Yet another example of nobody paying any attention to essentials.
The EU abdicated its role, and the German government went on its own
way and 'devil-take-the-hindmost'.
Politicians here point to the Single Market as being the great
achievement but since the inclusion of services was frustrated
( when these are of primary interest to Britain) any breakdown of the
rest will make the benefits seem ever more illusory.
But nobody will vote about this on Thursday because nobody is talking
about it. The population - including the 7 million people engaged in
theft by stealing music through free downloads - will enjoy kicking
the political class in general with their hypocritical boots - the
ones that leak!.
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FINANCIAL TIMES 1.6.09
Time to safeguard Europe's single market
by Wolfgang Munchau
What is the single biggest danger to the long-term cohesion of the
European Union? The failure of the Lisbon treaty? Another foreign
policy disaster? Or a low voter turnout at this week's election to
the European parliament? I think not. The biggest danger would be the
erosion of the single European market. And it may be happening.
The single market is enshrined in European law. It would take a
change in the European treaties to reverse it - and this is obviously
not going to happen. The single market will therefore not collapse,
or be replaced by something else. The real danger is that it may
wither, quietly.
When the banks were in trouble last September, governments
nationalised policy. Most EU countries drew up their own bank rescue
packages with little regard for European competition law. Charles
Goodhart, professor of economics at the London School of Economics,
noted that "banks are international in life, but national in death".
Unfortunately, this now applies to other industries too.
The way the German government has been negotiating the rescue of
Opel, the European subsidiary of General Motors , is another example.
Opel - or Vauxhall in the UK - has been a truly European carmaker,
with plants in several European countries. But when GM got into
trouble, the EU was nowhere to be seen. It should have declared any
rescue of Opel illegal, a flagrant breach of state aid law,
especially at a time when the industry suffers from overcapacity.
The German government exploited the policy vacuum, negotiating a deal
with one of the bidders to secure all four German Opel manufacturing
plants and to minimise the loss of domestic jobs. You cannot blame a
national government for wanting to link national money to national
jobs. But such decisions have negative externalities in a single
market. By seeking guarantees on German jobs and plants, the
government in effect forces the closure of foreign Opel manufacturing
plants, in Belgium for example. It is no surprise, therefore, that
Herman van Rompuy, the Belgian prime minister, accuses Germany of
destroying the single market and breaching European law.
I have no idea whether he is right about European law, but he is
certainly right about the single market. After the moves to retrench
back to national markets by the banks, we are witnessing a similar
trend among carmakers. The single market is still there, on paper,
but it is being undermined in reality.
Why does it matter? The reason is that the single market is far from
complete, and thus not nearly as robust as it should be. It works
better on the wholesale than the retail side. While there are some
cross-border supermarket chains, their offerings change completely
once you cross national borders. Last year, as a resident of Belgium,
I tried to make an online purchase of a computer in Germany - where
some IT equipment costs about 50 per cent less - but my efforts were
eventually frustrated. Half the German online retailers do not accept
any international means of payment, such as credit cards; the other
half does not deliver abroad. The single market is perhaps most
visible to ordinary people in the airline industry, where cheap
tickets have transformed holiday travel in Europe. Europe's single
market is a work in progress. It comes with a legal and institutional
process to extend and deepen it.
The failure to extend the single market to services - beyond a hugely
disappointing directive - should have served as a warning sign of the
changing political climate. After applying the brakes, governments
have gone into reverse gear. They have undermined the single market
bidding rules for public procurement contracts. They have undermined
the single market for financial services, and now they are
undermining the single market for cars. This will not be the end of
the process.
European law provides some safeguards, but the single market's
success depends a great deal on goodwill from member states. If
governments are determined to undermine the single market, while
technically remaining within some more or less plausible
interpretation of the law, they will eventually succeed. The
consequences would be that the single market would turn into an empty
shell. For example, if Germany in effect closes down an Antwerp car
plant, it would take the Belgians only days to come up with a clever
scheme to discriminate against the sale of German-made cars, or some
other products.
Why is the fate of the single market so important for the cohesion of
the EU? Because of its dynamic effects on other areas of European
integration. Take the euro, for example. The European currency has
proved to be very robust, even in times of crisis. But who would want
to place any bets on the euro's long-term survival in the absence of
an effective single market? The single market was one of the
rationales for creating a single currency in the first place. Without
it, one could easily conceive of situations in which eurozone member
countries had a rational reason to quit.
ne would have thought that such fundamental issues would be an
important subject of debate ahead of this week's European elections.
But no such luck. Neither of the two large party blocks, the centre-
right and the left, dare challenge the re-nationalisation strategy.
Whatever the outcome of the elections, expect no change - both in
policy and leadership. And "no change" means that it will continue to
get worse.
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