Matevž Hribernik INTRODUCTION Reforms are a reality for Europe. In 2000, the spring European Council recognised the need to pursue economic reform: to capture the benefits of the new knowledge-based society, to strengthen the European social system by investing in people and to prepare for challenges ahead. Change and modernisation of European policies are required, so that the values such as a high level of welfare, social cohesion and solidarity, high quality of life, accessibility of education and health care, participation of citizens in decision making, and sustainable development may be upheld in today's ever more dynamic and globalised world. The world economy is experiencing a period of rapid and significant economic change characterised by substantial growth in world trade and capital flows, and driven by the increased integration of emerging market economies into the global economic system, trade and investment liberalisation and technological change. Today, globalisation is not merely an outflow of low-paid jobs and profits into countries with lower social standards. Just the opposite, new competition threatens Europe in areas that have until recently had the incontestable comparative advantage of the developed world. Every year, universities in India educate and introduce into the world market a quarter of million new engineers and, judging by the amount of money spent on research, China could catch up with the EU by the end of the decade. China and India are expected to increase their share of world output in future years with important consequences for the geographical distribution of EU trade and investment. Slovenia is adapting its economic structure to the new European and global trends. A competitive economy requires well-structured public finance, market liberalisation and stimulation of market competitiveness, as well as a suitable environment for the development of entrepreneurship. Being a member state of the EU, Slovenia is thus building its national vision and basic strategic objectives based on the Lisbon development strategy targets: higher competitiveness, employment growth, and balanced social and environmental development. THE RENEWAL OF THE LISBON STRATEGY The Lisbon Strategy has set a goal that the EU will become“the most competitive and dynamic knowledge-based economy in the world capable of 94