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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: European Macroeconomics & Governance

  • 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

European Parliament

The impact of COVID-19 on the Internal Market

Study assessing the impact of the COVID-19 crisis on the European Union's Internal Market and consumer protection prepared for the European Parliament.

By: J. Scott Marcus, Niclas Poitiers, Lionel Guetta-Jeanrenaud, Monika Grzegorczyk, Sophie Buckingham, Fernando Hortal Foronda, Norman Röhner and Jacques Pelkmans Topic: European Macroeconomics & Governance, European Parliament, Testimonies Date: March 1, 2021
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Opinion

Central banking’s brave new world

Ever since the 2008 financial crisis, central bankers have been busy developing new policy instruments to fight fires and ward off emerging threats. Nonetheless, many secretly dreamed of returning to the good old days of cautious conservatism (with financial stability taken seriously).

By: Jean Pisani-Ferry Topic: Global Economics & Governance Date: February 24, 2021
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Podcast

Podcast

A rushed deal or a rush to judgement?

The Comprehensive Agreement on Investment (CAI) is supposed to improve market access for European companies operating in China and to ensure a level playing field, as well as reciprocity. Does it fulfil such expectations?

By: The Sound of Economics Topic: Global Economics & Governance Date: January 27, 2021
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Opinion

疫情對全球經濟的結構性改變或比想像的更深

現在是時候重新思考我們目前經濟模式中的基本原理,來減輕這些影響。

By: Alicia García-Herrero Topic: Global Economics & Governance Date: January 21, 2021
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Blog Post

What do vaccination passports mean for Europe?

To the extent that vaccination against COVID-19 stops individuals infecting others, restrictions on vaccinated individuals’ rights should be lifted: fundamental freedoms should not be limited unnecessarily. Nevertheless, acceptance of vaccination passports depends on whether the vaccination allocation timeline is perceived as fair.

By: Lionel Guetta-Jeanrenaud, Mario Mariniello and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: January 20, 2021
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Opinion

An EU - China investment deal: a second look

For the moment, it does not look like we have the basis for greater and deeper economic relations with China. However, dismissing China and the opportunities that it creates for global cooperation would also be a mistake.

By: Maria Demertzis Topic: Global Economics & Governance Date: January 19, 2021
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Opinion

Europe's disappointing investment deal with China

Why rush a deal that is so inherently complex?

By: Alicia García-Herrero Topic: Global Economics & Governance Date: January 4, 2021
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Policy Contribution

Deglobalisation in the context of United States-China decoupling

After decades of increasing globalisation, there now seems to be a slowing, or even a turn to deglobalisation, meaning decelerating trade and investment and reduced global value chains. This trend seems to have accelerated because of the United States’ push to contain China in the context of their strategic competition. So far, however, there is less evidence of deglobalisation in terms of financial flows.

By: Alicia García-Herrero and Junyun Tan Topic: Global Economics & Governance Date: December 21, 2020
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Blog Post

When and how should the European Union conclude an investment agreement with China?

A look into the potential Comprehensive Agreement on Investment between China and the European Union.

By: Alicia García-Herrero Topic: Global Economics & Governance Date: December 17, 2020
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Blog Post

COVID-19 has widened the income gap in Europe

Workers with low-educational levels suffered far worse than others in terms of COVID-19 related job losses during the first half of 2020 in the EU. Jobs for tertiary-educated workers even increased. Thus, the pandemic has increased income inequality, reinforcing the case for inclusive development.

By: Zsolt Darvas Topic: European Macroeconomics & Governance Date: December 3, 2020
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External Publication

European Parliament

Legal obstacles in Member States to Single Market rules

This study analyses the current state of national obstacles to free movement in the EU Single Market.

By: Erik Dahlberg, Mattia Di Salvo, Katarina Kubovicova, J. Scott Marcus, Sigurd Næss-Schmidt, Jacques Pelkmans, Virginia Dalla Pozza and Laura Virtanen Topic: European Macroeconomics & Governance, European Parliament, Testimonies Date: November 24, 2020
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Blog Post

Not all foreign investment is welcome in Europe

A new plan to tackle foreign subsidies would empower the European Commission to investigate foreign investments in the European Union, with Chinese investment particularly in the spotlight. This increased scrutiny could deter some investors. Overall however, fairer competition is worth some lost opportunities.

By: Julia Anderson Topic: Global Economics & Governance Date: November 10, 2020
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