This paper is the Commission’s 2006 Annual Report on research and technological development activities in the EU. The report is accompanied by a Commission Staff Working Document, which provides more detailed reporting and statistics.

Political achievements: The report finds that the Community’s overall research policy objectives for 2006 have been met namely, completion of the 6 th Framework Programme and the launching of the 7 th Framework Programme. This is a major achievement for European research. It follows four years of preparation and intense negotiations. Collaborative research remains a core activity and most thematic priorities are solidly founded on the experience gained through previous FPs. The themes identified reflect the key fields of knowledge and technology in which research excellence is particularly important for Europe’s to address the social, economic, public health, environmental and industrial challenges of the future, New concepts such as the European Research Council, the Joint Technology Initiatives and large infrastructure investments are of particular interest – together with continuous efforts to fight the “brain drain” and favour the “brain gain” in Europe. Other new elements include exploiting research excellence in convergence regions and risk sharing finance facilities to increase the availability of EIB loans. CORDIS services were fully migrated to the new EUROPA website and revamped to reflect the launching of the 7 th Framework Programme.

Implementation of the 6 th Framework Programme: Most calls for proposals have been published as planned. The most successful schemes include the Marie Curie fellowships and the ERA-NET scheme. In the domain of Life science, Genomics and Biotechnology, major actions are continuing in the European & Developing Countries' Clinical Trials Partnership in the fight against AIDS, tuberculosis and malaria. On food quality and safety, most activities relate to the foundations for the implementation of the Knowledge-Based Bio-Economy (KBBE). Following the Communication “Towards a European Strategy for Nanotechnology”, the implementation of the Action Plan towards the responsible development of nanosciences and nanotechnologies has advanced. The platform on European manufacturing based on high added-value research and innovation is expected to speed up the rate of industrial transformation in Europe. The implementation of the Environmental Technologies Action Plan is continuing with the development of policy activities notably on sustainable production and consumption. Research on global change and ecosystems, sustainable energy and transport systems has continued to make a significant contribution to the reinvigoration of the EU Sustainable Development Strategy.

The capacity to respond to emerging challenges has been demonstrated by the emergency Call for Proposals in response to the avian influenza crisis and work on pandemic flu. This policy oriented research is being implemented successfully through direct actions performed by the JRC and through SSP (Scientific support to policies) projects related to a wide range of EU policy areas such as environment, sustainability, health, agriculture and fisheries. The full implementation of New and Emerging Science and Technology (NEST) has generated broad recognition of the quality and innovation of the trans-disciplinary agenda, in fields such as synthetic biology and measuring the impossible.

Research and the revised Lisbon agenda: In 2005 the Lisbon strategy was re-launched and has resulted in renewed commitments to actively pursue a positive economic reform agenda. In 2006 the Member States, for the first time, implemented their National Reform Programmes (NRPs). Although most Member States have shown true commitment to the implementation of NRPS a certain number of Member States require further policy initiatives. The renewed impetus given to the Lisbon strategy offers a real opportunity but to achieve this a stronger commitment and a speedier implementation will be needed.

Progress towards the 3% objective: In 2005, the EU’s R&D intensity amounted to 1.84% of GDP, showing no signs of recovery after its stagnation in 2001-2002. The Commission points out, however, that the latest available information still predates the renewed commitments made by Member States in the context of the re-launched Lisbon strategy. In terms of R&D intensity, three distinct groups of countries can be identified. The first includes countries with an R&D intensity above 2.4% (GDP (Sweden, Denmark, Finland, Germany and Austria). These countries have already made important progress towards becoming knowledge based economies. A second group is made up of countries having an intensity close to the EU average with values between 1.5 and 2.1% of GDP (France, Belgium, the Netherlands, UK and Luxembourg) indicating that the economies of these countries are transforming, but that the pace of development should be increased. A third and larger group consists of countries with an R&D intensity below 1.5% of GDP (although differences within this group are large).

The Open Method of Coordination (OMC): The overall view emerging is that Member States have subscribed to a number of similar objectives and challenges. Explicitly or implicitly, therefore, taking guidance from discussion at a European level – such as the OMC. The Scientific and Technical Research Committee (CREST) affirmed that the OMC can continue to play an important role in strengthening and aligning Member States’ policies to meet the challenge of achieving the Lisbon and Barcelona objectives.

Future Outlook: The achievements of 2006 helped pave the way for the implementation of the 7 th Framework Programme. A Green Paper on “The European Research Area: New Perspectives” was adopted in April 2007, which will form the basis for a wide-ranging debate and public consultation. Building on the results of the Green Paper the Commission is expect to present new initiatives in 2008.

