EU summit in Barcelona: Minimalists at work

EU summit in Barcelona: Minimalists at work

High-minded goals are one thing. The ability to take political decisions is another. This was seen once again at the EU summit in Barcelona. In the liberalisation of the electricity markets, it lowered its sights from the targets set out in the Union’s growth strategy, modifying both the content (agreement applies only to – still undefined – corporate users) and the time horizon. But even more problematic than the delayed opening of the market could be the members’ request to the European Commission: it has been asked to specify which sectors and services in the member states are of general economic interest. In past proposals regarding the general economic interest, the Commission has always avoided identifying specific sectors as there is a danger that these services may then be excepted from liberalisation and kept entirely closed to competition.

The meagre results of the Barcelona Council strengthen the impression that the EU is backsliding while the need for reform mounts. It seems to be reverting to the principle that decisions must be unanimous. This subordinates the good of the whole Union to the interests of one country. So it is not surprising that the list of non-decisions (liberalisation, energy supply, railways, postal services, European patent, takeover directive) is growing longer and longer. The basic will to open markets seems to be dwindling, at least among the large member states. Countries are no longer even resorting to their former ploy of laying the blame on “Brussels” if they find themselves unable, for whatever national reasons, to introduce structural reforms.

But it will be impossible to transform the EU into the strongest growing economic region in the world unless it becomes a functioning single market. The USA will probably already outstrip the EU again this year (DBR forecast: 2% GDP growth compared with 1.2%), and per capita income in the EU is only about 64% of the US figure. The European Commission estimates that more efficient market regulation could, alone, bring savings equivalent to 4% of the Union’s GDP, and the creation of a real single market for financial services could boost growth to the tune of another EUR 40 bn. Despite the proven success of the single-market model, the impetus for a single market is flagging. And not only that: state intervention and the protection of national champions are no longer frowned upon. This is disconcerting, particularly for the Central and Eastern European candidates for EU membership, which have painfully restructured into market economies in order to meet the demanding accession criteria.

The course the EU is pursuing overlooks the fact that Europe’s employment problems can only be overcome in the context of open markets (as part of the Lisbon process, the EU wants to raise the employment rate to 70%, now about 63%). This refers not only to labour-market regulations as such. The OECD has proved that employment rates are much higher in countries whose product markets are extensively liberalised. In other words: where employment rates are below the OECD average, over-regulated, non-competitive product markets are one of the main causes.

Given the unconvincing action of the EU member states, the European Commission must not let up in its efforts to open the Union for more competition and market liberalisation. The criticism increasingly being levelled at the Commission, particularly from the German side, is justified only occasionally as regards content, besides being quite out of place as regards style. The Commission is obliged and, even more, it has the right to enforce the legal agreements concluded by the member states throughout the EU – if necessary against the will of individual member states. This is particularly relevant for the application of the European rules on competition.

Barbara Böttcher

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