Round table no 6 What kind of domestic market and what budget for the EU

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Round table no 6What kind of domestic market
and what budget for the EU?
Centre d'analyse stratégique Europe in the Global
Economy

• Adriaan Dierx
• European Commission
• Directorate General for Economic and Financial
  Affairs

Paris, 23 November 2007
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Overview

• A number of important policy initiatives have
  been recently put forward by the Commission to
  respond in a coherent manner to the internal and
  external challenges facing the EU economy
• 3 Reviews
• Mid-term Review of the Lisbon Strategy
• Single Market Review
• EU Budget Review
• and next year EMU_at_10

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Lisbon Strategy in the context of globalisation

• The October Communication from the Commission to
  the Autumn European Council highlighted
• The re-launch of the Lisbon Growth and Jobs
  Strategy in 2005 has helped to speed up the pace
  of reforms.
• Sound public finances and flexible and efficient
  markets are crucial in light of the increasing
  interdependence of the Member States' economies
  (spillover effects).
• Strong policy coordination and the adoption of
  country-specific recommendations represent a step
  forward.
• In the euro area spillovers are even more
  important.
• Sharing a common currency and monetary policy
  offers an added importance to policy
  coordination.

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Single Market Review Achievements and Challenges

• From 1992 to 2006 the SM resulted in a 2.2
  increase of the EU GDP and in the creation of
  2.75 million additional jobs. However,
• benefits can be doubled with the removal of
  Internal Market barriers which remain in place
• barriers still exist at national level
• The SM, EMU and enlargement, have contributed to
  reinforce the integration of European product
  markets. The resulting increase in competition
  led to considerable changes in market leadership.
  However,
• a lack of business dynamism and price rigidities
  persists
• the SM has lost attractiveness for foreign
  investors especially in comparison with fast
  growing markets
• the SM has failed to promote the expansion of
  activities in fast growing markets
• the SM has been an insufficient driver of
  innovation

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Single Market Review Further potential

• Obstacles to exploitation of full potential
• Implementation is slow and sometimes incorrect
• Rather legalistic than economic approach
• Barriers persist in certain sectors
• An Internal Market for knowledge is still missing
• Therefore, the SM of the 21st century needs to
• Deliver more results for citizens and SMEs
• Open new frontiers of knowledge and innovation
• Take better advantage of globalisation
• Be based on better knowledge of the functioning
  of markets

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Single Market Review External dimension

• Single Market policy cannot be developed in
  isolation but must take more account of the
  global context
• Expanding the competitive space for EU firms to
  third countries (by further trade liberalisation
  and active enforcement of our market access
  rights)
• Expanding the regulatory space (by promoting EU
  standards outside the EU as well as benefiting
  from best practices elsewhere)
• Actively ensuring that EU citizens fully reap the
  benefits of openness (through better standards,
  lower prices and greater choice)

7
Single Market Review Governance and market
monitoring

• Building on the existing experience of the
  Commission and Member States, the Commission
  developed a two stage methodology for market and
  sector monitoring.
• Sector screening aimed at identifying sectors
  offering the greatest benefits based on 3
  criteria
• Economic importance (static and dynamic)
• Their role in the adjustment capacity of the EU
• Signs of market malfunctioning
• In-depth monitoring of the selected sectors in
  order to determine why markets in these sectors
  are not functioning well

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Accepting the need to adjust in the global
economy

• The public acceptability of further integration
  of the SM is hampered by
• negative attitude of citizens towards economic
  reforms
• economic reforms tend to carry short-term
  adjustment costs for relatively small, well
  identifiable groups, while its benefits show in
  the longer-term to a wider, more heterogeneous
  group
• In order to increase the political acceptability
  for further reforms it is crucial to
• provide evidence illustrating the overall impact
  of reforms proposed and to identify the most
  appropriate sequencing of reforms
• facilitate the process of adjustment particularly
  for those most directly affected

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Need for a more supporting role of the EU budget

• The EU budget composition 36 structural funds,
  44 CAP, 7 education, RD, energy and transport.
• Perspectives for the EU budget review
• Does the current budget composition allow to
  fully support growth and cohesion?
• Could a reform of the CAP improve effectiveness
  and efficiency of current EU spending?

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Catching-up and regional cohesion

• For the period 2007 to 2013, 350bn are available
  for the Structural Funds (EFRD, ESF) and the
  Cohesion Fund
• Over 80 are reserved to promote growth and real
  convergence of the least-developed Member States
  and regions
• The bulk of this expenditure will support the
  Lisbon agenda through investments in
  infrastructure, education, research and
  entrepreneurship
• Perspectives for the EU budget review
• Could the effectiveness and efficiency of
  structural policy be enhanced by reinforcing its
  concentration on growth and competitiveness?
• Should the structural policy focus even more on
  least-developed Member States and on regions with
  a high growth potential?

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Making rural areas and farmers fit for the 21st
century

• Distortionary market interventions have been
  substantially reduced, demanding merely about 10
  of 2007 CAP expenditure
• 67 of CAP expenditure are dedicated to direct
  payments to alleviate income pressure in
  agriculture resulting from past and ongoing CAP
  reform
• 23 of CAP spending are dedicated to rural
  development to support adjustments in farm
  sector and rural areas and to promote the
  provision of agriculture-related public goods
• Perspectives for the EU budget review
• Does the successful reform process allow for
  reduced agricultural expenditure in the
  long-term?
• Do all rural development measures such as the
  provision of public goods need to be financed at
  EU level?