Lawmakers must move forward with EU single market integration now more than ever, the Chairman of the Board of the American Chamber of Commerce to the European Union told EURACTIV.
Karl Cox warned that rising political instability in Europe could “derail” further integration of the EU single market, which makes business easier for foreign investors and is a major driver of growth.
“At this point, with uncertainty and changes, it is more necessary than ever that policymakers take the necessary measures and have the courage to move forward in these areas,” Cox told EURACTIV.
“Now is really the time to move ahead, to provide a certain stability that seems to be lacking right now,” he said, adding: “We have some proposals on the table with respect to the Digital Single Market, to the Capital Markets Union, the Energy Union.”
According to Cox, the change of leadership in the US and the protectionist moves of the Trump administration do not really affect the country’s business commitments in Europe.
“We remain as committed as ever to the European economy. Vice President Pence was here the last few days trying to deliver some strong messages about the importance of Europe to the US as a whole. We’ll see what happens.”
Single market achievements
To coincide with the 25th anniversary of the single market, AmCham EU commissioned a report, which spells out the achievements EU integration.
According to the study by LE Europe, a consultancy, the single market has positively affected national economies which could see further gains if EU member states pushed for deeper integration.
The study focused on five broad economic indicators: Gross Domestic Product (GDP), household consumption, business investment, employment, and productivity in each of the EU member states.
It found that all had clearly benefited from the single market since it was launched in 1990. EU GDP has been boosted by 1.7% while GDP per capita has risen by almost €1,050. In addition, consumption per household has increased by approximately €600 and 3.6 million additional jobs were created.
“It has allowed businesses to operate more efficiently, led to increased competition in the market place, and given consumers greater choice of goods and services at lower prices,” the study underlined, adding there was still room for improvement by removing several barriers that continue to exist.
Regarding the future, the report claims that if all member states achieve the highest level of integration in the single market, the gains will increase.
EU GDP would further soar by 0.6% and GDP per capita could be permanently higher by €370, while household consumption could rise by up to €208 per year.
As far as employment is concerned, it could grow by up to 1.3 million new jobs annually. According to the latest Eurostat estimates, there were 20.065 million people unemployed in December 2016. The lowest unemployment rates were recorded in the Czech Republic (3.5 %) and Germany (3.9 %), with the highest in Greece (23.0 %) and Spain (18.4 %).
Greece and Cyprus lag behind
According to the general performance in terms of single market integration in 2015, the highest scores were marked in Malta (565.6) and Luxembourg (102.6).
The next highest scores were achieved by the Czech Republic (89.7), Ireland (88.7) and Slovakia (88.3), while the worst performance was recorded in Greece (54.3), followed by Cyprus (65.3), the UK (65.6) and Italy (67.6).
The outbreak of the financial crisis in 2008 interrupted integration, the report claims. The trade in goods indicator was particularly hard hit, while the indicators of trade in services and the implementation of EU directives remained intact.
Patrice Muller, senior managing partner at LE Europe, told EURACTIV that up until the financial crisis, Greece was seeing big benefits from its progressive single market integration, and its indicator had been rising since the early 1990s.
“But then, after the financial crisis, particularly on the exports side, the economy tanked, exports tanked, so the Greek economy became much less integrated to the EU, into the single market, to the point that the indicator level of integration in 2015 is below what it was in 1990.
“That is an indication of the extent to which the crisis has hit,” he said.
According to the report, Greece, Cyprus, and Bulgaria were especially badly affected by the crisis.
“All three countries show falls in the value of the homogeneity component, i.e. the economic performance of these countries diverged more from the average of the ‘core’ member states,” the report noted, adding that in the case of Athens and Nicosia, increases in public debt as a percentage of GDP relative to the ‘core’ were also reported.
Regarding the implementation of single market legislation, half of the member states are considered to be performing well (Bulgaria, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Greece, Hungary, Italy, Latvia, Malta, Portugal, Slovakia and Sweden).
In contrast, four of the large member states (France, Germany, Poland and the United Kingdom) perform poorly in terms of transposition of single market legislation.
Intra-EU trade and services
The report stressed that total intra-EU exports, expressed as a percentage of EU-wide GDP, rose from 14.2% in 1995 to 20.8% in 2015, representing an increase of almost 50%.
However, the 2008 financial crisis marked a turn in this growing trend.
“Over the past six years, the percentage of intra-EU exports to EU GDP has fluctuated around the 21% level and no further growth of intra-EU exports was achieved,” the study noted.
The highest percentage of intra-EU trade in goods was recorded in Slovakia (70.4%), followed by the Czech Republic (64.8%), Lithuania (63.7%) and Hungary (61.6%).
On the other hand, the UK and Greece scored quite poorly in the goods field, with 9.5% and 10.5% respectively.
In contrast to intra-EU trade in goods, the financial crisis did not stop the upward trend of internal trade in services, which doubled from 3% in 1992 to 6.1% of GDP in 2013.
“However, the value of EU-wide intra-EU trade in services (as a percentage of EU-wide GDP) represents less than a third of the value of intra-EU trade in goods,” the report noted.
Citing the UK as an example, the study underlined that London showed a low level of trade in services as a percentage of GDP as well as a moderately low share of intra-EU trade. “In the case of the UK, this translates into the third lowest ratio of intra-EU trade in services as a percentage of GDP among all member states.”
Foreign direct investment
Another important factor that varies among EU member states is the level of foreign direct investment (FDI).
Luxembourg tops the list (119.3%), followed by Ireland (96.3%), Malta (64.6%) and the Netherlands (54.8%). Well below the EU average (33.9%) were Greece (9.3%), Slovenia (14.5%), Italy (16.1%), Latvia (18%) and Romania (19.7%).
“In the instances of Greece and Italy, the relatively low value of the indicator is largely explained by a low level of total FDI as a percentage of GDP,” the report said.
Call for structural reforms
Speaking about the future of the EU single market, Muller underlined the need to further develop the single market in services.
“Now there is some contention there, but there are a lot of issues in services that are not contentious and could be easily adopted. We also recommend that the digital single market proposal, which is already out there, be implemented, and rather quickly because again we see a lot of benefits in that,” he said.
He also stressed that the traditional policy instruments, fiscal and monetary policy, were limited in terms of what they can do nowadays because monetary policy sets the interest rate and may be negative in some cases.
“There is not much more it can do. It has quantitative easing, but it is limited in scope. Fiscal policy is constrained because of high public debt and, in some cases, very large public deficits.
“So the other avenue to stimulate the European economy is what I would call structural reform in a broader sense, but in a sense that would stimulate the single market, which would grow the European economy again,” Muller said.