustos, Margareta Drzeniek Hanouz, Thierry
environment, promoting social inclusion and enhancing Geiger, Danil Kerimi, Irene Mia, Sandrine Perrolaz, Carissa
sustainable development. Sahli, Pearl Samandari and Eva Trujillo Herrera.

The recent economic crisis has underscored the Finally, we would like to convey our sincere gratitude
importance of a competitiveness-supporting economic to our network of Partner Institutes worldwide, without
environment to better enable national economies to absorb whose enthusiasm and hard work the annual administration
shocks and ensure solid economic performance going of the Executive Opinion Survey and this Review would
into the future. To this end, the World Economic Forum not be possible.
has published The Lisbon Review every two years since
the European Union first articulated the Lisbon Strategy,
assessing Europe’s progress towards meeting its ambitious
goal. The present – and final – edition takes stock of where
Europe stands in this, the deadline year.
Klaus Schwab
As this Review indicates, there is much variation in Founder and Executive Chairman
performance across the EU member states, with some World Economic Forum
countries performing very well in all areas and others still
lagging behind. While bringing many economic benefits,
the accession of 12 new members since the middle of the
decade has increased this variation. The results show that,
while some progress has been made, much remains to
be achieved in order to fully harness Europe’s economic
potential.

Europe’s leaders are well aware of the need to keep up
the momentum of the reform process beyond the original
deadline of 2010. Therefore, the new Europe 2020 Strategy
will continue to place great emphasis on improving
Europe’s competitiveness and delivering sustainable,
inclusive growth through innovation, education and
improvements to the enterprise environment.

As Europe and the world emerge from the most
significant economic crisis in a half century, accelerating
the reform process articulated through such strategies
will be critical for ensuring that the region gets back to
growth. The World Economic Forum will continue to
monitor and assess Europe’s progress through its ongoing
competitiveness research.


The Lisbon Review 2010:
Towards a More Competitive Europe?
By Jennifer Blanke and Stephen Kinnock, World Economic Forum

Introduction study – the final one in the series – carries out three
types of comparisons. First, it compares the performance
The past decade has been an eventful one for the of individual EU members to provide a sense of which
European Union (EU) from both a political and an countries are making the most progress and which are
economic perspective. Between 2004 and 2007, the lagging behind. It also takes stock of the change in relative
number of member countries almost doubled from 15 to performances of individual countries since the last Lisbon
27, prompting efforts to improve the EU’s efficiency and Review in 2008 to gauge the countries’ relative progress.
democratic legitimacy. Following the failure to adopt a
European Constitution in 2005, political reform finally Second, it assesses the extent to which the 27 EU
materialized in the form of the recently adopted Lisbon member countries are competitive vis-à-vis an
Treaty.1 international standard. The United States provides one key
benchmark, as it is widely seen as among the world’s most
The economic landscape has also seen booms and busts competitive, particularly with regard to market efficiency, 1
over the decade, with Europe plunged over the past two entrepreneurship and innovation, all critical elements of
years into the most significant global economic crisis since the Lisbon Strategy. In addition, we compare the EU’s
the Great Depression. The recent economic difficulties performance with the average performance of five of the
have highlighted the importance of the EU’s “other” most competitive economies in East Asia – Hong Kong
Lisbon effort: the Lisbon Strategy for economic reform. SAR, Japan, Republic of Korea, Singapore and Taiwan,
China – a highly competitive region attracting increasing
The Lisbon process has been a decade-long effort. At attention given the rising importance of Asia in the global
the March 2000 European Council in Lisbon, Portugal, economy.
Europe’s heads of state and government set a 10-year
timeline to make the European Union “the most Third, the study assesses the economic competitiveness
competitive and dynamic knowledge-based economy in of the EU candidates and potential candidate countries,
the world, capable of sustainable economic growth with providing a sense of the challenges they currently face. In
more and better jobs and greater social cohesion.” The addition, we take an enlarged approach, going beyond the
economic crisis has clearly underscored the importance of likely future accession countries to encompass a number
a competitiveness-supporting economic environment to of countries that have adopted European Neighbourhood
better enable national economies to weather these types of Policy Action Plans. Our reason for doing so is that
shocks and to ensure solid economic performance going economic development in these countries is of critical
into the future. importance for the stability of the EU’s greater economic
neighbourhood, both on economic and security grounds.
The objective of the Lisbon Strategy was to improve
Europe’s productivity and competitiveness through This study differs from those that have been regularly
various policy initiatives, building on a number of earlier carried out by the EU or other organizations, such as the
goals. These included the creation of an information Centre for European Reform2 and the EU itself in that
society for all, establishing a European area of research it is largely based on the results of the World Economic
and development, developing a business-friendly start-up Forum’s Executive Opinion Survey (EOS). This survey
environment, completing the single market, establishing is carried out among CEOs and top executives in each
efficient and integrated financial markets, building a of the countries under analysis. The results can therefore
knowledge society, ensuring more and better jobs for be interpreted in large part as the business community’s
Europe, modernizing social protection, promoting social perspective on European countries’ relative performances
inclusion and enhancing sustainable development. in meeting the Lisbon goals. Since business leaders make
many of the investment decisions in their economies,
The World Economic Forum has been carrying out a their perceptions are clearly related to the prospects for
review of Europe’s progress towards these goals every economic development and competitiveness.
two years since the Strategy was articulated. The present



