Fisher Investments Editorial Staff
Developed Markets

Europe’s One-Stop Shopping

By, 10/04/2012

Given the myriad challenges the eurozone and the EU have faced over the last several years, it’s not hard to see why some question whether the whole thing’s been a worthwhile endeavor. And to be sure, coordinating 17 countries’ monetary policies and a single market covering 27 countries is an extremely tall order—one perhaps in hindsight more easily discussed than actually accomplished.

But those who suggest Europeans call the whole thing off largely neglect some clear benefits tighter integration have brought—among them, the efficiencies a single market brings. The more the eurozone economically integrates into one, barrier-free market, the easier it is to do business across borders—a huge factor in a continent with 500 million-plus residents divided by mostly political boundaries.

In an effort to further make the eurozone one fluid market, the European Commission (EC) proposed the Single Market Act in April 2011, including 12 projects intended to be “instruments of growth, competitiveness and social progress rang[ing] from worker mobility to SME [small and medium enterprise] finance and consumer protection, via digital content, taxation and trans-European networks.” In other words, finding ways to make business easier to conduct across the European continent, making it easier for workers to relocate among countries, protecting intellectual property rights, making it easier for small and medium-sized enterprises to obtain financing and in general promoting business, competition and entrepreneurship. All worthy enough goals likely to benefit not only businesses, but consumers across the Union, too.

Wednesday, the EC attempted to further those efforts, making its second proposal to continue the push to deepen the single market and (ideally) help the region gradually overcome its recent relative economic sluggishness. According to Wednesday’s announcement, the Single Market Act II includes efforts to further integrate transportation and energy networks, encourage greater citizen and business mobility, integrate the digital economy more tightly (i.e., help facilitate e-commerce between EU nations) and give consumers broader access to bank accounts in other countries, streamline fees, etc.

The BBC reports with respect to the energy industry the act aims to open “energy markets so the 500 million citizens of the EU can choose their power supply from across the whole EU region—something the commission says could collectively save 13bn euros if all citizens switched to the cheapest tariff.”

Pretty hard to argue any of those are bad ideas—on the contrary, all the proposed measures are rather encouraging in the sense they promote greater economic freedom and stiffer competition. From here, the goal is for the EC to put forward corresponding legislative proposals by spring 2013 and for the European Parliament and Council to then adopt them by spring 2014.

The rub, though, is whether any of it actually gets implemented and to what degree it ultimately resembles the original proposals. While charged with representing strictly “European” interests, as opposed to those of their individual countries, the reality is that politicians are still (and ever will be) politicians. And legislation like the Single Market Act (either versions I or II) is likely to create some short-term winners and losers, which means interim dislocations for local businesses who may not be as competitive under a more tightly integrated single European market. That’s not to say there’s not still enormous long-term benefit in proceeding—there most likely is—but it’s not without cost, and the question will be whether, when the rubber meets the road, politicians are willing to inflict that pain and risk the ire of their individual countries.

Still, in our view, the goal is an entirely worthy one—and if European politicians can put their money where their mouths are, they may very well pass some of the more useful legislation for the future success of Europe’s grand monetary union experiment to date.

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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.

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