Helping Europe's Digital Economy Take Off

Turning Europe into a truly digital economy will take years, but there are several courses of action that the European Commission can take to boost digital-led growth in the short-term, according to a paper published this week by the think tank, the Centre for European Research (CER).

The paper gives an upbeat assessment of Europe’s digital prospects. The number of tech start-ups is on the rise in Europe, but scaling up is a massive challenge largely because of the fault-lines that remain in the Single Market.

It points to the benefits that can be enjoyed by European businesses through a properly functioning Single Market and an open approach to trade.

The Single Market and open trade should be given top priority by the next Commission, the paper states.

Entitled “Helping Europe’s digital economy take off: an agenda for the next Commission”, the paper points out the biggest constraints holding back Europe’s digital transformation.

The paper recommends that the new Commission due to take office in the autumn should pursue three lines of action. It should ensure that the existing rulebook is properly enforced, and where necessary it should make amendments in order to future-proof the rules.

It also calls for Europe’s data economy to be unlocked. This can be done by updating the regulatory framework so that it promotes data-driven innovation while at the same time protecting citizens’ privacy. This can be achieved through the use of anonymizing and synthesizing datasets.

And third, Europe’s digital infrastructure must be improved. This will require investment in resilient, robust and high-quality digital connectivity. The European Commission plays a central role here, enforcing strict competition rules and pushing for a true single market for telecoms across Europe.

“The number of European tech start-ups has grown dramatically in recent years. The task for the next Commission is to capitalise on this opportunity – by giving these firms opportunities to scale and thrive, and by ensuring all sectors of the European economy can take full advantage of new innovation,” said the paper’s author and assistant director at CER, Zach Meyers.

Read the full report here

 


EU Won’t Strengthen the Single Market with an Interventionist Industrial Policy

A teacher writing an end-of-term report on a pupil whose progress resembled that of the EU Single Market would no doubt end the report with: “Could do so much better”.

The annual Single Market and competitiveness report published by the European Commission acknowledges the challenges the EU faces in realising the full potential of the Single Market. How could it not?

The report shows no improvement in the transposition of EU directives into national laws.  The so-called conformity deficit means that in many fields companies and citizens are faced with a patchwork of laws instead of enjoying legal certainty across the internal market.

Venture capital investment as a proportion of GDP is falling, R&D spending by companies and governments as a proportion of GDP is down too.

The number of patent applications per capita – a common metric to assess the level of innovation in an economy - is also in decline.

Meanwhile, the regulatory burden on companies was lifted slightly but remains heavy, and productivity growth remains less than half that of the US, as it has over the past 30 years.

These are all worrying statistics. But more concerning still is that elements within the current European Commission remain wedded to an economic strategy that will further undermine Europe’s economic crown jewel – the Single Market of some 450 million consumers.

"The Single Market and industrial policy go hand in hand to support the EU’s competitiveness," said Commissioner for the internal market, Thierry Breton in the Commission press release.

But the prevailing view from economists and from companies themselves is that efforts to boost Europe's competitiveness will in fact be undermined by industrial policy.

The Single Market is just that - a market. Industrial policy is short-hand for lax state aid rules, favouring national champions, protectionism and European economic sovereignty - the very things that undermine the functioning of the Single Market.

Europe must abandon its obsession with interventionist industrial policy if it is to strengthen the EU's Single Market and boost the competitiveness of the European economy.


Time for Major Reforms to Strengthen our Single Market

The Centre for European Policy Studies (CEPS) has unveiled a report on the EU Single Market that pulls no punches. It says that while there has been progress in some areas, for decades the Single Market has been largely neglected and there has been a lack of political will pushing it, especially when it comes to enforcement.

As a result the project that was conceived by Jacques Delors in the mid-1980s is still far from completion, and poorly enforced due to political inertia and vested interests at member state level, the report says, while acknowledging that Europeans have enjoyed some benefits over the years.

Its author, CEPS Senior Fellow Professor Jacques Pelkmans calls for a shake up in the way EU institutions manage what many people see as the EU’s economic crown jewels. If his 10-point plan is followed, Professor Pelkmans believes EU gross domestic product in the EU could be boosted a whopping 9 percent over the next decade.

“That’s the equivalent of the combined GDP of Belgium, the Czech Republic and Ireland,” he said, adding: “It sounds a lot, but that illustrates how much the Single Market today is underperforming.”

“The EU needs the Single Market much more than some people realise. In the long-term the Single Market is the key determinant of Europe’s competitiveness,” he added.

The CEPS report, sponsored by Europe Unlocked, identifies the broad obstacles holding the Single Market back and proposes concrete action to address them. They include call for a detailed programme of medium-term priorities to be adopted this summer, and for the incoming European Commission and European Parliament to commit to meeting the targets during their term in office.

The plan calls for reforms in the three key EU institutions, as well as in infringement procedures that end up at the European Court of Justice.