Evolution of the EU’s Growth Strategy Overall, the Commission found that the Lisbon Strategy
has had a positive impact on Europe despite the fact that its
The pursuit of the Lisbon goals over the past decade has main targets will not be reached.9 Specifically, it found that
been complicated by a number of economic and political the Strategy helped to build a general consensus on the
realities. To begin, the goals were formulated during a time reforms needed in the EU in key priority areas, and that it
of economic exuberance, just prior to the dot.com crash at has delivered concrete benefits for citizens and businesses,
the beginning of the decade. In this light, some of the goals such as increased employment (before the present crisis),
as initially formulated were perhaps not entirely realistic a less bureaucratic environment for doing business, greater
within the initial time frame of one decade. choice for consumers and a more sustainable future (e.g.
through lower energy intensity). More generally, the
Second, the accession of 12 new countries since 2004, report asserted that structural reforms carried out within
while offering many economic benefits, raised additional the context of the Lisbon Strategy have made the EU
challenges in meeting the goals given the less advanced economy more resilient and better placed to weather the
state of many of the more recent members.Yet, the main present economic storm.10
challenge in meeting the Lisbon goals has arguably been
a lack of political action across many of the key priority On the other hand, the Commission noted that increased
areas. The apparent lack of political will to push through employment has not always translated into reducing
the necessary reforms has resulted in the Lisbon Process poverty and, indeed, the gap between the best and the
being perceived by many as a failure. worst performing countries is arguably wider in 2010 than
it was in 2000. In addition, the report reiterated its concern
Indeed, already in 2005, the EU carried out a detailed that reforms were implemented at a “slow and uneven”
midterm review of the Lisbon Process, which showed that pace across issue areas and member states.11
not nearly enough progress had been made in most areas in
great part due to a lack of political action and commitment It also found that its effectiveness would have been
at the national level. The general assessment was that the improved through a stronger link between the Lisbon
agenda had been overloaded, with poor coordination and Strategy and other EU instruments and strategies such
conflicting priorities.3 This led the Commission and the as the Stability and Growth Pact. Finally, in line with the
2 European Council to streamline the Lisbon Strategy in the 2005 assessment, the report found that communication of
spring of 2005 to focus specifically on those elements that the Strategy has been a strong weakness, and that a greater
increase growth and jobs, relaunching the process as the focus on articulating the benefits of the reform programme
“Partnership for Growth and Jobs”4 with the social and to the general public would have reinforced the reform
environmental aspects seen as longer- term goals.5 process.12

Further, member states would need to become more The Commission carried out this assessment in the
involved in the Strategy to ensure ownership of the project context of preparing its growth strategy for the next
at the level at which many of the reforms would need to decade, dubbed “Europe 2020”. The idea was to identify
take place, based on three-year cycles.6 Related to this the strengths of the Lisbon Strategy so these could be
point, they also stressed the importance of communicating included in the new growth strategy, as well as to highlight
better with the EU’s citizens to galvanize popular support the weaknesses that should not be repeated. Europe 2020
for the reform process. This process has become known as will focus even further on employment and environmental
Lisbon II.7 sustainability aspects of development. The Europe 2020
Strategy is summarized in Box 1.
Having arrived at the 10-year deadline at the beginning
of 2010, the Commission carried out its own assessment
of the overall successes and failures of the Lisbon Strategy.
Since the goal has been to enhance growth and jobs, the
Commission noted that it is a difficult moment to assess
the Strategy given the effects of the economic cycle and,
specifically, the present economic crisis.

The report therefore noted that any assessment would need
to also consider whether the Lisbon Strategy had a positive
impact on “the pace and quality of reforms at national and
European level … whether the Strategy shaped reform
agendas by forging greater consensus among stakeholders
on challenges and policy responses.”8


Box 1: Europe 2020: Europe’s New Growth Strategy

Given that the Lisbon Agenda is set to expire this year, the EU has been preparing a new 10-year growth strategy
to replace it in an effort to improve the process this time around. This has been termed “Europe 2020”, which
seeks to enhance the delivery of growth and jobs for the next decade. At the heart of the agenda is a goal of “smart,
sustainable, inclusive growth brought about through greater coordination of national and European policy.”

The three priorities of the strategy are:
• Smart growth: developing an economy based on knowledge and innovation
• Sustainable growth: promoting a more resource-efficient, greener and more competitive economy
• Inclusive growth: fostering a high employment economy delivering social and territorial cohesion

Europe 2020 thus places a stronger focus on sustainability than was the case in the Lisbon Agenda, and continues to
stress the development of skills and the digital economy. Specifically, it aims to promote low-carbon industries, invest
in efforts to develop new products, unleash a digital economy and modernize education and training.

Within the plan, five specific targets have been proposed, as follows:
1. Increasing the employment rate to 75%
2. Boosting spending on research and development to 3% of GDP
3. Attaining the EU’s “20/20/20” climate/energy targets (including an increase to 30% of emissions reduction if the
conditions are right)
4. Lifting 20 million people out of poverty
5. Cutting the school dropout rate to below 10% from the current 15% and expanding the share of younger people
with a university degree (from 31% to 40%)

To reinforce the ability to meet these targets, the strategy also identifies seven flagship initiatives the EU should take
to boost growth and employment: 3
1. “Innovation union” to improve framework conditions and access to finance for research and innovation to ensure
that innovative ideas can be turned into products and services that create growth and jobs
2. “Youth on the move” to enhance the performance of education systems and facilitate the entry of young people
into the labour market
3. “A digital agenda for Europe” to speed up the roll-out of high-speed Internet and reap the benefits of a digital
single market for households and firms
4. “Resource-efficient Europe” to help decouple economic growth from the use of resources, support the shift
towards a low-carbon economy, increase the use of renewable energy sources, modernize the transport sector and
promote energy efficiency
5. “An industrial policy for the globalization era” to improve the business environment, notably for SMEs, and to
support the development of a strong and sustainable industrial base able to compete globally
6. “An agenda for new skills and jobs” to modernize labour markets and empower people by developing their skills
throughout the lifecycle with a view to increase labour participation and better match labour supply and demand,
including through labour mobility
7. “European platform against poverty” to ensure social and territorial cohesion such that the benefits of growth and
jobs are widely shared and people experiencing poverty and social exclusion are enabled to live in dignity and
take an active part in society

With regard to implementation, the strategy proposes that governments should agree on national targets that would
take account of conditions in each country while helping the EU as a whole achieves its goals. The Commission
plans to monitor progress and will issue warnings in cases of “inadequate response”. By focusing on fewer areas
and setting clear goals, the hope is that Europe 2020 will be more successful than the strategy of the last decade in
moving Europe to a higher competitiveness level.

