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Policy Contribution

Making the best of the European single market

Now more than ever, the EU needs to address concerns about the significant decline in productivity growth and the increasing perception of unfairness. Completing the single market would unlock the EU's growth potential. At the same time, the EU should empower member states to fight inequality by helping them better distribute the gains arising from economic integration.

By: , , , and Date: February 2, 2017 Topic: Macroeconomic policy

  • The slow-down in productivity and income over the past decade has weakened the European Union’s output legitimacy, which is grounded in delivering prosperity to its citizens. At the same time, decreasing growth reduces the capacity of governments to maintain existing levels of welfare protection and translates into a perception of rising unfairness and inequality across and within EU countries.
  • It is estimated that remaining non-tariff obstacles, in particular in services sectors, limit intra-EU trade to a level about four times smaller than the intensity of trade between US states. By completing the single market, the EU could generate significant income gains. However the more straightforward steps have already been taken, so the single market agenda now touches upon specific domestic regulations in EU countries.
  • We recommend a two-pillar strategy: for sectors with large externalities and/or economies of scale (such as energy or telecoms), regulations should be harmonised and at least close coordination between regulators should be achieved; for other services sectors, the efficiency of individual regulations on a cost-benefit basis with respect to their objective should be assessed, with systematic benchmarking.
  • We also recommend pursuing a credible environmental policy agenda on a destination basis (impacting both EU and non-EU firms) rather than on an origin basis (which is the case today), through a combination of ambitious technical standards, a reference path for the carbon price and revenue-neutral tax instruments. This would stimulate long-term investment in the energy transition without overly hurting EU firms’ competitiveness.
  • To further stimulate investment, especially in innovative sectors, we suggest moving ahead decisively with the capital markets union agenda. In parallel, the use of EU funds should be reviewed taking into account the objectives of economic convergence, spillovers between member states and solidarity.
  • EU national governments are responsible for welfare-related redistribution. However EU policies can help by empowering member countries to address the possible effects of EU integration, or by developing EU-wide instruments to limit its impact on possible losers. We argue that tax and social security avoidance or fraud need to be combatted with modern tools, eg a single electronic interface to monitor the payment of social charges of posted workers in their home countries. In order to fight corporate tax avoidance and improve tax fairness, the interest and royalties directive could be modified if the project of a common, consolidated corporate tax base (CCCTB) proves too difficult to agree.
  • Finally, we recommend making social security systems more neutral with respect to intra-EU migration, eg by introducing the full continuation of home-country unemployment rights for migrant jobseekers, with closer cooperation between national employment services, and by centralising information on pension entitlements on a single platform.
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External Publication

Global Economic Resilience: Building Forward Better

A roadmap for systemic economic reform calling for step-change in global economic governance to increase resilience and build forward better from economic shocks, prepared for the G7 Advisory Panel on Economic Resilience.

By: Thomas Wieser Topic: Global economy and trade, Macroeconomic policy Date: October 14, 2021
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Blog Post

Inclusive growth

Making antitrust work for, not against, gig workers and the self-employed

Policymakers should act to deal with labour-market concentration trends that potentially harm workers, especially gig workers and the self-employed.

By: Georgios Petropoulos Topic: Digital economy and innovation, Inclusive growth Date: October 11, 2021
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Upcoming Event

Oct
28
14:00

Can climate change be tackled without ditching economic growth?

What will be necessary to achieve climate goals and keep growing?

Speakers: Francesco Starace, Simone Tagliapietra and Guntram B. Wolff Topic: Green economy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
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Podcast

Podcast

Is tech redefining the workplace for women?

Laura Nurski, Sabine Theresia Köszegi and Giuseppe Porcaro explore the relationship between artificial intelligence and job transformation and ask whether the impact differs by gender.

By: The Sound of Economics Topic: Digital economy and innovation, Inclusive growth Date: October 6, 2021
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Policy Contribution

Inclusive growth

Do robots dream of paying taxes?

The digital transition should be managed – and taxed – alongside other societal transitions, but any tax on companies that replace employees with automated systems should be targeted and carefully designed to not stifle innovation.

By: Rebecca Christie Topic: Digital economy and innovation, Inclusive growth Date: October 5, 2021
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Opinion

Letter: Declining investment may explain why rates are low

Perhaps an analysis of the causes of the declining investment rate would bring us closer to explaining why real interest rates are so low.

By: Marek Dabrowski Topic: Macroeconomic policy Date: October 1, 2021
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Opinion

What Evergrande signals about China's economic future

Under Xi Jinping's new economic agenda 'common prosperity', China is cracking down on indebted real estate developers like Evergrande.

By: Alicia García-Herrero Topic: Global economy and trade Date: September 30, 2021
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Opinion

The pandemic’s uncertain impact on productivity

The pandemic has certainly permanently affected our way of working. Whether this is for the better remains to be seen.

By: Maria Demertzis Topic: Macroeconomic policy Date: September 28, 2021
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Opinion

Can climate change be tackled without ditching economic growth?

The ultimate answer to the question on whether climate change can be tackled without ditching economic growth depends on our willingness to step up climate action massively.

By: Klaas Lenaerts, Simone Tagliapietra and Guntram B. Wolff Topic: Green economy Date: September 27, 2021
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External Publication

Winners and losers of energy and climate policy – How can the costs be redistributed?

Who should bear more and who less of the burden achieving climate policy goals?

By: Gustav Fredriksson and Georg Zachmann Topic: Green economy Date: September 24, 2021
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Past Event

Past Event

How to strike the right balance between the three pillars of the pension system?

In this event panelists will discuss the future of European pension schemes.

Speakers: Elsa Fornero, Svend E. Hougaard Jensen and Suvi-Anne Siimes Topic: Macroeconomic policy Date: September 23, 2021
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Opinion

Inclusive growth

For remote work to work, new ground rules are needed

The pandemic has shown workers and employers that another way to work is possible. The European Union should develop a framework to facilitate hybrid work.

By: Mario Mariniello Topic: Inclusive growth Date: September 23, 2021
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