Single market needs new champions

Celebrations for the 20th anniversary of the single market are premature, but it is worth fighting for.

The party clothes can stay in the wardrobe for now. The European Commission is planning a party, but it will not happen until 2012. This week the Commission published its plans to boost the European single market “so that the 20th anniversary of the single market in 2012 can be celebrated with renewed dynamism”. Well, that leaves a little time for Europe’s citizens to practise their celebratory dance steps (one step forward, two steps back).

As the Commission rightly observes, the financial crisis has dented people’s expectations and confidence in markets and, sometimes, in the single market itself.

Indeed so. The predecessors of Michel Barnier, the European commissioner for the single market who launched this week’s plans for a single-market act, used to tell the European public that cross-border consolidation of the banking sector was a good thing. Indeed it was, up to a point. The point was the credit crunch, when banks began to go to the wall. Banking consolidation had created the problem of banks that were deemed ‘too big to fail’ – meaning so big that they had to be propped up at public expense for fear of bringing the whole edifice down. Hardly the greatest advertisement for a single market.

The single market was long used as the justification for all manner of legislative proposals from the Commission. But it is no longer the object of veneration that it once was. Sharon Bowles, the MEP who chairs the European Parliament’s economic and monetary affairs committee, observed this week that in the financial-services sector, safety now ranks ahead of efficiency when it comes to justifying legislative proposals. Market efficiency is no longer a sufficient reason for doing or not doing something, she said. In that field, as in others, the goal of building a single market no longer commands the political support that it once did.

The enforcement of state-aid rules presents another example of how faith in the single market has been shaken. In the early years of the 21st century, the Commission sought to enforce state-aid rules with increasing vigour, attempting to limit the unfair subsidies given by public authorities to prop up uncompetitive enterprises. But the economic crisis has already forced the Commission to relax the state-aid rules – an indication that the single market is undermined – and there is no reason to think that the old orthodoxies will be swiftly or easily reasserted. With unemployment high and job cuts still spreading, governments will be under great pressure to prop up domestic employers to stop jobs going elsewhere (even if they will also be constrained by budget deficits as to the kind of public subsidy they can offer).

Nicolas Sarkozy’s infamous assertion that he wanted to see French carmakers keep jobs in France, rather than transferred to Slovakia, was good domestic politics, even if it was dodgy economics.

So the champions of the single market are starting their campaign for 2012 celebrations in unfavourable circumstances. But the fight-back is worth attempting. In the long term, Europe will achieve greater economic growth and will create more jobs if it creates a wider and deeper single market. The short-termism that has so long hampered the single market is self-defeating. The longer-term economic benefit lies in strengthening the single market.

Whether the Commission is justified in thinking that it can win over the EU’s 500 million citizens to applaud the single market is to be doubted. A more modest objective would be to get citizens to use the single market more, even if they never acknowledge that that is what they are doing. The extent to which they buy and sell goods and services across national borders at the moment falls pitifully short of past EU hype. A significant improvement upon that record by 2012 would be worth a party.

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