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28th Jul 2021

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Untapped potential of the single market could boost European recovery

  • Morten Løkkegaard: Last year, the European economy contracted by a staggering 7.4 percent. As a result, millions lost their jobs (Photo: europarl.europa.eu)

As governments across the European Union begin their coronavirus vaccination rollouts, there is growing hope that we shall soon leave the worst of the health crisis behind us.

However, it will take much more than just a small injection to reverse the economic damage caused by the pandemic.

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Last year, the European economy contracted by a staggering 7.4 percent. As a result, millions lost their jobs.

Rising unemployment and economic anxiety is threatening families all over Europe. The need to create jobs is urgent, and that demands concrete proposals to boost the economy.

One way is to realise the huge potential in the single market for services.

The EU has taken unprecedented and decisive action to mitigate the economic fallout. However, for the European economy to remain competitive and resilient in the long-term, we need to continue reforming and strengthening our single market.

Improving the free movement of services, one of the 'four freedoms' of the single market, is the best way to continue creating jobs and help our economies recover.

The services sector is the indispensable growth engine of the European Union. It accounts for three-quarters of the EU's economy and a similar proportion of its employment.

Faced with a historic recession, boosting the services sector must be on top of our political agenda. Especially, since completing the single market for services is one of the few areas where we can generate growth without increasing public debt.

As studies have shown, the potential gains of better harmonising service regulations could be around €300bn – that is around half the entire recovery fund.

Due to the nature of service provision, other economic sectors - such as manufacturing or the digital economy – are strongly dependent on it. A better functioning internal market for services is therefore a crucial necessity for a more competitive and innovative European economy.

Over the last years, the EU has taken important steps to address existing barriers to the free movement of services, for example by adopting the services directive.

However, the full potential remains largely untapped.

There is ample evidence of how red tape, discriminatory practices and regulatory restrictions create barriers that deprive citizens of jobs, consumers of choices and entrepreneurs of opportunities.

Having worked on this subject for many years, there are three key problems that Europe must tackle to fully benefit from a single market for services.

Three steps

First, we must address national barriers and ensure the enforcement of EU legislation.

Unfortunately, some member states frequently either refuse to fully implement existing legislation or create unjustified barriers that obstruct the provision of services.

Especially smaller companies suffer from red-tape and unjustified administrative barriers. The European Commission must finally make use of all resolution mechanisms and infringement procedures at its disposal to ensure the proper functioning of the internal market.

Second, provide legal clarity to businesses and consumers.

Whenever I talk to small business owners one issue comes up sooner or later: how exceedingly difficult it is to obtain the necessary information about what rules to comply with, which procedures to follow, and which authorities to contact in the member state they wish to do business in.

Given these realities, an improvement of the already existing single points of contact is needed. Member states must make serious efforts to implement them in a more business and consumer friendly manner and to transform them from mere regulatory portals into fully functioning portals.

Third, providing transparent evaluation of member states performance.

Evaluating how open member states are for the provision of services is essential to complete the single market. It allows member states to learn from each other through best practice and it applies much needed pressure for enforcement of EU legislation and the removal of administrative barriers.

To this end, using the single market scoreboard would enable consumers and businesses to see how much progress is being made and in which areas, as well as allow the commission to prioritise enforcement action in areas that are particularly lacking.

The time has come to address the enduring flaws of the single market and to launch the necessary reforms to create a stronger and more prosperous Union.

The European Parliament will speak with one clear voice: creating a truly unified market for services, from Madrid to Tallinn, must be given the highest priority.

Author bio

Morten Løkkegaard is a Danish Renew Europe MEP and member of the committee on the internal market and consumer protection (IMCO) and rapporteur of the report on the future of free movement of services.

Disclaimer

This article is sponsored by a third party. All opinions in this article reflect the views of the author and not of EUobserver.

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