Source: http://ec.europa.eu/commission_2010-2014/president/news/documents/pdf/20100303_1_en.pdf



The Lisbon Agenda: Dimensions of Reform The Lisbon Strategy includes a variety of policy measures
to enhance innovation. In particular, the Council
The present analysis is based on the same methodology highlighted the need to “improve the environment for
used in the past four editions of this study, breaking private research investment, R&D partnerships and high
the Lisbon Strategy into eight distinct dimensions that technology start-ups.” Better integration and coordination,
capture the areas highlighted by Europe’s leaders as critical and concerted efforts for research programmes among
for reaching the goal of becoming the world’s most member states were also seen as critical. Further, it was
competitive economy. The eight dimensions are:13 stressed that efforts should be made to retain the EU’s “best
brains” and to attract high-quality researchers from abroad,
as well as to facilitate the mobility of researchers within the
1. Creating an Information Society for All EU.16

This dimension measures the extent to which an In addition, the Council advocated a favourable regulatory
economy has harnessed information and communication environment including a comprehensive and inexpensive
technologies (ICT) for sharing knowledge and enhancing EU-wide patent system. This second Lisbon dimension
the productivity of its industries. ICT has evolved into is captured in the index using measures such as business
the “general purpose technology” of our time,14 given the investment in research and development (the EU has
critical spillovers to other economic sectors and their role set a goal of 3% of GDP for R&D spending, which has
as efficient infrastructure for commercial transactions. been maintained in the new Europe 2020 Strategy),17
the quality of scientific research institutions, the extent of
Countries with companies that aggressively integrate these collaboration in research between universities and industry,
new technologies into their production processes tend to patenting per capita, and the protection of intellectual
see better productivity improvements than others. Further, property and innovation stimulation through government
countries with governments that strongly prioritize the procurement.
adoption of ICTs have often leapfrogged in this direction.
In other words, to create a true information society, all In this area, a root-and-branch reform of the EU’s
stakeholders in the economy (individuals, businesses and Framework Programmes would be extremely helpful.
4 governments) must use these tools. The Framework Programmes are fragmented into a
proliferation of projects, making it difficult to have a strong
Given the importance of creating an information society, impact. A smaller number of larger-scale projects could be
the Lisbon European Council in 2000 stressed that more effective for meeting this particular Lisbon goal.
“businesses and citizens must have access to an inexpensive,
world-class communications infrastructure and a wide
range of services” facilitated by a regulatory framework 3. Liberalization: Completing the Single Market/State Aid and
allowing electronic commerce and the Internet to flourish. Competition Policy
Governments were expected to make “real efforts […]
to exploit new technologies to make information as The “four freedoms” protect the free movement of goods,
accessible as possible.” In the index used in this review, services, capital and labour within the internal market of
this first dimension is captured by variables such as the the European Union. This particular dimension captures
prioritization of ICT by the government, ICT penetration aspects related to the free flow of goods and services, which
rates (Internet, mobile phones), Internet usage by business is critical for the competitiveness of European industry.
and the extent to which students have Internet access in Although much progress has been made in completing the
schools.15 single market for goods, the market remains fragmented,
particularly with regard to services and protected industries.
This dimension of the Lisbon Agenda provides for
information exchange between the strong and weak A reduction in the impediments to trade in services
performers. The Europe 2020 Strategy offers an excellent was proposed, which would have followed a “country
opportunity to enable governments and companies with of origin” principle. However, concerns raised by some
real strengths in this area to advise and guide those with countries about its impact on Europe’s social model led
weaker performances. Europe’s leaders to water down the Services Directive that
was ultimately adopted in December 2006, and was meant
to be fully implemented by December 2009, although
2. Developing a European Area for Innovation, Research and it has not yet been achieved in all countries.18 Ensuring
Development a level playing field for local and foreign investors and
carrying out a proper competition policy are key elements
Innovation is critical, especially for those countries that of liberalization.
have moved very close to the technology frontier, as is the
case of most EU countries. As well as making maximum In this regard, the Council particularly recognized the
use of existing technologies, as discussed in the first importance of reducing state aid to national industries (still
dimension above, these countries must have the necessary practiced in many EU countries, particularly large ones
framework to ensure that they are at the forefront of such as Italy and France) and of “shifting the emphasis
innovation in products and processes. from supporting individual companies or sectors towards