The Commission has presented its Annual Report on research and technological development activities of the European Union in 2005.

At the Spring European Council 2005, the heads of State and government reinforced the Lisbon Strategy with a new partnership for growth and employment, re-boosting the Barcelona objective of dedicating 3% of its Gross Domestic Product (GDP) to research in 2010 compared with 1.9% today. In its Communication 'Building the ERA of knowledge for growth' of 6 April 2005 which sets out the European Research policy objectives for 2007-2013, the Commission reiterated how crucial it is to provide new impetus to knowledge for sustainable growth to achieve the Lisbon goals. Major steps towards the Seventh Framework Programmes (FP7) were made in 2005 with the presentation by the Commission of its proposals for the entire legal framework.

Alongside the preparation of the future research funding framework, the Commission enhanced in 2005 major policy initiatives towards the European Research Area (ERA) .

substantial progress has again been made to reduce mobility obstacles and to enhance skills and competences for career development across sectors and disciplines. In addition, the enhancement of the researchers' status, profession and career development was boosted in 2005 with the Recommendations to Member States on the European Charter for Researchers and on the Code of Conduct for the recruitment of Researchers, of which the concrete uptake started immediately after its adoption; 28 European Technology Platforms are now in progress. They focus on strategic issues where achieving Europe's future growth, competitiveness and sustainability depends upon major technological advances, ranging from steel to air, rail and maritime transport, hydrogen and photovoltaics, water and chemicals, and from nanoelectronics to innovative medicines, plant genomics or sustainable chemistry (including industrial biotechnology), manufacturing, mutual learning and foresight knowledge; 68 ERA-NET projects were selected; these aim at the coordination of national and regional research programmes in fields such as bilateral cooperation with third countries, metrology, agriculture and fisheries, plant and human health, energy, transport or environment; an action plan for 2005-2009 for the implementation of a safe, integrated and responsible European strategy for the development of Nanosciences and Nanotechnologies was adopted in June; the Commission reported on the successful implementation of the Environmental Technologies Action Plan as well as the Environment and Health Action Plan, which continued in 2005; the 10 Year Implementation Plan for the Global Earth Observation initiative has been adopted at the Brussels Summit organised by the Commission in February 2005.

Implementation of sixth Framework Programme continues : in 2005, the budget was fully committed. Efforts were pursued for the FP6 to continue to attract the best research groups and the most innovative companies, organisations and institutions and significant scientific and technological progress was achieved in all thematic priorities. Furthermore, research is being carried out to support policies in areas such as agriculture, fishing, health and consumer protection, education, youth, employment and social policies, justice and home affairs, the environment, the single market, energy and transport. Concerning the regulatory and administrative environment, further improvement and progress continued where appropriate, notably concerning simplification.

Progress towards the 3% objective : the report confirms that all Member States have now set generally quite ambitious R&D expenditure targets either in the context of their NRP or soon after.

Assuming that all the R&D expenditure targets were met, R&D expenditure in the EU would increase significantly to around 2.6% of GDP in 2010. By comparing, both within each Member State and the EU-25 as a whole, the annual rate of growth of the R&D intensity required between 2004 and 2010 to meet the target with the rate of growth experienced over recent years (1997-2004), we can assess the level of the target. Countries such as Denmark, Finland, Sweden, Germany and Austria have experienced a rate of growth which, if they continue on the same trend, is sufficient to reach their target: while these countries have R&D intensities already higher than the EU average, in recent years they have managed to pull even further ahead. For countries such as Belgium, France or the UK and for the EU-25 as a whole, the target will be reached only if there is a substantial acceleration of the growth of R&D expenditure. For countries such as Poland, Slovakia, Malta, Latvia and Greece, the target is extremely ambitious.

This Annual Report covers developments and activities during 2004. It is accompanied by a Commission Staff Working Document, which provides a more detailed over view of statistics. The Report notes that the implementation of the 6 th Framework Programme has been a success. Launched in 2002 with a budget of EUR 17 500 million (later increased to EUR 19 200 million following enlargement) it sought to integrate the new Member States as much as possible. In 2004 almost 16 000 proposals were received with more that 84 000 participants, of which 2 000 were given Community funding. In total 2 100 contracts were signed with a total EU contribution amounting to more than EUR 4 200 million.

In addition to the Framework Programme, the EU took a number of important steps towards the creation of a European Research Area. Actions included the “Investing in research” action plan, preparing a Communication on nano-technology, establishing an independent European satellite observation and remote sensing capacity under the Global Monitoring for Environment and Security (GMES) initiative and supporting the GALILEO initiative. Further, the EU worked to secure a consensus between the parties on the geographical location of the ITER project in France. The EU has encouraged the use of the Open Method of Coordination (OMC) to help policy learning and integration through the mutual exchange of knowledge and best practice.

