Five minutes to midnight for the European single market

Last year, the European Union celebrated the 30th anniversary of the single market, which is considered one of its greatest successes. The single market has significantly simplified the daily lives of both citizens and businesses and has contributed greatly to job creation and economic growth across the EU. This market has been crucial in promoting the free movement of goods, services, capital, and people. It has not only fostered economic integration and innovation but has also created consumer benefits through the standardization of rules and the stimulation of competition.

Today, the same single market is under pressure, as acknowledged by the President of the European Council, Charles Michel: “We have neglected the source of our prosperity.” As a result, the future of the single market will be a prominent topic of discussion in the coming period, both in Europe and in the Netherlands.

Enrico Letta calls for necessary reforms

Last year, the European Council tasked Enrico Letta, former Prime Minister of Italy, with preparing a report on the future of the single market. It is no coincidence that Letta was given this task, as he was instrumental in the introduction of the single market back in 1993. In his report, Letta concludes that the circumstances under which the single market was established differ greatly from the world we live in today and notes that, although the EU officially has one single market, it too often fragments into 27 national markets in practice. Moreover, Letta emphasizes that Europe is quickly losing ground to Asia and the United States; the deteriorating European position on the global economic stage requires action.

Therefore, Letta advocates for major maintenance through, among other things, deeper integration of the single market with uniform rules, to enable companies and investors to do business more easily. This could be achieved, according to Letta, by using more regulations instead of directives. Regulations are rules that apply directly and uniformly across all EU countries, without allowing countries to choose how they implement them. Directives, on the other hand, give countries more freedom to determine how they implement the rules, which can lead to differences in how laws are interpreted and applied in each country. These differences can cause unfair competition and make it difficult for companies operating in multiple EU countries, as they face different rules in each country.

Letta also stresses the importance of better integrating the financial markets within Europe, particularly by strengthening the Capital Markets Union, whereby European savings should find their way to European investments to finance transitions. This is essential to tackle the biggest challenge facing the European Union: financing the transition to a green and digital economy. At present, European companies receive less private capital than American companies, which particularly hinders small and medium-sized enterprises in their growth plans. Since each country has its own rules, confusion arises. Letta therefore proposes introducing a European corporate model with uniform rules. This model would exist alongside the current 27 national models, and companies could choose to use it.

Parallel to this, another report is expected this summer on European competitiveness, drafted by former ECB President (and once again a former Prime Minister of Italy) Mario Draghi, who will likely advocate for a European industry fund financed with common debt guaranteed by the member states. This plan for further European integration may prove challenging, given the rise of right-wing and Eurosceptic parties, a trend that has not bypassed the Netherlands either.

Attention to reform in “The Hague”

Dutch politicians also show interest in the reform of the European single market. During a plenary debate in the Dutch House of Representatives on the extraordinary European Council of April 17 and 18, which took place on April 16, Prime Minister Rutte emphasized the need to strengthen Europe’s competitiveness. He expects that Letta’s report will contribute to this.

During another debate in the Dutch House of Representatives on April 24 about market regulation and consumer protection, the single market was also discussed. Parties such as CDA (Christian Democrats), VVD (Conservative Liberals), and D66 (Liberal Democrats) asked Minister Adriaansens (Economic Affairs and Climate) about her strategy regarding territorial supply constraints, trade practices that prevent retailers or wholesalers from sourcing from a supplier of their choice in a member state of their choice. Minister Adriaansens indicated that she is currently working with the Benelux to possibly ban such practices and is trying to persuade the European Commission to tackle territorial supply constraints. Additionally, the cabinet is currently preparing a position paper on this issue in preparation for the European Competitiveness Council at the end of May, and is also trying to mobilize other member states around this paper. The minister is therefore pleased that territorial supply constraints are mentioned in Letta’s report on the single market, which she says “gives her more ammunition.”

Influencing the future European playing field

After the European elections in June, there will be a new European Parliament, which is expected to make a shift to the right. This could pose a challenge for further European integration plans. Also, a new European Commission will need to set policy priorities, with special attention to the single market. The choices made will be decisive for the future playing field for consumers, businesses, and organizations in Europe.

For stakeholders, it is thus important to make their voices heard. Further European integration is beneficial for the business climate but may be hindered by a more Eurosceptic parliament – both at European and various national levels. If the EU indeed starts working more with regulations, this will also mean that lobbying in Brussels becomes more important. Member states will then have little or no room for their own interpretation of the rules.

Meanwhile, we patiently await the formation of a new cabinet in the Netherlands, as the cabinet fell last summer after the coalition partners clashed over immigration. Therefore, they are currently in a caretaker capacity awaiting the outcome of negotiations between the parties PVV (Freedom Party), VVD, NSC (Social Conservatives) and BBB (Farmer–Citizen Movement) to form a new cabinet. The current forming parties undoubtedly want to exert their influence on this issue in their government agreement. In the meantime, the current “caretaker cabinet” continues to work on the subject, including an official appreciation of Letta’s report, expected in May. Regardless, the issue is in the spotlight. One thing is certain: it is five minutes to midnight for the European single market.