tackling horizontal objectives of Community interest, such improve the allocation of capital across the EU, giving
as employment, regional development, environment and firms increased opportunities to access markets in other
training or research.” member states and carry out business effectively on a cross-
border basis. The EU has a number of policy objectives and
The Internal Market is generally acknowledged to be the specific measures designed to improve the single market for
jewel in the crown of EU policy, and Professor Mario financial services.
Monti’s eagerly awaited review of the internal market
will provide important recommendations about the Some progress has been made across Europe, most notably
future of the single market as the cornerstone of Europe’s within the context of the Financial Services Action Plan,
competitiveness strategy. which set out specific objectives for developing a single
market in financial services. However, the quality of
financial services continues to vary significantly across
4. Building Network Industries: In Telecommunications, EU countries. A report by the European Central Bank
Utilities and Transportation looking specifically at the euro area countries found “that
there is a fair amount of heterogeneity in financial system
Among the Lisbon Strategy’s measures for improving the performance across euro area countries … suggest[ing] that
functioning of markets are actions aimed at liberalizing there appears to be further scope for structural reforms of
and building network industries. These industries, like financial sectors.”20
services discussed above, continue to be fragmented.
The telecommunications and aviation markets have been
liberalized. More recently, after a 15-year process to open 6. Improving the Enterprise Environment: Business Start-ups/
up the postal services sector, the third Postal Directive was Regulatory Framework
passed in February 2008, placing the deadline for member
states to abolish existing legal monopolies on postal Improving the prospects of growth and employment in
services for most countries at the end of 2010, and for the EU also requires improving the overall enterprise
some countries by 2012.19 The successful implementation environment for budding businesses. Critical for achieving
of this directive will be crucial in increasing efficiency in this goal is the overarching regulatory environment.
the sector. For example, the Lisbon Strategy aims to stimulate 5
entrepreneurship by reducing the administrative
With regard to electricity, European consumers have in impediments to doing business in the EU and reducing
theory been able to freely choose their energy supplier distortionary or burdensome taxes.
following the entry into force of EU directives in 2004
and 2007, but many obstacles remain, with a single Another key objective is to facilitate business creation by
European energy market not yet a reality. Building up improving the business start-up environment, in particular
these industries at an EU level would promote greater by making it cheaper and easier to start a business and
efficiency and quality of service, and better support a ensuring access to capital for new businesses. The EU has
competitive economic environment. The index separately taken an important step in this area by recently making
assesses two dimensions of the EU’s network industries: it possible to start a business within a week in most EU
in telecommunications and in the area of utilities and countries, and facilitating the process through a one-stop
transportation. shop.Yet, the enterprise environments vary greatly across
member countries and much remains to be achieved in this
While policy reform and investment in infrastructure have area.
an important part to play in this dimension, it will also be
critical for European business to recognize and act on the
need to restructure business models to better compete in 7. Increasing Social Inclusion: Bringing People to the
the globalized market place. Workforce, Upgrading Skills and Modernizing Social
Protection

5. Creating Efficient and Integrated Financial Services Creating jobs and bringing more people into the
workforce was one of the main tenets of the refocused
The recent turmoil in financial markets around the globe Lisbon II Strategy, with the EU’s target of 70%
and the ensuing economic crisis has focused particular employment (compared with an EU average of 65.9% in
attention on this sector. Despite recent concerns about the 2008, according to Eurostat). This target has been made
excessively high risk-taking of some actors, the financial even more stringent in the Europe 2020 Strategy with a
sector remains critical for the proper functioning of a goal of 75% employment. With a rapidly ageing European
dynamic economy. An efficient financial sector makes population, this is critical for ensuring the ability to pay for
capital available for business investment from such sources growing pension liabilities. This will require high-quality
as credit from a sound banking sector, well-regulated formal education and on-the-job training to ensure that
securities exchanges or venture capital. the population has the necessary skills to compete in the
rapidly changing business environment.
An integrated and properly regulated financial services
market would reduce the cost of accessing capital and



The recent focus on “flexicurity” is an interesting model, Data and Methodology
with the EU learning from the Danish experience of
combining labour market flexibility with generous Country Coverage
unemployment benefits and retraining. Facilitating the
ability of women and older people to remain in or re-enter At the core of the analysis are the 27 current member
the workplace by providing services such as sufficient and countries of the European Union, which are meant to
affordable childcare and training programmes is also vital. be striving towards the Lisbon goals. These are Austria,
Finally, modernizing social protection and dealing directly Belgium, Bulgaria, Cyprus, the Czech Republic,
with issues of social exclusion and poverty are critical to Denmark, Estonia, Finland, France, Germany, Greece,
increasing social inclusion. Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg,
Malta, the Netherlands, Poland, Portugal, Romania, the
Slovak Republic, Slovenia, Spain, Sweden and the United
8. Enhancing Sustainable Development Kingdom. Their performance according to the Lisbon
criteria is compared among each other to assess which are
Ensuring sustainable growth and development is a long- the leaders in achieving the Lisbon goals, and which are the
term Lisbon goal, which was added to the Lisbon Agenda countries lagging behind.
at the Stockholm European Council in March 2001,
and has taken on key importance in the new Europe As in past years, the United States is used as a key
2020 Strategy. This takes account of the extent to which benchmark against which to place the performance of
countries ensure that improvements in the quality of life the EU countries in an international context, as it is
for the present generation proceed steadily and do not considered one of the most competitive economies in the
come at the expense of future generations. world by a variety of assessments.22 In addition, the average
performance of five very competitive East Asian economies
The goals were elaborated in the Council conclusions of – Japan, Hong Kong SAR, Republic of Korea, Singapore
June 2001, singling out four priority areas for attention: and Taiwan, China – is also included. This second
climate change, transport, public health and natural comparison provides a sense of how Europe measures up
resources. The Council invited the business community to this highly dynamic and competitive region, which has
6 “to take part in the development and wider use of new been able to greatly increase its productivity and prosperity
environmentally friendly technologies in sectors such as over recent decades.
energy and transport.” Efforts were to be focused both at
the country level and the centralized EU level. Member As explained above, the competitiveness of non-EU
governments were asked to elaborate their own sustainable Eastern European economies has also been analysed to
development plans, while at the global level, the EU would assess how their performance compares to each other,
“seek to make sustainable development an objective in as well as to the EU average. This analysis concerns 11
bilateral development cooperation and in all international countries: Albania, Armenia, Azerbaijan, Bosnia and
organizations and specialized agencies.”21 Herzegovina, Croatia, Georgia, Macedonia, Montenegro,
Serbia, Turkey and Ukraine.23 For this group, we make
In the index presented in this review, we assess this comparisons with the EU 27 average as well as two of its
dimension by taking into account the stringency and components: the average of the 15 EU member countries
enforcement of environmental legislation, the ratification prior to 2004, and that of the 12 countries that joined
of international environmental treaties and the actual more recently.
quality of the natural environment.
As shown in Table 1, some of these countries are already
The multidimensionality of the Lisbon reform programme official accession candidates for joining the European
reflects the multiple forces driving economic growth and Union in the coming years, including Croatia, Macedonia
development. and Turkey. Others are potential accession countries,
such as Albania and Montenegro.24 Still others are not
scheduled to join the EU but have entered into European
Neighbouring Policy Action Plans, such as Armenia
and Georgia.Yet, the analysis provides valuable insights
regarding the competitiveness of the large majority of the
countries critical for the prosperity and sustainable security
of the greater European region.


