The state of the EU Single Market

DANIEL DEBONO – EU AFFAIRS MANAGER & HEAD OF BRUSSELS OPERATIONS – MBB

The Single Market is the EU’s most important asset, driving economic growth, jobs, innovation, and higher living standards for citizens. It also helps the EU to be more resilient during crises and to address strategic dependencies. The Single Market is based on four fundamental freedoms: the free movement of goods, services, capital, and labour. These freedoms have helped to create an open economic space where businesses and people can operate more freely and efficiently. However, although the Single Market has achieved a great deal over its 30-year history, there is still room for finetuning and further alignment to address barriers to cross-border trade and investment.

These barriers can be caused by a variety of factors, including complex and inconsistent application of EU legislation and a lack of transparency about the rules that businesses need to comply with. The rise of digital technologies and events like the global health pandemic also had a significant impact on the Single Market and the EU needs to continue responding with regulatory frameworks for emerging industries without stifling innovation, as well as to address other external challenges.

Businesses, particularly SMEs, are increasingly struggling to keep up with the regulatory burden within the Single Market’s landscape. Even more, when legislation is not applied consistently, and companies must face complex national rules and procedures which makes it difficult to export goods and services to other EU member states in what should be a seamless process. Moving forward and looking at the new upcoming EU legislative term (2024-2029), firm action is required by the European Commission first and foremost to strengthen the Better Regulation agenda by regulating only what is necessary and to apply a robust ‘Competitiveness Check’. Strongly commit to the 1-in-1-out principle based on proper evaluation of compliance costs and simplification and prioritising leaner implementation of existing legislation before proposing new initiatives.

The Commission should also ensure that EU regulations are coherent and consistent across Member States. By taking these steps, the Single Market would become an enabler for businesses and more attractive for investors, which in turn would boost economic growth and job creation.

The EU must promote and further improve the visibility of information portals such as Your Europe and the Single Digital Gateway that provide information and contact points to companies looking to access new markets or internationalise their business. The National Contact Points and the local Enterprise Europe Network are also there to provide support in this regard. By taking these steps, the EU can make the Single Market more accessible and easier to navigate for businesses of all sizes.

The COVID-19 pandemic and the war in Ukraine have exposed the fragility of the EU Single Market, particularly its reliance on global supply chains and imports from politically unstable regions, including close to the EU borders. These crises have highlighted the need for EU strategic autonomy. The Single Market Emergency Instrument is one example of the EU’s proactive efforts in providing for a crisis governance framework that aims to preserve the free movement of goods, services and persons. The Critical Raw materials act attempts to ensure EU access to a secure and sustainable supply of critical raw materials counteracting EU supply disruptions. The latter is complemented by the Net-Zero Industry Act which is an initiative stemming from the Green Deal Industrial Plan which aims to scale up the manufacturing of clean technologies in the EU.

Another important element for the good functioning of the Single Market is an integrated European capital market, or as it is better known, the Capital Markets Union (CMU). A fully functioning CMU would make it easier for companies to raise money from investors across different member states, which would also help finance projects that speed the transition to a more sustainable and digital economy. Equity-based financing can be more suited than traditional bank lending for the financing of certain innovative higher-risk growth sectors, such as digital and hi-tech and carbon-intensive sectors developing green technologies. Sourcing cross-border investment would give life to projects that would have otherwise remained on paper at the detriment of the economy, jobs, and climate.

The Single Market is a living project that needs to constantly evolve to reflect the changing global economy and to meet the expectations of EU businesses and citizens. For this reason, it must continue to be at the centre of EU policy making. EU officials should continue engaging with business stakeholders to gather feedback and identify areas where the Single Market can be improved. The Single Market is essential for the future of Europe and must therefore remain resilient, competitive, and a source of prosperity to all.

Daniel Debono is the EU Affairs Manager and Head of Brussels Operations of the Malta Business Bureau (MBB). The MBB is the EU-advisory business organisation of The Malta Chamber and the Malta Hotels and Restaurants Association. It is also a partner of the Enterprise Europe Network.

This article was first published in The Malta Independent on Sunday on 8^th October 2023.