European Parliament

The Internal Market Committee (IMCO) needs to be beefed up so that it plays a more supportive role to the Commission in enforcing single market laws. Once a year the committee should meet to address infringements by member states. The Single Market hearings will give voice to third parties including companies and consumers, that are impacted by member states’ failure to uphold EU laws.

The Committee will have no powers to punish member states, but it will add to European Commission pressure being put on countries that don’t transpose EU laws properly.

“The Commission is tip-toeing through this problem. There needs to be much more pressure on member states to respect the laws underpinning the Single Market,” professor Pelkmans said.

“There are many infringement cases each year. Dealing with them takes so long and costs so much. If a company is impacted negatively by an infringement it could take years for it to be resolved. There has to be more pressure on member states,” he said.

Council

Beef up the Council Troika comprising past, present and future EU presidencies. The European Council of heads of government should instruct the presidencies to work closely together on a revolving basis based on the overall  commitment to implement Single Market programme. them a specific mandate to ensure continuity and commitment to the Single Market.

“In the early years of the Single Market in the mid to late 1980s the Troika was used to push priority areas of policy, but more recently it has limited itself to being a vehicle to help with the practicalities involved in the handover from one presidency to another, “ the professor said.

European Commission

There hasn’t been a dedicated Single Market commissioner since 2015, when the Commission combined internal market, entrepreneurship, SMEs and EU industrial policy into one directorate, unclearly called DG Grow, under one commissioner.

“There needs to be a senior member of the next Commission dedicated to the Single Market. This should either be a vice president, or there should be a structure created linking the Commission president with the Single Market Commissioner,” professor Pelkmans said.

European Court of Justice

For cases of significant Single Market concern, the report calls for the creation of a fast-track procedure  to the European Court of Justice (CJEU), and/or the automatic suspension of a national law that contradicts Single Market laws at the outset of an infringement proceeding.

The CEPS report also calls for a specific action plan on the implementation of the Services Directive. It focuses on professional services, retail and construction, which it said are in particular need of intervention.

And it warns that deep-rooted resistance by some member states to opening their markets up to competition from within the Single Market has been economically damaging, especially in telecoms, spectrum, air traffic control and copyright.

The report also points to a “steep and unmatched increase in the regulatory burden” for businesses, especially during the mandate of the current Commission. And it urges the EU to establish a methodology  for measuring the cumulative burden of regulation.

And while the report sees the Single Market helping the EU to address the challenges posed by the green and digital transitions, it also warns that well-intended initiatives “often create rigidities”, and could even feed vested interests that hinder common EU solutions.

“Do we want the Single Market to become significantly more dynamic or do we want to continue with a half-baked Single Market?  With a limping Single Market, the engine of economic progress risks stuttering, no longer engendering the expected mobility and dynamism,” Professor Pelkmans said.

The report said that if we don’t act now there’s a serious risk that world class EU enterprises would be inclined to invest elsewhere. Meanwhile, more must be done to encourage European start-ups and mid-caps. Member states and the EU should do far more to help these companies to become more dynamic. That means, for example, giving them easier access to markets and to private risk finance from venture capitalists and capital markets, he said.

But there is much more to be done to realise the full potential of the Single Market, the report said.

“There needs to be a common commitment on the main elements of this medium-term programme from all three institutions, and there needs to be follow-through afterwards, setting milestones” he said.

Download the full report


The Calls to Strengthen Our Single Market are Becoming Deafening

Business has been saying it. Now 15 EU member state governments are saying it too. The Single Market has not been given the prominence it deserves. And there's currently a lack of political will to further develop what is widely seen as the EU's crown jewels.

Companies and countries alike are now demanding that the Single Market be put at the top of the agenda of the incoming European Commission. It is essential for Europe's long-term competitiveness and strengthening it will bring growth and prosperity for Europe.

In a so-called non-paper or unofficial government position released on Wednesday (drafted by Finland and co-signed by 14 other small and medium size EU member states) the countries state that "competitiveness requires investments in research and innovation, continuous efforts to tackle unnecessary burdens on businesses, particularly SMEs and micro-enterprises, a competitive legislative and policy framework, an attractive business climate and maintenance of a functioning market economy."

They argue that three things will strengthen the EU's competitiveness: "a more integrated Single Market, a more prominent role in digital development and an active policy of free and rules-based trade with the rest of the world."  This chimes with Europe Unlocked’s members and the wider business community.

Meanwhile, Enrico Letta, former Prime Minister of Italy, is preparing a report on the future of the EU Single Market to be presented to the European Council in March 2024. The SOS calls for action to Strengthen Our Single Market are becoming deafening.


Simply spending more won’t restore Europe’s competitiveness

Simply spending more won’t restore Europe’s competitiveness, regardless of whether it comes from national or EU coffers

Belgium takes over the Presidency of the Council of the EU on 1 January and Belgian Prime Minister Alexander De Croo is sending some mixed messages on how to restore the European Union’s economic fortunes in a recent interview with the Financial Times.

