EU Council meetings no longer have the drama associated with the most acute phase of the euro zone debt crisis over 2011 and 2012, but they are once again assuming a similar level of importance.
EU institutional reforms over the past decade have provided it with enough ballast to ensure that the 27-member union will not collapse due to a sudden shock. But there are legitimate concerns about its long-term viability unless further deep-rooted reforms are implemented.
Top of the agenda at this week’s summit is deepening the single market, the rules which are designed to allow the free movement of goods, services, capital and people. On January 1st, 1993, the White Paper on the Completion of the Single Market was launched. It was a remarkable project and much has been done. But 32 years later, many of the recommendations and objectives in the White Paper remain theoretical concepts.
When faced with a choice of breaking down internal barriers to a single market or caving in to national and sectoral interests, member states have too often chosen the latter. Barriers to trade and investment remain buried in national rules and regulations and key parts of the plan for banking union have still to be implemented, damaging investment and disadvantaging consumers.
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Europe has relied heavily on exporting beyond its own shores. But protectionism is on the rise since Donald Trump embarked on his second term as US president. Globalisation has reached an impasse and may be replaced by more regionalisation.
This means that the EU can no longer rely to the same extent on export-led growth. It must build its level of self-sufficiency. A crucial starting point is unleashing the potential of the Single Market. A fully functioning European economy is the underpinning of a robust EU and this is important politically as well as economically.
There are encouraging signs that EU leaders are cognisant of these challenges. Friedrich Merz, the German chancellor, has upended the country’s economic orthodoxy by scrapping the national debt brake and pledging hundreds of billions in investment in the domestic economy. There is a general acceptance of the direction of the economic reports drawn up by former Italian prime ministers Mario Draghi and Enrico Letta. The commission has drawn up a strategy plan on the Single Market, which is up for discussion.
But the challenge is to take action. EU leaders have a lot on their plate, including urgent political and foreign affairs issues and tariff talks with the US. It is all too easy to get preoccupied with today’s issues and Trump’s tariff threats. But EU growth has been lacklustre and Europe lags behind in too many areas of innovation and technology. The EU needs to move ahead quickly to improve its own economic foundations.