Table 1: Lisbon Review 2010 Coverage the quality of the educational system, the government’s
European Union membership and relationships with selected countries prioritization of information and communications
technologies, etc.).
EU Status/
Economy code Relationships with EU Since The EOS also allows us to capture the critical perspective
EU15 of business leaders on the state of their operating
Austria AT Member € 1995 environments on a variety of issues. Most of the hard data
Belgium BE Member € 1952 dates from the end of 2009, which is the most recent end-
Denmark DK Member 1973 of-year data available. The EOS was carried out in the
Finland FI Member € 1995 springs of 2008 and 2009.25
France FR Member € 1952
Germany DE Member € 1952 The overall Lisbon scores for each country are calculated
Greece EL Member € 1981 as an unweighted average of the individual scores in the
Ireland IE Member € 1973 eight dimensions. We have maintained the same overall
Italy IT Member € 1952 index model as in the 2008 Lisbon Review, which makes
Luxembourg LU Member € 1952
it possible to carry out inter-year comparisons. The scores
Netherlands NL Member € 1952
and rankings of the countries covered by the review are
Portugal PT Member € 1986
extracted from a database covering a total of 133 countries.
Spain ES Member € 1986
The precise structure of the index, including details on
Sweden SE Member 1995
United Kingdom UK Member 1973
the specific hard and survey data used in making the
calculations, is shown in Appendix A of this review.
EU Accession 12
Bulgaria BG Member 2007
Cyprus CY Member € 2004 Table 2: Rankings and Scores of EU Countries 2010 and 2008
Czech Republic CZ Member 2004
Lisbon Review Index
Estonia EE Member 2004
Economy Rank 2010 Score Rank 2008
Hungary HU Member 2004
Latvia LV Member 2004 Sweden 1 5.83 1
Lithuania LT Member 2004 Finland 2 5.72 3
7
Malta MT Member € 2004
Denmark 3 5.61 2
Poland PL Member 2004
Romania RO Member 2007 Netherlands 4 5.51 4
Slovak Republic SK Member € 2004 Luxembourg 5 5.43 7
Slovenia SI Member € 2004 Germany 6 5.39 6

Croatia Candidate country 2004 Austria 7 5.39 5
Macedonia, FYR Candidate country 2005 France 8 5.22 8
Turkey Candidate country 1999
United Kingdom 9 5.15 9
Albania Potential candidate1 2006 Belgium 10 5.15 10
Bosnia and Herzegovina Potential candidate1 2008
Ireland 11 5.00 11
Montenegro Potential candidate1 2007
Serbia Potential candidate1 2008 Estonia 12 4.96 12

Cyprus 13 4.83 13
Armenia ENP2 2006
Azerbaijan ENP2 2006 Slovenia 14 4.79 15

Georgia ENP2 2006 Czech Republic 15 4.71 16
Ukraine ENP2 2005 Portugal 16 4.70 14

Malta 17 4.58 18
€ Member of the Eurozone
1
Signed a Stabilization and Association Agreement (SAA) Spain 18 4.53 17
2
Adopted a European Neighbourhood Policy (ENP) Action Plan Slovak Republic 19 4.45 20

Source: European Commission Lithuania 20 4.39 19

Hungary 21 4.28 22

Latvia 22 4.21 21
Calculating the Lisbon Scores
Greece 23 4.18 23

Poland 24 4.07 26
The assessment of Europe’s competitiveness is based on
publicly available hard data from respected institutions Italy 25 4.03 24
(such as Internet penetration rates, unemployment rates, Romania 26 3.96 25
etc.) and data from the World Economic Forum’s Executive Bulgaria 27 3.77 27
Opinion Survey (EOS). The EOS is a survey of business
EU 27 average 4.81
leaders, conducted annually in over 130 countries, which
United States 5.27
provides data for a variety of qualitative issues for which
hard data sources are scarce or frequently nonexistent (e.g. East Asia 5.28



The Lisbon Review Rankings 2010 This year there has been a slight improvement among
a number of the more recent member countries, with
Performance of the EU27 Slovenia, the Czech Republic, Malta, the Slovak Republic
and Hungary each moving up by one rank, and Poland
Table 2 shows this year’s rankings and scores of the 27 moving up by two ranks to 24th, notably displacing Italy
EU member countries, as well as their 2008 rankings for in the overall ranking. On the other hand, Lithuania, Latvia
comparison.The scores are on a scale from one to seven, and Romania see a slight weakening, each going down by
with larger values indicating stronger performance. one rank since 2008.

