Introduction: The Single Market is composed of all of the national markets within the EU. With almost 500 million consumers since the enlargement of the European Union in 2007, it is the biggest market in the world. Moreover, it was one of the key factors concerning the creation of the European Community. The establishment of the Single Market represents a liberal entity, in which the suppression of barriers for the exchange of goods is perceived as a factor of growth and encouraging employment.
The establishment of the Market was based on 3 crucial steps: -Custom union (no more custom barriers for the intra-community exchanges, effective on 01/07/1968) -The Single European Act (adopted in 1986, fixed at the 01/01/1993 the completion of the Single Market) -Maastricht treaty (1992, it opened the way for the Euro as a unique currency for 16 of the 27 member state of the EU) In order to realise the Single Market, it was necessary to insure the free trade of people, goods, services and assets.
Therefore, national rules have been harmonized thanks to the principle of non-discrimination according to the nationality, the mutual recognition of national laws, and the application of the community directives for each member state. To accompany this process, rules concerning competition have been created: mainly controls concerning fusions and agreements for companies. The Single Market allowed considerable growth of intra-community exchanges.
Nevertheless, the total unification of financial markets has not been accomplished. On the one hand, this report will explain the expectations of the Single Market concerning the economic performance of the EU. On the other hand, it will give evidence for the indication that such an improvement has occurred. 1. Expectations of the Single Market concerning the economic performance of the EU The Single Market At the centre of the European Single Market, people, goods, services and capital flow as freely as in a Member State.
Whether for business or pleasure, European citizens through EU customs and enjoy of products from the whole EU in their own country, thanks to the Single Market. The creation of this market, which seems to be obvious nowadays, is one of the greatest achievements of the EU. Out of the crisis Qualified professionals can work anywhere in the EU. The Single Market constitutes a valuable bulwark against the current economic crisis. It encouraged Member State to face it together instead of rejecting their problems to the neighbour.
Instead of using some short-term protectionist measure that would have made the situation worse, the Member State agreed on a common plan that aspires to stimulate demand by public investment, also to strengthen the financial sector regulation and to create sustainable employment. An ongoing process Successes of the Single Market must not make us forget its deficiencies. Services sector, for example, has trouble opening itself even if there is a new important legislation adopted in 2006 that allows societies to offer services in other Member State from the country of origin.
The financial services sector and the transport sector, where subsist national markets, are late. Finally, the diversity of national tax systems is harmful to the efficiency of the market. Most of financial services have been liberalised. Consumers can easily use their debit or credit card abroad and transfer money from a Member State to another one. Bank charges for border transfers have been reduced. The EU has also decided to open the postal services market. This opening aims to reinforce competition, encourage lower prices and improve the quality of services.
Protect the Single Market The Single Market is principally based on the competition and regulators to guarantee the free movement of goods and services with fair conditions. The free movement of people is guaranteed by the Schengen agreement. This agreement eliminates controls for most of frontiers of the EU and reinforces controls for external borders. Indeed, external borders security is the condition of free movement in the EU. Nowadays, it does not exist land border controls between 22 Member States of the Union anymore.
5 countries continue to make border controls inside the EU: Cyprus, Ireland, the United Kingdom, Bulgaria and Romania. Eliminating barriers to trade and to free movement constitute a considerable asset for traders and regular travellers. However, a lot of people try to abuse this system for criminality. In order to face this criminality without borders, the EU has established a system, also without borders, a police and judicial cooperation. Europol is the entity created to face these problems. From the common market to the unique currency Since 2007, 27 countries establish economic relations “without barriers”.
The Rome treaty, then the Single European Act aspire to suppress all obstacles impeding employment, goods, services and capital market. The Maastricht treaty follows this process of economic integration with the establishment of an economic integration with the single currency, the Euro. The free competition between goods, services, capital and employment has to increase growth. This allows obtaining economies of scale resulting of the market opening, a downward convergence of prices, a new dimension of markets both volume and value in order to increase performance.
The productivity gains benefit to businesses, households, States and external markets. Prices reduction stimulates the demand and provides competitiveness without inflation for businesses. These are the principal virtues of the EU that the economy is at the world second place just behind the US of A. The effects of the Single Market are relevant: works of the European Commission have progressed, the GDP has increased, from 300 to 900 thousand employment creation, the inflation rate is 1 to 1,5 point lower compared to what could happen without the Single Market. 2.
Evidence of this improvement The Commission estimates that the Single Market has created more than €800 billion of additional wealth. Consequences are multiple: telephone communication are much cheaper than 10 years ago, the prices of flight tickets are lower, air links are outnumber and individuals and businesses can now choose their supplier of gas and electricity. How does it work? With the deletion of barriers and the opening of national markets, a lot of firms can compete. For the consumer, this evolution has led lower prices and a wider choice of products.