Regarding overall trends in research investment, the Commission notes that R&D intensity in the period 2000-2003 is close to stagnation. This can be attributed to the low growth rate of R&D spending in Germany, France and the UK, which represent around two thirds of the total R&D expenditure in the EU-25. The annual growth rate in R&D intensity of 0,7% (average annual growth between 2000 and 2003) is far from sufficient to reach the 3% objective by 2010. If this trend remains unchanged ( i.e. assuming a linear forecast applied on the 2000-2003 trend), the EU’s R&D intensity will be some 2,20% in 2010. The EU’s R&D intensity, however, grew at a higher rate than that of the US, where private spending on R&D has been significantly decreasing since 2000. As a result, the EU-25 as a whole is slowly catching up with the US. The growth of R&D intensity is higher in Japan than in both the EU and the US, although this seemingly good performance can be partially explained by the low growth rate of Japan’s GDP (denominator) over recent years. At an EU level, the share of R&D private sector funding is considerably lower than that of Japan and the US.

It has been estimated that to fulfill the Lisbon target, an extra 1.2 million researchers are needed: 500 000 for renewal of the research labour force and 700 000 net new entries. At the same time, the Report notes that the number of researchers has been growing by 22.5% between 1997 and 2002, equivalent to 105 000 full-time researchers.

In terms of trends in research funding, the Report finds that there is a growing awareness amongst the Member States of the need for improved coherence and an integration of policies. A first trend identified is the convergence of conceptual approaches to R&D policy toward the so-called “system” framework. This policy framework is explicitly adopted in countries such as Finland, Germany, Sweden and the Netherlands. It focuses on the overall system of institutions and organisation that foster research and innovation. An increasing complexity of policy mixes has been identified as the second trend. The range of long standing policies for funding such as subsidies and technology transfers has been expanded with additional financial instruments such as venture capital operations. Other initiatives relate to education and researcher training, clustering policies, company formation etc.

Lastly, in terms of the future outlook, the Commission reports that the future of European R&D has been secured by a proposed doubling of the budget under the financial perspective, 2007-2013. The preparation of the 7 th framework programme is well under way and is to be based around six major objectives namely, creating centres of excellence through collaborative research, launching major European technological initiatives, stimulating basic research and creating a European Research Council, making Europe attractive to the most talented researchers, developing research infrastructures and improving the co-ordination of national research programmes. These proposals are complemented by the proposed next generation Structural Funds, which also emphasise investment in research and innovation as a source of economic growth.

PURPOSE: presentation of the five-year assessment of Community research activities (1999-2003) carried out by high-level independent experts.

CONTENT: In the second half of 2004, a strategic Panel of thirteen high level experts 1 carried out the Five-Year Assessment covering Community research activities 1999-2003 and as foreseen in the Decisions concerning the 6 th Framework Programme. In response, the Panel provided a clear and authoritative overview and assessment, at a horizontal level, of Community research activities, through a thorough evidence-based analysis of the implementation and achievements of past and current activities.

The Commission warmly welcomes the Five-Year Assessment report and its analysis, conclusions and recommendations.

First, the Commission agrees with the Panel on the four main challenges identified: attract and reward the best talent; create a high-potential environment for business and industrial RTD; mobilise resources for innovation and sustainable growth; build trust in science and technology.

Second, it notes the positive assessment of the implementation, results and added value of the Framework Programmes, notably in terms of contribution to the European knowledge base, networking among researchers and structuring of the research system in Europe.

Lastly, it broadly agrees with the recommendations put forward in order to improve the relevance and quality of research initiatives and programmes at present and in the future. The Commission’s proposals for the 7 th Framework Programme, adopted on 6 April 2005, take full account of these recommendations. They also will be kept in mind in the preparation of the entire legal framework for Community research, notably the specific programmes and the rules for participation and dissemination of results.

The evaluation report has been disseminated widely, including through Europa and presented to and welcomed by the main stakeholders, notably the relevant committee and Working party of the European Parliament and Council, CREST and programme committees.

A more detailed analysis and comments for each specific recommendation are provided in the Commission staff Working Paper SEC(2005) 1054.

This Annual Report on research and technological development activities covers developments and activities during the period from January 2003 to March 2004.

The Commission states that a major step towards the creation of a European Research Area was taken in 2003 with the first full year of the 6 th Framework Programme. The Programme is one of the largest international R&D programmes in the world, with a budget of EUR 17.5 billion for the period 2002-06 (increased to 19.2 billion euro with the enlargement of the Union).

