How to Deepen Economic Integration within the EU Single Market?

Last week in Brussels the Bertelsmann Stiftung successfully held its long planned joint conference with the European Commission “Making the EU services market an engine for growth”. The aim of this conference, as described in one of our last blogposts, was to discuss together the challenges and benefits of tapping into one of the biggest potentials the EU single market still has to offer, the services market. The conference was a full success and a lot of valuable input was collected which we want to look at in a bit more detail in this post.

Across nearly all participants over the course of the conference there was a strong agreement on the importance of the services market and that too little had been done so far and that policies like the 2006 Services Directive have been implemented too weakly until now to fully yield all the economic benefits a unified European service market could provide. This theme already became clear during the two opening speeches held at the event.

The Bertelsmann Stiftung’s own chairman of the board Aart De Geus highlighted the service market’s significance not only as a fundamental source of jobs and economic growth for Europe but also as a necessary provider of stability and a symbol of European unity. Referencing the current and past crises in Europe Mr. De Geus said the Single Market “could help rebalancing the euro-economy, avoid the build-up of new imbalances and thus help stabilizing the monetary union”.

European Commissioner for the Internal Market Elżbieta Bieńkowska held the second opening speech. While the commissioner also highlighted the work already done by the European Union since adoption of the Service Directive in 2006, she openly admitted she was “very disappointed” with the member states implementation of the Directive thus far. Of the additional 1.8% in GDP growth the directive could have yielded according to a Commission report from 2012, only about 0.1% had been realised. In fact, she said, reforms had almost exclusively only been undertaken by “countries subject to financial assistance programmes or implementing comprehensive national reform programs” where the reforms had been conditionally tied to the assistance programmes. Bienkowska furthermore added yet another significant aspect of the EU services market by highlighting its growing interconnectedness with the manufacturing sector stating that “25% of Europe’s manufacturing output can be attributed to input of services” and that “between 25-50% of manufacturing firms’ total revenue stems from sales of services.

What followed were three lively panel sessions presenting opinions from the fields of politics, business and consumer organisations. A more detailed report of the debates can be found looking at the conference’s live Twitter coverage on the GED channel or simply following the hashtag #EUServices2015.

Serving as a refreshing pause from the debate, Professor Philippe Aghion from Harvard University gave a well-received keynote speech on the topic of “creative destruction” stating that in order to achieve further growth and productivity in advanced economies, this growth has to come from innovation and a constant willingness to reform and replace the old with the new.

Professor Henrik Enderlein from the Hertie School of Governance and director of the Jaques Delors Institute in Berlin, as well as European Commission Vice President for Jobs, Growth, Investment and Competiveness, Jyrki Katainen, held the two closing speeches for last week’s conference. Enderlein, who began his speech congratulating the single market on “becoming sexy again” picked up Mr. de Geus point of European Unity, cautioning policy makers that the EU would need a reformed and flexible single market if they wanted to keep “multi speed countries” like the United Kingdom part of the EU. The Global Economic Dynamics team recently published its own study on the effects of a potential Brexit, showing how such a move would bring GDP losses to all involved, particularly to the UK itself. We therefore fully support any strategy aimed at calming the waves between the UK and the rest of Europe.

Finally, it was Mr. Katainens turn to recap the day’s events and comments. He praised the involvement of all the participants and ensured the audience that “any input collected at the conference was sure to be used and taken into account by the Commission when coming up with a new services single market strategy” by the end of this year.

Overall the Conference can be seen as a big success and we are very happy so many of you followed it live over Twitter. The potential of the EU services market remains an interesting and significant topic for the European Community and we can surely expect new developments for this area in the near future. And If you want to read up now on the various more in-detail aspects of the “EU Services Market” topic, we highly recommend the Background Note “Growth and Euro Area Stability” by the “Europe’s Future” programme of the Bertelsmann Stiftung, which was written specifically for this event.