The Nordic countries continue to dominate the rankings, More generally, the table shows a wide disparity in
with Sweden holding the leading position for the second performances across the 27 member countries, with scores
year in a row, followed by Finland and Denmark. Finland ranging from 3.77 out of a maximum of 7 for Bulgaria, up
has displaced Denmark this year for the second-place spot. to 5.83 for Sweden.
The Nordic countries have always been the top three
performers in all five editions of the Lisbon Review, as Figure 1: Score Dispersion among EU Countries
shown in Table 3.
1 7

This stability is also seen among the top-10 performers Information
3.5 6.2
as a whole, which have been the same since 2002, with Society

some slight movements among the ranks.26 Specifically,
Innovation and
this year Luxembourg has moved up by two places to R&D
3.1 6.1

5th, while Austria falls to 7th, with the two countries in
effect swapping places. All other top-10 rankings have not Liberalization 3.8 5.6

changed since the 2008 edition.
Network
4.1 6.5
Industries
Outside the top 10, among the pre-2004 accession wave
8 countries, we see a slight weakening in the performance Financial
3.8 5.9
of the southern European countries with Portugal (down Services

by two places) and Spain and Italy (each down by one
place), placed at 16th, 18th and 25th, respectively. Indeed, Enterprise
3.5 5.4

among the more recent members, it is notable that the
top performers such as Estonia, Cyprus, Slovenia and the Social Inclusion 3.5 5.6

Czech Republic outperform not only most other recent
members, but also the southern European longer-standing Sustainable
3.8 6.6
Development
members.
Highest/lowest score EU 27 Average United States

Table 3: Historical Top 10 in the Lisbon Review (2002-2010)

Lisbon Review Ranking

Country 2010 2008 2006 2004 2002

Sweden 1 1 3 3 2

Finland 2 3 2 1 1

Denmark 3 2 1 2 3

Netherlands 4 4 4 5 5

Luxembourg 5 7 8 7 n/a

Germany 6 6 5 6 6

Austria 7 5 7 9 7

France 8 8 9 8 9

United Kingdom 9 9 6 4 4

Belgium 10 10 10 10 8

Source: Lisbon Review, various editions.
Note that Luxembourg was not included in the 2002 edition for lack of survey data that year.


This disparity is clearly shown in Figure 1, which Table 4 presents the details driving the overall ranks and
presents the score dispersion between the best and worst scores of the 27 EU member countries in each of the
performing EU member countries on each of the eight eight Lisbon dimensions. As the table shows, the countries
dimensions that comprise the index. The black dash at the top of the overall ranking tend to do well across all
represents the EU average and the white dot represents the dimensions measured. Table 5 provides an overview of the
US score. top-three performers in each pillar, which highlights the
areas where individual countries do particularly well.
The figure shows that there is a large range in
performances, particularly in four areas: information society, Sweden is ranked 1st in five dimensions and is among
innovation and R&D, network industries and sustainable the top three ranked countries in three other dimensions.
development. This is of significant concern given that these Similarly, Finland is ranked among the top three five times,
areas remain critical for the EU even in its more recent and Denmark does so three times. These countries do
Europe 2020 Strategy, as described in Box 1. The narrowest particularly well as a group in the areas of developing an
gaps are found in liberalization and the enterprise information society, innovation and R&D, social inclusion
environment, areas where EU rules on the single market and sustainable development, and they are never ranked
seem to have had a stronger consolidating effect in terms of below 8th in any of the Lisbon dimensions.
performances.
In terms of developing an information society, the
The figure also shows that the best performers in the Nordics have achieved very high ICT penetration rates
EU consistently outperform even the US. Further, in with strong use by individuals and businesses, buttressed
the sustainable development dimension, an area that will by supportive government policies prioritizing ICT use.
continue to receive strong focus in the new Europe 2020 Their innovative capacity is also a clear strength, with
Strategy, even the average EU27 performance is better than strong comparative performances on a European as well
that of the US. as a world scale in areas such as company spending on
R&D, the aggressiveness of the private sector in adopting
new technologies and the extent of collaboration between
universities and companies in innovation and discovery. 9
Table 4: Rankings and Scores of EU Countries
Subindexes
Final
Index Information Innovation and Network Financial Enterprise Social Sustainable
Liberalization
Society R&D Industries Services Environment Inclusion Development
Economy Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score Rank Score
Sweden 1 5.83 1 6.20 2 5.64 1 5.55 2 6.19 1 5.93 4 5.15 3 5.42 1 6.57
Finland 2 5.72 5 5.51 1 6.12 7 5.26 8 5.96 3 5.86 2 5.27 2 5.59 3 6.19
Denmark 3 5.61 3 5.74 3 5.33 5 5.39 4 6.09 6 5.60 7 5.05 1 5.64 5 6.07
Netherlands 4 5.51 2 5.81 5 4.94 2 5.54 7 5.98 7 5.54 6 5.06 4 5.31 6 5.91
Luxembourg 5 5.43 7 5.43 12 4.17 6 5.29 5 6.08 2 5.90 1 5.43 5 5.31 7 5.87
Germany 6 5.39 9 5.27 4 5.10 4 5.39 1 6.49 9 5.36 17 4.50 9 4.85 2 6.19
Austria 7 5.39 6 5.45 8 4.65 3 5.42 6 6.08 4 5.70 10 4.79 8 4.91 4 6.14
France 8 5.22 10 5.21 9 4.62 11 5.10 3 6.17 5 5.61 12 4.78 13 4.71 9 5.54
United Kingdom 9 5.15 4 5.61 7 4.71 10 5.12 9 5.77 14 5.10 11 4.78 14 4.61 10 5.48
Belgium 10 5.15 14 4.71 6 4.78 8 5.22 11 5.76 11 5.28 8 4.88 6 5.08 11 5.46
Ireland 11 5.00 13 4.78 10 4.47 9 5.20 18 5.24 17 4.87 5 5.08 11 4.72 8 5.64
Estonia 12 4.96 8 5.33 14 3.99 14 4.84 13 5.47 10 5.33 3 5.17 16 4.47 14 5.07
Cyprus 13 4.83 16 4.44 21 3.71 13 4.91 10 5.76 12 5.28 13 4.73 7 5.03 18 4.77
Slovenia 14 4.79 12 4.84 11 4.28 18 4.49 15 5.37 19 4.75 15 4.61 15 4.56 12 5.43
Czech Republic 15 4.71 17 4.43 13 4.02 12 4.96 20 5.11 15 5.00 19 4.47 10 4.73 16 4.96
Portugal 16 4.70 15 4.64 16 3.92 19 4.47 12 5.69 16 4.97 16 4.50 17 4.18 13 5.20
Malta 17 4.58 11 5.15 23 3.50 16 4.73 16 5.30 8 5.49 23 3.99 12 4.71 27 3.80
Spain 18 4.53 20 4.21 15 3.93 15 4.73 14 5.37 13 5.10 25 3.94 21 3.92 15 5.06
Slovak Republic 19 4.45 18 4.42 25 3.46 17 4.70 23 4.64 20 4.75 9 4.81 18 3.98 17 4.86
Lithuania 20 4.39 19 4.38 20 3.76 24 4.15 19 5.11 21 4.58 18 4.49 20 3.93 19 4.73
Hungary 21 4.28 22 4.12 18 3.79 21 4.35 21 4.85 23 4.42 20 4.40 23 3.79 22 4.50
Latvia 22 4.21 21 4.15 24 3.48 22 4.21 24 4.57 26 4.27 14 4.72 26 3.61 20 4.68
Greece 23 4.18 25 3.55 17 3.81 25 4.10 17 5.25 18 4.81 26 3.62 24 3.75 21 4.54
Poland 24 4.07 26 3.50 22 3.64 20 4.44 26 4.12 22 4.46 24 3.95 19 3.96 23 4.49
Italy 25 4.03 23 3.74 19 3.78 23 4.16 22 4.81 24 4.31 27 3.54 25 3.64 24 4.28
Romania 26 3.96 27 3.48 26 3.37 26 4.04 27 4.05 25 4.30 21 4.38 22 3.89 25 4.19
Bulgaria 27 3.77 24 3.63 27 3.12 27 3.82 25 4.23 27 3.80 22 4.22 27 3.55 26 3.82
EU 27 - 4.81 - 4.73 - 4.23 - 4.80 - 5.39 - 5.05 - 4.60 - 4.51 - 5.16
United States - 5.27 - 5.79 - 6.03 - 5.05 - 5.73 - 5.22 - 5.07 - 4.71 - 4.59
East Asia - 5.28 - 5.56 - 5.24 - 5.10 - 6.06 - 5.41 - 5.17 - 4.93 - 4.74



Table 5: Top Three EU Performers in the Lisbon Dimensions
Lisbon Review Dimensions

3. Liberalization

8. Sustainable
1. Information

Development
2. Innovation

6. Enterprise
Environment
5. Financial
4. Network
Industries

Inclusion
and R&D

Services
Number of

7. Social
Society
times ranked
Country Final Index in top three

Sweden 1 7 1 2 1 2 1 4 3 1

Finland 2 5 5 1 7 8 3 2 2 3

Denmark 3 3 3 3 5 4 6 7 1 5

Netherlands 4 2 2 5 2 7 7 6 4 6

Luxembourg 5 2 7 12 6 5 2 1 5 7

Germany 6 2 9 4 4 1 9 17 9 2

Austria 7 1 6 8 3 6 4 10 8 4

France 8 1 10 9 11 3 5 12 13 9

Estonia 12 1 8 14 14 13 10 3 16 14

These innovation “inputs” provide a clear return in terms among the top five of all EU members. On the other
of the level of patenting per capita, an area where the hand, the country is ranked outside the top 10 in three
Nordics outperform most of the world (with Finland, key areas: liberalization, the enterprise environment and
Sweden and Denmark ranked worldwide at 6th, 8th and social inclusion, where it is ranked 11th, 12th and 13th,
15th, respectively). respectively.

They also do well in the human resources and The United Kingdom and Belgium round out the top-
environmental areas. With regard to social inclusion, 10 ranking at 9th and 10th, respectively. As shown by
they hold the top three spots in the EU. They have their absence from Table 5, these two countries are not
10 achieved relatively low levels of unemployment and have ranked among the top-three countries in any of the eight
high female participation rates in the workforce. Their dimensions, although they do, of course, have comparative
workforces are supported by formal educational systems strengths in specific areas. Belgium’s main strengths are
as well as professional training programmes that ensure in the areas of innovation and R&D, and social inclusion
ongoing upgrading of the skills needed to perform in a (ranked 6th in both dimensions), with its greatest weakness
rapidly changing environment. the development of an information society (ranked 14th).