The 6 th Framework Programme has attracted a very high level of response. During 2003 over 16000 proposals were submitted involving nearly 160000 participants from more than 50 countries. Some 2600 of these proposals were retained for funding (involving over 27000 participants).

Under the heading of Focusing and Integrating Community Research, more than 10000 proposals were submitted of which over 1,600 were selected for funding involving some 24000 participations. The majority of these were in the seven thematic priorities identified in the 6 th Framework Programme, and a significant number in the horizontal activities involving SMEs and the specific measures in support of international cooperation. In addition, the new activities introduced in the 6 th Framework Programme on Scientific Support to Policy and NEST (New and Emerging Science and Technology) witnessed a considerable success with 128 proposals selected to be funded.

Calls for proposals in the Structuring the European Research Area heading led to nearly 6000 proposals being received in 2003, the vast majority under the human resources and mobility actions. Some 880 of these proposals were selected for funding. Furthermore, a Researcher’s Mobility Portal was launched providing information on job and funding opportunities and the practicalities of a European research career.

Under the Strengthening the Foundations of the European Research Area heading, a new activity was introduced in the 6 th Framework Programme, the ERANet initiative – to network and open up national and regional research programmes. The initiative has a successful start in 2003 with 74 proposals received in the first call of which over 30 were selected for funding.

Regarding the dissemination of results, the Research and Innovation actions in the 6 th Framework Programme, including the network of Innovation Relay Centres, supported the use of research results for the purpose of innovation while the horizontal research activities involving SMEs allowed smaller companies to access research which meets their needs.

Implementation and budgetary execution of the Programme remained on track, a major achievement given the level of response. By the end of 2003, a total of 489 contracts were signed with a financial commitment of 1.64 billion euro. The rest of the budget for 2003 was committed globally, and then committed to individual contracts during 2004.

The report lists other actions toward the creation of a European Research Area and moves on to describe developments on Member States and the application of the open method of coordination. 2003 was an important year in this regard, through the application of the Open Method of Coordination to the objective of raising research investments towards 3% of GDP in the EU. Groups of experts from Member States were established in six areas under the Scientific and Technical Research Committee (CREST) as a first cycle in the application of the Open Method of Coordination for the 3% objective.

In line with the 3% objective, nearly all Member States have set national targets for increasing R&D investment. Latest data suggests that a majority of Member States have increased their level of public funding of R&D since 2002, although substantial further progress is needed to reach the 1% of GDP. Trends in private sector investments in research are less clear, and the situation varies considerable across Member States.

The implementation of the Sixth Framework programme is well on track. The continued high level of response from the research community shows its important role in the promotion of the European research efforts. At the same time the Commission is making improvements to the implementation of the Programme in order to address concerns of the research community and the recommendations of monitoring and evaluation exercises, including the report of the high level panel on the effectiveness of the Instruments of the 6 th Framework Programme. The Commission has set out these measures in its response to the panel’s recommendations and has established an action plan to rationalise and accelerate procedures.

This is the second Commission report concerning the implementation of "A Mobility Strategy for the European Research Area". Whilst the first report, published in 2003, focused on the Strategy's implementation this second Report seeks to examine and assess the achievements of the Strategy both at a national, as well as, a Community level. Thus, much of the Report focuses on those policy initiatives, which encourage researcher mobility, including taxation, social security, statistics and the inter-change between academia and industry. In terms of removing legal and administrative obstacles to the mobility of researchers, the Commission observes that significant progress has been made. Member States have strived to create a package of legal instruments which aid third country researcher admission as well as providing for fast track procedures to obtain special residence permits. As far as Community initiatives are concerned the Report notes the creation of the "Pan-European Researcher's Mobility Web Portal", which provides access to a wide range of web resources covering information about research fellowships and grants, job opportunities as well as practical information relevant for settling in a European country. A related imitative includes the creation of the "European Network of Mobility Centres" or ERA-MORE. These mobility centres have been established in thirty European countries and offer help and assistance to researchers and their families relating to practical issues covering both their professional and daily lives. In addition to these initiatives the Report cites legislative progress in the form of one Directive and two Recommendations, which are set to be adopted in 2004. The Directive provides for a fast track procedure for the admission of researchers by offering them a specific residence permit. The Recommendations, on the other hand, allow Member States to accelerate, on a voluntary basis, the implementation of the Directive and to tackle supplementary issues, such as family reunification, short-term visas and co-operation between Member States. The Commission Report suggests that similar actions ought to be undertaken in the field of social security. Lastly, the Commission is committed, during the course of 2004, to implementing the different institutive proposed in its Career Communication.