High time for the EU to refocus on the Single Market

The Confederation of Swedish Enterprise engaged actively in providing input to Mr. Letta throughout the drafting process of the report. We are pleased to note that several of the issues that we together with Europe Unlocked, a coalition of 19 like-minded business organisations across Europe, raised have been taken onboard, such as the lack of free movement in services, the need to improve the quality of the regulatory framework including proper enforcement mechanisms and addressing persistent fragmentation within the Single Market in various sectors.

Mr Letta’s report shows the complexity of improving our internal market. The report covers a range of topics, from free trade, transport, and telecommunications to a capital markets union (CMU) and even a fifth freedom regarding intangible growth drivers. The report is broad and comprehensive, hence there are topics that the business community can support but also topics which, from a Swedish perspective, could be problematic or at least require further reflection to ensure his ideas can stand the test of boosting EU competitiveness. Areas that our Confederation considers a priority when discussing the future of our Single Market include further integration, efficient enforcement and better regulation while maintaining a level playing field both internally and globally. Mr. Letta’s report needs to be considered in this broader context so as not to lose sight of the basic and indispensable building blocks of the Single Market.

Swedish Enterprise believes that forthcoming discussions on the Single Market need to focus on the core issues of removing barriers and reducing the administrative burdens in order to improve the four freedoms so that the EU can boost long-term competitiveness and productivity,

Mr. Letta is right in highlighting the need to remove obstacles to trade, mobility and competition in the internal market – not least on the service side, where much remains to be done. Member States should provide political momentum for the European Services sector to develop. We need to bring about more uniformity in implementation and enforcement and better monitor compliance. Herein lies a big task for the European Commission.

Mr. Letta also proposes an increased degree of integration via harmonisation. In many cases this is the preferred option. By enabling trade and competition on a level playing field, harmonised rules in many cases facilitate entrepreneurship and promote innovation. In policy areas where EU competence is and should remain limited, better functioning markets can be facilitated by an exchange of good practices between Member States.

Take energy and capital markets as examples. Changes to the functioning of these markets have a systemic impact and are therefore of great importance to the competitiveness of Swedish businesses. In Sweden, as in a number of other EU countries, these are relatively well-functioning markets. Therefore, in parallel to the discussions on increased integration, we also need to ensure that Member States undertake the necessary reforms, underpinning reform efforts by means of the exchange of good practices.

On the energy side, each Member States first needs to ensure a certain degree of self-sufficiency in order to develop a robust, balanced and efficient interconnected energy system. Similarly, dynamic capital markets must play an increasingly important role in supporting growth, innovation and competitiveness of the European economy.

The Single Market needs to attract investments. This is particularly important in view of the green and digital transitions, and other emerging long-term needs. The saving and investments union that Mr. Letta suggests must be inseparably intertwined with a market-driven competitiveness agenda, where the role of broader framework conditions impacting the business environment, and hence firms’ willingness to invest, is of paramount importance. When it comes to encouraging household investment in equity markets, our successful tradition in Sweden of facilitating private savings on the stock market could serve as a useful example of how to build trust and change household saving patterns at national level.

However, regarding the question of maintaining a level playing field both internally and globally, our views differ from those expressed by Mr. Letta. Swedish Enterprise considers that the focus on state aid instruments and EU level funding through industrial policy risk obscuring policies on how the EU can and must create better conditions and an enabling environment for private investment. State aid, whether distributed via member states or EU institutions, should not be considered a miracle solution to building long-term European competitiveness.

Last but certainly not least, Mr. Letta briefly touches upon the topic of free trade at the end of his report. Swedish Enterprise cannot stress enough the importance of not detaching the Single Market from the rest of the world.

The EU is the largest economy in the world and the world’s largest trader of manufactured goods and services. Almost 40 million European jobs depend on our exports to countries outside the union. Trade, both imports and exports, are needed in order to keep the Single market valid and competitive. The EU must stand up for freer global trade and openness and protectionist tendencies in the world economy must be countered – recalling that the free trade zone that the internal market has been a driver of prosperity, peace and freedom within the EU.