Marius-Jan Radlo The correlation between unemployment and income transfer levels in the time series from 1970 to 2000 shows that there is almost a linear relationship between these two variables, and the correlation coefficient is 0.92. In this context, Engen and Skinner(1992) investigated the impact of the growth of budget spending and tax revenue on the pace of GDP changes in 107 countries in the period from 1970-1985. These authors showed that there is an inverse relationship between changes in the levels of the states' intervention in their economies and the pace of growth of their economies. They found that an increase in public spending and tax revenue of 10% of GDP with a stable budget results in an average decrease in the pace of long-term economic growth by 1.5 percentage points. This relationship is confirmed by an analysis of changes in public spending and the pace of economic growth in the 1990s in the EU member states and the US and Japan, which shows that the pace of economic growth in the second half of the 1990s increased considerably in those EU countries that managed to significantly cut their public spending. Among them can be found not only low­spending countries such as Ireland but also traditionally high-spending ones such as Finland or Sweden. To sum up, we emphasise that low labour utilisation in the EU in relation to the US is the main reason for almost 75% of the GDP per capita gap. This cannot be qualified as a consequence of a preference for leisure in the EU but rather of several institutional and regulatory features present in many European countries. As was shown, most EU member states still have both high levels of product market regulation and high labour protection. In addition, excessive regulation and low effectiveness of product markets and labour markets in the EU are integral to the social models of many EU countries. This model assumes excessive government expenditures, including, in particular, income transfers and public consumption spending. This is accompanied by the higher taxes imposed on labour. These factors discourage Europeans from taking up work or lengthening their working time and European companies from creating more jobs. All those conditions lead to a lower level of employment and lower working time in the EU economies than in the US. LISBON FAILURES AND ITS SOURCES The Lisbon Strategy was adopted in 2000, just before the dot-com bubble burst, but still at the time of a bit of naive enthusiasm for the so-called“new economy” or“knowledge-based economy”. Consequently it was full of uncritical state­82