Download publication

Policy Contribution

Making the best of the European single market

Now more than ever, the EU needs to address concerns about the significant decline in productivity growth and the increasing perception of unfairness. Completing the single market would unlock the EU's growth potential. At the same time, the EU should empower member states to fight inequality by helping them better distribute the gains arising from economic integration.

By: , , and Date: February 2, 2017 Topic: European Macroeconomics & Governance

  • The slow-down in productivity and income over the past decade has weakened the European Union’s output legitimacy, which is grounded in delivering prosperity to its citizens. At the same time, decreasing growth reduces the capacity of governments to maintain existing levels of welfare protection and translates into a perception of rising unfairness and inequality across and within EU countries.
  • It is estimated that remaining non-tariff obstacles, in particular in services sectors, limit intra-EU trade to a level about four times smaller than the intensity of trade between US states. By completing the single market, the EU could generate significant income gains. However the more straightforward steps have already been taken, so the single market agenda now touches upon specific domestic regulations in EU countries.
  • We recommend a two-pillar strategy: for sectors with large externalities and/or economies of scale (such as energy or telecoms), regulations should be harmonised and at least close coordination between regulators should be achieved; for other services sectors, the efficiency of individual regulations on a cost-benefit basis with respect to their objective should be assessed, with systematic benchmarking.
  • We also recommend pursuing a credible environmental policy agenda on a destination basis (impacting both EU and non-EU firms) rather than on an origin basis (which is the case today), through a combination of ambitious technical standards, a reference path for the carbon price and revenue-neutral tax instruments. This would stimulate long-term investment in the energy transition without overly hurting EU firms’ competitiveness.
  • To further stimulate investment, especially in innovative sectors, we suggest moving ahead decisively with the capital markets union agenda. In parallel, the use of EU funds should be reviewed taking into account the objectives of economic convergence, spillovers between member states and solidarity.
  • EU national governments are responsible for welfare-related redistribution. However EU policies can help by empowering member countries to address the possible effects of EU integration, or by developing EU-wide instruments to limit its impact on possible losers. We argue that tax and social security avoidance or fraud need to be combatted with modern tools, eg a single electronic interface to monitor the payment of social charges of posted workers in their home countries. In order to fight corporate tax avoidance and improve tax fairness, the interest and royalties directive could be modified if the project of a common, consolidated corporate tax base (CCCTB) proves too difficult to agree.
  • Finally, we recommend making social security systems more neutral with respect to intra-EU migration, eg by introducing the full continuation of home-country unemployment rights for migrant jobseekers, with closer cooperation between national employment services, and by centralising information on pension entitlements on a single platform.
View comments
Read article More on this topic More by this author

Blog Post

Moroccan job market issues, and labour trends in the Middle East and North Africa

Morocco is an interesting case of structural labour market disequilibrium despite respectable growth, and illustrates the issues facing the region’s oil-importer countries

By: Uri Dadush Topic: Global Economics & Governance Date: December 7, 2017
Read about event More on this topic

Past Event

Past Event

Flexicurity and labour market reforms in Europe

This event will discuss the potential of the flexicurity model as employment strategy and the way it could be implemented in European countries to be successful.

Speakers: Grégory Claeys, Philip Collins, Werner Eichhorst, Antoine Foucher, Maria Jepsen and Marco Leonardi Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: December 4, 2017
Read article More by this author

Blog Post

Why US investors earn more on their foreign assets than Germans

The United States benefits from large yields on its foreign assets relative to foreign liabilities, while in most continental European countries foreign assets and liabilities yield almost the same. Risk factors can explain only a small part of this difference; tax, intellectual property and financial sophistication issues might contribute to the high yields on US foreign assets.

By: Zsolt Darvas Topic: Finance & Financial Regulation, Global Economics & Governance Date: December 1, 2017
Read about event

Upcoming Event

Jan
24
12:30

Corporate taxation in the digital era

How can we address digital taxation in the EU? Is the proposed "equalisation tax" on turnover the best policy to tackle the challeges posed by digital taxation?

Speakers: Johannes Becker, Dmitri Jegorov, Stephen Quest and Stef van Weeghel Topic: European Macroeconomics & Governance, Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article Download PDF

Working Paper

Returns on foreign assets and liabilities: exorbitant privileges and stabilising adjustments

Large stock of foreign assets and liabilities could foster international risk diversification. US, British and Japanese investors earn high yields on FDI assets, which might also relate to tax, intellectual property and financial sophistication issues. Valuation changes on net foreign assets had a stabilising impact.

By: Zsolt Darvas and Pia Hüttl Topic: Finance & Financial Regulation, Global Economics & Governance Date: November 29, 2017
Read about event

Past Event

Past Event

Sustainable growth in transition countries

This event will feature a presentation of the EBRD Transition Report 2017-18.

Speakers: Jonathan Charles, Zsolt Darvas, Sergei Guriev, Debora Revoltella and Lucio Vinhas de Souza Topic: European Macroeconomics & Governance, Finance & Financial Regulation Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: November 28, 2017
Read article More on this topic More by this author

Blog Post

The Republican Tax Plan

As the Trump administration’s tax plan continues its way through the legislature, we review economists’ and commentators’ recent opinions on the matter.

By: Silvia Merler Topic: Global Economics & Governance Date: November 27, 2017
Read article Download PDF More on this topic

Policy Contribution

How should the European Central Bank ‘normalise’ its monetary policy?

During the crisis, the ECB resorted to a number of unconventional monetary tools. This paper discusses how to phase out these policies and what the ‘new normal’ in monetary policy should look like.

By: Grégory Claeys and Maria Demertzis Topic: European Macroeconomics & Governance Date: November 23, 2017
Read article More on this topic More by this author

Blog Post

The capital tax cut debate

How much do workers gain from a capital gains tax cut? CEA chairman Hasset claims the tax cut will cause average household labour income to increase by between $4000 and $9000. Several commentators note this implies that more than 100% of the incidence of the tax is on labour. This question has triggered a heated discussion in the economic blogosphere, which we review here.

By: Silvia Merler Topic: Global Economics & Governance Date: October 30, 2017
Read about event More on this topic

Past Event

Past Event

Growth, productivity and social progress in Europe

On 26 October, Bruegel is organizing an interactive brainstorming seminar on Growth, Productivity and Social Progress in Europe. This is a closed-door, high-level workshop for a selected number of experts in the field.

Speakers: André Sapir Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels Date: October 26, 2017
Read article More on this topic More by this author

Blog Post

Long-term growth potential, or dead in the long run?

By linking growth with both employment and the imperative for India to hold its own with China for strategic autonomy, Prime Minister Modi has brought sustainable, high quality, inclusive economic growth to the centre of political discussion, which is where it rightfully belongs.

By: Suman Bery Topic: Global Economics & Governance Date: October 5, 2017
Read article Download PDF More by this author

External Publication

An innovation deficit behind Europe’s overall productivity slowdown?

Reinhilde Veugelers' chapter in "Investment and Growth in Advanced Economies", conference volume of the European Central Bank’s Forum on central banking in Sintra.

By: Reinhilde Veugelers Topic: European Macroeconomics & Governance, Innovation & Competition Policy Date: October 2, 2017
Load more posts