He was right in saying that we need to deepen the Single Market and that relaxation of state aid rules is the “exact opposite” of what is needed to regain competitiveness.

State aid has been on the rise since 2013 and ballooned during the covid pandemic. EU Member States trebled the amount they handed to companies. According to European Commission figures state aid reached EUR335 billion in 2021, compared with EUR103 billion in 2015.

But state aid has continued to rise in the wake of the pandemic. According to figures cited by the FT, approved aid totalled EUR733 billion between March last year and August 2023. Exceptional circumstances increasingly are becoming the norm and a pretext to continue splashing the cash on firms.

Unfortunately, Prime Minister De Croo favours bloc-wide incentives and EU coordination of industrial policy to help boost Europe’s economy. His gripe is that larger countries with deeper pockets will hand out more state aid than Belgium can.

He’s not opposed to handouts, rather he believes the money should be distributed at EU level, not national level. This wrongly assumes that Europe can just spend its way to a more competitive future. It can’t.

This mindset puts market mechanisms at risk. We hope that Mr. Draghi will also reach similar conclusions in his competitiveness report when that is published next year. If we really want a more competitive Europe then, amongst other things, we need to create the right conditions for private sector investment, a regulatory framework which supports the innovation needed for the green and digital transitions and overcome needless barriers to cross-border trade. This is a far better way to boost productivity and the only sustainable long-term way to grow the EU economy.


An Open Letter to Mario Draghi

We are delighted to announce the launch of Europe Unlocked, a new industry coalition whose goal is to increase the competitiveness of the European region by strengthening its Single Market. To this end, Europe Unlocked is sending an S.O.S to the Commission, Member States and the incoming Parliament to Strengthen our Single Market.

We invite you to explore our open letter to Mr Draghi, highlighting the need for a new approach to the economic and security challenges we face, focused on opportunity. This letter sets out our call for a commitment to boost competitiveness in the EU by urging the Commission to prioritise the strengthening of the Single Market in its next mandate.

Join us in this journey to unlock the full potential of Europe, fostering a brighter future for all.

Read the full letter here.


Introducing Europe Unlocked

Europe Unlocked is launching today !

Our newly formed industry coalition aims to increase the competitiveness of the European region by strengthening its Single Market. To this end, Europe Unlocked is sending an S.O.S to the Commission, Member States and the incoming Parliament to Strengthen our Single Market.

Europe needs to embrace competition and trade, ensure that the green and digital transitions deliver productive and sustainable outcomes, and help prepare Europe’s workforce with the skills needed to compete in a modern, global economy.

Looking ahead to a new European Commission and the European Parliament elections in 2024, Europe Unlocked will push for a radical re-think of how to boost productivity, and therefore prosperity across the continent.

We encourage you to read our associated press release, which provides further context and insights into the initiatives Europe Unlocked will be undertaking across the next year.

Follow us on LinkedIn and X to keep engaged with our activities throughout next year and unlock the full potential of Europe.


New business initiative forms to push for open and competitive markets in the EU

Europe Unlocked will campaign for greater focus on competitiveness, a stronger Single Market and it will fight against the drift towards protectionism in the EU

BRUSSELS - November 7th 2023: A broad coalition of organisations representing European businesses both large and small launched under the name Europe Unlocked today, to push European policy makers to address serious weaknesses in Europe’s economy.

The Europe Unlocked initiative continues to grow and the organisations whose names appear below were members at the time of launch.

At the time of the global financial crisis the EU and the US economies were roughly the same size. However, by 2020 the EU economy was significantly below the level of the US and this divergence continues (International Monetary Fund, GDP figures).

“This trend is alarming,” said Kieran O’Keeffe, Executive Director of Europe Unlocked.

Over the past decade the European economy has lurched from one crisis to another. The global financial crisis of 2008 was followed by a European currency crisis and unfortunately many others since, not least the pandemic and the war in Ukraine.

The risk is that exceptional measures that were needed to address the crises will become the norm. “That mustn’t happen. It is time the EU re-established some of the core elements that underpin the Union - in particular, the Single Market” Mr O’Keeffe said, adding: “Under the current European Commission the Single Market has been neglected.”

Looking ahead to a new European Commission and the European Parliament elections in 2024, Europe Unlocked will push for a radical re-think of how to boost productivity, and therefore prosperity across the continent.

Productivity is by far the biggest, and the only sustainable driver of economic growth in the long-term. The prosperity that would result from a more productive economy would in turn strengthen Europe’s security.

“The current Commission is too keen to treat the EU as a war-time economy. Europe should not run its economy from a bunker. We need a positive and confident policy programme from the next Commission which puts open and competitive markets at its heart,” Mr O’Keeffe said.

Current Members: