Dear Colleague

REPORT FROM THE COUNCIL (ECOFIN)

TO THE EUROPEAN COUNCIL IN NICE ON

"STRUCTURAL INDICATORS :

AN INSTRUMENT FOR BETTER STRUCTURAL POLICIES"

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The Council (Ecofin) on 7 November 2000 discussed the report of the Economic Policy Committee on "Structural Indicators: an Instrument for Better Structural Policies" (doc. 13170/1/00 rev 1), which takes full note of the Commission's Communication of the 27 September 2000. As a result of the discussion, the Council

- endorsed the common list of 35 indicators (Annex 1), resulting from an agreement between the Council and the Commission and

- invited the Presidency to inform the European Council of priorities of Member States with regard to future work on indicators and of the possibility to highlight a more limited set of indicators, taken from the agreed list, in order to focus public debate on key messages (Annex 2).

ANNEX 1 :
AGREED list of INDICATORS WHICH WILL BE INCLUDED IN THE SYNTHESIS REPORT NEXT SPRING

General economic background indicators (7 indicators)

a. GDP per capita (in PPS) and real GDP growth rate

b. Energy intensity of the economy

c. Labour productivity (per person employed and per hour worked)

d. Inflation rate

e. Real unit labour cost growth

f. Public balance

g. General government debt

List of 28 indicators

I. Employment

1. Employment rate

2. Employment growth

3. Female employment rate

4. Employment rate of older workers

5. Unemployment rate

6. Tax rate on low-wage earners

7. Life-long learning (adult participation in education and training)

II. Innovation and research

1. Public expenditure on education

2. R&D expenditure

3. ICT expenditure

4. Level of Internet access

5. Patents

6. Exports of high-technology products

7. Venture capital

III. Economic Reform

1. Trade integration

2. Business investment

3. Relative price levels and price convergence

4. Prices in network industries

5. Public procurement

6. Sectoral and ad hoc State aids

7. Capital raised on stock markets

IV. Social Cohesion

1. Distribution of income (income quintile ratio)

2. Poverty rate before and after social transfers

3. Persistence of poverty

4. Jobless households

5. Regional cohesion (variation in unemployment rate across regions)

6. Early school-leavers not in further education or training

7. Long term unemployment

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ANNEX 2 :

NOTE FROM THE PRESIDENCY

ON STRUCTURAL PERFORMANCE INDICATORS

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Overall mandate

At the Lisbon summit, Heads of State and Government underlined that "comprehensive structural improvements are essential to meet ambitious targets for growth, employment and social inclusion". With a view to monitor the progress of Member-States, they expressed the necessity to follow up a set of relevant indicators in this respect. They invited the Council to report by the end of 2000 in order to agree on a set of structural performance indicators which will be included in the synthesis report they mandated the Commission to prepare for the spring European Council in Stockholm.

An agreed Council and Commission list of indicators to be included in the synthesis report next spring

The Commission and the EPC have been keeping exchanging views in close co-operation. As a consequence, there is a great degree of coherence between the lists of indicators set forward in the Commission Communication and in the Council report, although there are some differences on individual indicators. Those were discussed during the 7 November Ecofin meeting, which allowed a consensus to be reached.

The work on indicators is an on-going process. Various Council formations and parts of the Commission services are continuing to develop more appropriate indicators or to improve existing ones. While the list of indicators needs to be stable enough to measure progress over a number of years, this list also needs to be flexible enough to take into account improvements made in various domains. Priorities for indicators to be developed are highlighted in both reports. There is a pressing need, for instance, to develop as soon as possible indicators reflecting the openness and market structure of network industries( 1), as well as regional GDP indicators to be used in the synthesis report prepared by the Commission for the spring European Council. It should be stressed that the presentation of structural indicators in no way prejudges the criteria to be used in the definition of economic and social cohesion.

A small set of headline indicators to focus the public debate

At the Ecofin Council on 7 November, Ministers expressed the wish that a more limited set of indicators, taken from the agreed list, should be highlighted in order to focus public debate on key messages. As a result, in concertation with the Member-States and the Commission, the Presidency selected the following 12 indicators( 2) :

1. GDP per capita and real GDP growth rate

2. Employment rate by gender

3. Employment rate of older workers

4. R&D expenditure

5. Level of Internet access

6. ICT expenditures

7. Prices in network industry

- In telecommunications market

- In electricity market

8. Business investment

9. Capital raised on stock markets

10. Long-term unemployment

11. Regional cohesion (variation in unemployment rate across countries)

12. Early school-leavers not in further education or training

A set of indicators that provides a valuable tool for co-ordinating, leading and driving forward the Lisbon conclusions

In order to take maximum advantage of this opportunity and to give them political focus, the Presidency believes the Ecofin Council should be requested to consider what areas for further attention the indicators suggest, especially in the field of economic reform. This will allow the Council to adapt its ongoing structural reform agenda and contribute to the elaboration of the key issues paper to be sent to the Stockholm summit.

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SHORT list of INDICATORS PARTICULARLY RELEVANT FOR THE PUBLIC DEBATE FOR HEADS OF STATE AND GOVERNMENT

General economic background indicators	Definition, statistical source
1. GDP per capita and real GDP growth rate	Real GDP per capita in PPS and growth rate of GDP at constant prices, Eurostat, National Accounts

Employment
2. Employment rate by gender	Persons in employment in age bracket 15-64 as % of total population in the same age bracket, Eurostat, Labour Force Survey
3. Employment rate of older workers	Persons in employment aged 55-64 as % of total population in the respective age bracket, Eurostat, Labour Force Survey

Innovation and research
4. R&D expenditure	Total R&D expenditure as % of GDP, Eurostat R&D statistics and OECD
5. Level of Internet access	Internet on-line active accounts (both residential and business users) per 100 inhabitants, European Information Technology Observatory
6. ICT expenditures	ICT expenditures as a percentage of GDP, European Information Technology Observatory (EITO)

Economic Reform
7. Prices in network industries : - Prices in telecommunications market - Prices in electricity market	Consumer price relative to EU-15=100, Commission services, DG INFSO Consumer price excluding taxes, price for 1kWh in euro, Eurostat
8. Business investment	Business investment expenditure as % of GDP, Eurostat, National Accounts
9. Capital raised on stock markets	Capital raised on stock markets as a percentage of GDP, FIBV, ECB statistics

Social Cohesion
10. Long-term unemployment rate	Total long-term unemployed population (> 12 months ; ILO definition) as proportion of total active population, Unemployment Harmonised Series, Eurostat, Labour Force Survey
11. Regional cohesion ( variation in unemployment rate across regions)	Coefficient of variation of unemployment rate at NUTS3 level for regions, Eurostat, Regional Statistics
12. Early school-leavers not in further education or training	Share of people aged 18-24 years with only lower secondary education and not in education, training, Eurostat, Labour Force Survey

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Footnotes:

( 1) These indicators should be finalised by the end of the first semester 2001, at the latest.

( 2) A detailed list, with comprehensive definition and statistical source can be found in annex 2