After 30 years, the single market remains unfinished and faces an uncertain future –

As the Single European Market celebrates its 30th anniversary, it is clear that certain sectors are still largely structured at the national level and not integrated into the borderless intra-European market.

Although the goods market in the EU is generally well integrated, some key economic sectors are less so. Moreover, the transition to a more restrictive industrial strategy forces the EU to choose between more or less fragmentation.

There is still no common labor market Nils Redeker, deputy director of the Jacques Delors Center, noted in an interview with EURACTIV.

The single market is generally recognized for removing regulatory barriers between different EU member states. But this is possible only if these obstacles can be replaced by general rules. However, this may be more difficult in some sectors than others, either because of issues of national sovereignty or entrenched national interests in sectors which Member States are trying to protect from European competition.

Difficult integration of the financial sector

For many years, the European Commission has been trying to create a Capital Markets Union (CMU). However, since money saved for pensions constitutes a large part of European capital, a true CMU will also require some harmonization of European pension systems.

But since social security systems are at the heart of modern welfare states, these national powers are jealously guarded.

James Watson of the European Union Business Interests Association told EURACTIV that cross-border finance has not changed much in recent years.

In addition to the regulation of pension funds, Mr Watson pointed out that insolvency procedures differ across the Union and therefore create problems for investors who want to know the compensation conditions in different member states.

The banking sector is another area where the single market is complete. There is a uniform rulebook for banks, but as economist Andre Sapir explains, “the question is how to apply this rule“.

He told EURACTIV that since regulation is carried out by national regulators, no uniform application can be guaranteed.

do things together»

André Sapir, a researcher at the Bruegel think tank, insists that the single market is not only about removing trade barriers, but also about “do things together“. In addition to general rules, this may also include general public procurement in some cases.

Countries will be more willing to liberalize their markets if you can guarantee security of supplyhe cited the energy market as examples, as well as masks and vaccines during a pandemic.

When the single market was created 30 years ago, at the height of the free trade consensus, all national subsidies (or state aid) to industries were banned except in exceptional cases to ensure a fair market that would not be distorted by laws. favoring certain national industries over others.

Today, the 1990s consensus has lost much of its authority as the Commission responds to the economic disruption caused by the pandemic, as well as the fallout from Russia’s aggression in Ukraine, by authorizing more and more state aid.

According to Mr Redeker, the increased use of state aid has not yet distorted the level playing field that underpins the single market. “But there is a risk of this happening“, but he warned.

In addition, European companies feel increasingly threatened by China’s large-scale subsidies to their industries and, more recently, by the US to American industries through the Anti-Inflation Act (Inflation Reduction ActIRA).

Industrial policy: alone or together?

The French and German governments are trying to relax EU state aid rules to support their domestic industries.

We need more public assistance than we previously thoughtsaid Mr Redeker.

But this can only work if harmonized at the European levelHe added that financially powerful governments can distort the single market if they provide too many subsidies to their industries.

However, a “european solutionmay be more controversial than relaxing state aid rules.

The Commission has announced that it will propose a European Sovereign Fund (ESF) aimed at supporting the environmental and digital transition of European industry, but this still very uncertain solution may come too late. In February 2023, EU leaders will meet in Brussels to discuss the EU’s response to the US IRA.

Mr. Redeker believes that reform of state aid rules can be agreed fairly quickly.

But then Germany and France will have what they wanthe said this could make it harder to pressure Germany and other member states to complement state aid reform with a European solution.

2023: What is the future of EU economic policy?

In 2023, the EU’s economic policy agenda will likely focus on responding to the US’s Deflation Act. The politicians will also discuss fiscal regulations, trade policy, the reconstruction of Ukraine, as well as financial stability.

[Édité par Anne-Sophie Gayet]

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