The internal market and economic policy coordination

Article 26(2) of the Treaty on the Functioning of the European Union (TFEU) succinctly defines the Internal Market as “an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties”. Today, we tend to take for granted that we can transport goods across the internal borders of the EU and that no restrictions apply to travellers or EU citizens taking up residence in another EU Member State, or indeed, (for the most part), in the European Economic Area (EEA), which comprises Iceland, Liechtenstein, and Norway.

However, there is nothing static about the internal market, which is affected by political, economic, social, and technological change. It has to adapt to these changes and point a way forwards for the European Union, helping its economy to flourish. Advancing the completion of the internal market is therefore a permanent task for the European Union. At the same time, the EU is facing major challenges like the future development of the economic and monetary union and the Schengen area, as well as the planned withdrawal of the United Kingdom from the European Union.

The Single Market Strategy

Building on the presentation of Single Market Acts I and II by former Internal Market Commissioner Barnier, Elżbieta Bieńkowska, Commissioner for the Internal Market, Industry, Entrepreneurship and SMEs, published the Single Market Strategy for goods and services on 28 October 2015. In it, the European Commission announces projects to deepen the internal market. These include measures to strengthen the Single Market for Services and the free movement of goods, and to assist SMEs and start-ups, to modernise the standardisation system, to create a more efficient public procurement system, to consolidate the legal framework for intellectual property rights and to improve the implementation and application of EU law.

In its written opinion (in German) (PDF, 371 KB), (in English (PDF, 354 KB)), the Federal Government welcomes the presentation of the strategy. It is a necessary addition to the Digital Single Market Strategy presented in May 2015. However, it is not ever more new regulation that will help deliver further integration within the Single Market, but correct implementation and enforcement of those rules that already exist. In particular, therefore, the Commission’s focus on enforcement of the law is important.

Establishing a Single Market for Services

The European Commission wishes to make greater use of the potential of the internal market in the services sector. The Services Directive, which aims to remove red tape and promote cross-border trade in services, was a key step in this direction. For more detailed information on the Services Directive, see www.dienstleistungsrichtlinie.de (in German only).

In the Single Market Strategy, the European Commission is also emphasising the deepening of the Single Market for Services. To this end, proposals for a comprehensive services package were presented on 10 January 2017, including the introduction of a services e-card in order to cut the red tape involved in the cross-border delivery of services.

The Federal Government will work constructively in the context of the further negotiations. Here, the goal of strengthening the Single Market for Services must not undermine the protection of health or consumers, and expensive new administrative structures in the Member States must be avoided. In particular, the law on the posting of workers and on welfare insurance should remain fully exempted from the scope of the services e-card.

Mutual recognition of the professional qualifications obtained by EU citizens in the Member States is another pivotal factor when it comes to creating a single market for services. Directive 2005/36/EC on the recognition of professional qualifications sets out rules for recognition and for administrative procedure in the Member States.

In the Single Market Act I, the Member States, the European Commission, and the European Parliament agreed to modernise this directive, and to simplify and speed up the recognition system. In the future, there are to be electronic professional cards for certain professions. The updated Professional Qualifications Directive will foster labour mobility within the EU and thus help address the skills gap in Germany.

Upholding quality standards for regulated occupations

As part of a transparency initiative, the European Commission has undertaken an evaluation of all regulated occupations in the Member States in order to gain a complete picture of and to assess the different conditions for access to various occupations in the Member States. Regulated occupations are occupations where legislation requires a person to have certain qualifications in order to work in that occupation. Regulations primarily exist where there are particular interests in quality assurance or a high level of skills.

In its services package, the EU is proposing the introduction of an analytical system to scrutinise the proportionality of occupational regulations. The Federal Government regards the underlying intention of the EU, i.e. to improve the proportionality of occupational regulations, as justified, but takes a highly critical view of the introduction of a new, binding legal instrument. It is important not to undermine the competence of the Member States for the regulation of occupations.

Steering of the single European market and economic policy coordination

Individuals and companies can only make effective use of the opportunities offered by the internal market if every individual internal market directive is fully and correctly implemented by the Member States within the specified deadline. In order to monitor the Member States’ performance in this regard, the European Commission publishes the Single Market Scoreboard online. Various instruments are used to measure each Member State's performance in terms of implementing and applying internal market legislation. The relevant criteria include the number of internal market directives that the Member State has failed to implement within the deadline and the performance of the country’s SOLVIT centres.

The single European market has progressed a long way, but economic policy remains first and foremost a national responsibility in many areas. The debt crisis in the eurozone has made it clear that even greater economic policy coordination is needed, and that the responsibility of the Member States for their own actions must be strengthened. To this end, the Stability and Growth Pact has been supplemented by a new procedure to prevent and correct excessive macroeconomic imbalances. Like the Stability and Growth Pact, it is subdivided into a preventive and a corrective arm, and includes instruments which can insist effectively on necessary structural reforms. The procedure is concentrated on countries which have weaknesses in terms of their competitiveness.

Further to this, the eurozone countries in particular have promised to undertake the measures they deem necessary to strengthen the forces for growth. To this end, the heads of state and government annually make commitments at the highest political level in the context of the Euro Plus Pact, and these are then implemented by the states within the following year.

A new level of priority is attached to existing procedures of economic policy coordination which involve all EU countries, and particularly the annual country-specific recommendations. The Member States respond to these in their National Reform Programmes (NRPs). Germany’s NRP is drawn up by the Federal Government under the leadership of the Economic Affairs Ministry.

Budgets for the individual areas of the Multiannual Financial Framework (MFF) of the European Union

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Infographic (PDF, 975 KB)

Development of the Economic and Monetary Union

The eurozone has successfully been stabilised in response to the economic and financial crisis. However, the work on the sustainable institutional strengthening of the Economic and Monetary Union has not yet been completed. The crises of recent years have shown that crises can be overcome only be more, and not by less Europe.

The aim is to lastingly strengthen the resilience of the euro and consolidate the preconditions for a high level of growth, competitiveness and employment, and for sound public finances. On 22 June 2015, the five Presidents of the European institutions presented ambitious plans to reach this aim. The European Commission relaunched the debate on the future development of the Economic and Monetary Union by publishing a White Paper on the Future of Europe on 1 March 2017. At the end of May 2017, it also produced a reflection paper with ideas about deepening the Economic and Monetary Union.

Detailed information on the sovereign debt crisis in the eurozone and the European policy measures to tackle the crisis can also be found at www.stabiler-euro.de (in German).