For the firms, they can now compete on a market of 500 million consumers. Benefits of the Single Market. Indeed, it is estimated that the GDP has increased of 1. 8% (€164. 5 billion) in 2002. But actually, figures of the Euro-zone show that the integration does not play its role of growth. The European economic integration slow down and potential arising from enlargement exist but it is necessary to provide the economic and policy means to make it real. The size of the market allowed businesses to make economies of scale and productivity gains that enable lower prices.
Individuals can work easily in other country of the EU because Member States recognize the major part of professional qualifications and diplomas acquired in other countries of the EU. The integrated market for financial services, completed and under implementation, will allow lower costs concerning loans for individuals and firms and will propose to savers a bigger range of investment products. Bank charges concerning credit transfer have decreased. The vigilance of the Union in its fight against cartels, the concentration of dominant firms or State Aids aim to maintain a fairness concerning access condition to the market for every firm.
Concerning the outside of the EU, the Single Market protect firms against dumping, piracy and forgery more effectively thanks to the coordination of specialised services of the Union with national customs and police structures. Deepening the Single Market However, the Single Market needs a continuous effort to update, particularly to answer to new expectations like the security of products or waste recycling. Progress is often hampered in sectors in which States are still the main authority or in which the mode of decision does not favour a common policy, it is the case for the direct taxation.
Also, some sensitive sectors do not open to competition easily; it is the case for rail, postal services. A recent example concerning the deepening of the Single Market is the “Bolkestein” directive concerning services (12/12/2006); the adoption was preceded by years of debate. However, the objective to make the EU zone the most competitive of the world in 2008, fixed in Lisbon in 2000, reinforce the necessity of a Single Market deepening. Strategy of the Lisbon Treaty The strategy of Lisbon defined in 2000 by the European Council aspired to make the European Union “the knowledge economy the most competitive and dynamic around the world ».
It meant to obtain a sustainable economic growth accompanied by a quantitative and qualitative improvement of employment and a greater social consistency concerning the respect for the environment. Two methods have been focused to achieve these goals: accelerate the pace of structural reforms, essentially conceived bringing it closer to a perfect competition and create conditions for a healthy development, actually, preserve neutrality of the currency and the budget. The potential growth is established by structural policies to promote competition and eliminate rent in different markets.
Currency and budget management has no other aim than eliminate cyclical fluctuations around this tendency of the long-term. The Lisbon strategy has inaugurated a new tool of economic policy. The introduction of a new pillar (the open method of coordination) aim to facilitate the establishment of efficient policies that aim to increase employment offer and decrease structural unemployment rate in Europe. Each country involves itself to hold other country of the EU to international comparison. The idea is that States adopt policies that were already efficient in other countries, on common objectives.
The EU aims to affirm priorities, advice and compare experiences to current ones. But, obviously, this method has not been really efficient. Most of objectives assigned in Lisbon were not reached. Indicators show that there was delay and that a failure was predictable. The lack of incitation to coordinate structural reforms policies is probably the principal responsible. However, concerning growth and employment, The EU is lacking of means of action: Budgetary plan, taxation, social contributions, regulations of the labour market and training concern States.
We can say that there is an inconstancy; indeed, supply-side policies depend on Member States, instead of regulation of the demand that depends on currency and budgetary rules, and therefore they depend on the European Union (Only for States of the Euro-zone). Conclusion: Obviously, this report explains that the Single Market is a pretty good thing for individuals and businesses. The aim of the Single Market is to allow a free flow of people, goods, services and capital all around the EU (Member State).
It is obvious that the aim of this special market is also to be stronger against weaknesses of a crisis (make a strong and stable currency and a way of solidarity between Member State). Concerning Individuals, it allows lower prices (telephone, airplane, products of everyday life), a possibility to choose every service even gas or electricity and a possibility to work all around the EU easier. Concerning businesses, it is now a 500 million people market and a free way to practice business in each Member State. But, as this report explains, there are deficiencies.
Indeed, the fact that there are some European rules and national rules (specific to each Member State) is sometimes a problem because things are slowed and in this globalisation world we are all living in that needs fastness and efficiency, it is necessary to find solutions especially concerning services in general and more specifically for financial services. We could imagine that global rules for the Member State could be the solution but actually, but will each country agree for global rules, and how long could it take? References: -“The Single Market: wallflower or dancing partner?”, House of Lords, European Committee, Volume 1:
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