Their economic systems have been the most effective Belgium’s performance stands in some contrast with that
worldwide in reducing income inequality and poverty over of the United Kingdom, receiving the highest mark for
the years. The Nordics are also world leaders in terms of its information society (ranked 4th), and with its weakest
working towards sustainable development, with strong and performances in the areas of social inclusion and financial
enforced environmental legislation effectively protecting services (ranked 14th in both dimensions).
the environment, and placing these countries in a natural
leadership position amid international discussions on The UK’s low rank in financial services has become
environmental issues. increasingly pronounced over the past few years, falling
from 1st in this dimension in the 2006 Lisbon Review to
The Netherlands follows closely in the ranking at 4th 11th in 2008 and finally to 14th in the present assessment,
overall, with particular strengths in its information society, no doubt related to weaknesses revealed and exacerbated
and the extent of liberalization (with the economy by the recent financial crisis. In particular, there have been
characterized by significant competition), ranked 2nd in deteriorations in the access to capital and the perceived
both areas.27 Luxembourg, Germany and Austria follow in soundness of the banking sector over recent years. This has
the rankings, holding the 5th through the 7th places. been an important contributing factor to the UK’s fall in
the overall Lisbon Review rankings over the years, falling
Luxembourg is ranked 1st for its enterprise environment from 4th position in 2002 eventually down to its present
and a strong 2nd for financial services, while Germany 10th position.
has particularly strong network industries (ranked 1st) and
an environment that is conducive to ensuring sustainable Table 5 also includes Estonia among the countries
development (ranked 2nd). Austria’s performance remains demonstrating a top-three performance, the first time
somewhat more mixed, with the extent of liberalization that one of the more recent members has been included
the economy’s greatest strength. on this list, based on its strong enterprise environment.
Estonia’s information society is also ranked among the
France maintains its position at 8th place, ranked among top-10 countries (8th), which has been the result of a
the top-three countries only for its network industries, targeted government effort over many years to provide
with excellent transport, energy and telecommunications the population with easy access to the Internet and related
infrastructure. France’s financial services are also ranked services.


Among other recent members, many are found in the Comparing the EU to the United States and East Asia
middle of the ranking, and there are some clear areas of
strength in individual countries. For example, Cyprus and At the bottom of Table 4 are the scores and rankings for
the Czech Republic are ranked 7th and 10th, respectively, the United States and the average of five competitive East
for social inclusion based in large part on their high-quality Asian economies, which are included for comparison. As
educational systems. Malta is ranked 8th for financial the table shows, the EU27 overall score of 4.81 lags behind
services and the Slovak Republic a very reasonable 9th for both those of the United States (5.27) and East Asia (5.28).
the quality of its enterprise environment. Indeed, the EU27 score lags behind that of the others in all
eight Lisbon dimensions with one exception – sustainable
Among the southern European countries, there is some development.
divergence between Portugal and Spain on one hand,
which are found at the lower middle of the ranking at 16th As Table 6 shows, the EU27 on average is outperformed
and 18th, respectively, and Greece and Italy on the other by the US and East Asia in seven of the eight dimensions
hand, which are among the poorest performers, at 23rd and most subdimensions, with the largest gap in the area
and 25th. In particular, Portugal is rated among the top half of innovation and R&D, a critical driver of growth and
of countries for its network industries (12th) and efforts competitiveness for countries at more advanced stages of
towards sustainable development (13th), while Spain is development. The one overall dimension, as mentioned
ranked 13th for its financial services. above, where the EU27 on average outperform the US and
East Asia is in sustainable development. Beyond this area,
Greece and Italy tend to do more poorly across the the EU27 outperforms the US in just two subdimensions:
board with slightly better performances in areas such as modernizing social protection, and telecommunications by
innovation and R&D, but with notable weaknesses in a small margin.
both countries in the areas of liberalization, the enterprise
environment and social inclusion. Greece has notably seen However, while the EU as a whole is outperformed by
a weakening since the past edition in measures of social these comparators overall, the detailed performance of
inclusion, dropping from 22nd to 24th in this area.28 individual countries across specific dimensions provides a
more nuanced picture. Indeed, the significant diversity in 11
Romania and Bulgaria, the two most recent members competitiveness levels within the EU27 is shown both in
of the EU, round out the bottom of the ranking, with Figure 1 and in the “diamond” charts in Appendix B of this
weaknesses across most areas, most particularly innovation review.
and R&D and liberalization, where they hold the
bottom two places out of all countries, with low R&D The charts provide a visual representation of the
spending, companies that are not aggressive in adopting scores shown in Table 4, comparing individual country
new technologies, significant regulatory burdens and performances with the US and East Asia benchmarks. A
government policy-making that is considered among the country with a perfect performance in any of the eight
least transparent in the world.

Table 6: Lisbon Scores: Comparing the EU with the United States and East Asia

EU 27 EU 27 average relative EU 27 average relative
Lisbon Dimension United States East Asia
average to the US to East Asia
1. Information society 4.73 5.79 5.56 -1.06 -0.83

2. Innovation and R&D 4.23 6.03 5.24 -1.81 -1.01

3. Liberalization 4.80 5.05 5.10 -0.25 -0.30

4. Network industries 5.39 5.73 6.06 -0.34 -0.67

Telecommunications 5.62 5.54 5.89 0.07 -0.27

Utilities and transport 5.16 5.91 6.24 -0.75 -1.07

5. Financial services 5.05 5.22 5.41 -0.17 -0.36

6. Enterprise 4.60 5.07 5.17 -0.47 -0.56

Business start-up environment 4.80 5.31 5.14 -0.51 -0.33

Regulatory environment 4.41 4.83 5.20 -0.42 -0.79

7. Social inclusion 4.51 4.71 4.93 -0.20 -0.42

Returning people to the workforce 4.97 5.39 5.41 -0.42 -0.45

Upgrading skills 4.47 5.09 5.09 -0.62 -0.61

Modernising social protection 4.10 3.66 4.30 0.44 -0.19

8. Sustainable development 5.16 4.59 4.74 0.57 0.42

Final Index Score 4.81 5.27 5.28 -0.46 -0.47


The Lisbon Review 2010 - Towards A More Competitive Europe - May 2010 - World Economic Forum

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