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Brussels, 7th May 2003

Internal Market: Commission presents ten-point plan for making Europe better off

The European Commission has published its Internal Market Strategy 2003-2006, a ten-point plan to make the Internal Market work better, building on the 2.5 million jobs and € 877 billion of wealth it has already created since Europe's frontiers were dismantled at the end of 1992. The Strategy aims to respond to the challenges of enlargement and an ageing population and to keep Europe on course to become the world's most competitive economy by 2010. Particular priorities include improving the implementation and enforcement of Internal Market law, making the free movement of services into a practical reality, removing remaining obstacles to trade in goods and building genuinely European public procurement markets. In a Union of 25, the onus will increasingly be on the Member States to make the Internal Market work on a day to day basis. The Strategy calls on them to implement Internal Market laws promptly and correctly, inform their citizens and businesses of their rights, solve problems when they arise and refrain from adopting national laws which conflict with Internal Market principles. The Strategy proposes strengthening enforcement through closer co-operation between the Commission and Member States, so that quick and effective solutions can be obtained without systematic recourse to infringement procedures.

Internal Market Commissioner Frits Bolkestein said: "The Internal Market has been a tremendous force for economic and social good. But much of its potential is being wasted: it's as if we are driving a Ferrari in second gear. Back in 1985 everybody agreed Europe needed an Internal Market. Then they went ahead and did it, sorting out the nitty-gritty without losing sight of the big political picture. We need that sort of consensus and determination again now, to meet the challenge of enlargement and to kickstart the economy."

The Internal Market Strategy, along with the Broad Economic Policy Guidelines (see IP/03/38 and IP/02/609) and the Employment Guidelines (see IP/03/41), is one of the EU's three key instruments for co-ordinating economic policy. All now cover a three-year period, to ensure the EU approaches economic reforms effectively and coherently.

There are three main reasons why Europe needs to improve the Internal Market.

First, if the EU is to reach its goal of becoming the most competitive and dynamic economy in the world by 2010, it needs to act decisively now.

Second, enlargement offers unprecedented opportunities for existing and new Member States alike. But for those to be realised, the EU needs to strengthen the foundations of the Internal Market and boost its performance.

Third, the EU, in common with other parts of the world, is currently facing a slowdown in economic growth and job creation. This makes it all the more essential to press ahead with structural reforms in order to increase the capacity of our economies to grow. Removing the bottlenecks in the Internal Market will put Europe in a much better position to face up to the ever stiffer competition from emerging economies. It will also leave the Union better protected against future fluctuations in the economic cycle and provide it with a stronger economic basis to deal with the huge challenges of an ageing population.

The Internal Market Strategy sets out ten main strands of action:

Enforcing the rules

Not only the Commission, but also Member States, have a responsibility to ensure that EU laws are applied properly and made to work in practice. Yet the Internal Market Scoreboard (see IP/03/621) has recently shown that national delays in implementing EU law are worsening and the number of infringements increasing.

When things do go wrong, citizens and businesses need effective remedies. The Commission will, of course, continue to pursue infringement procedures where this is the most effective way to achieve a solution. Going before a national court is another option. But alternative means of problem solving such as the SOLVIT network (see IP/02/1110) - are often more effective, quicker, and less expensive.

The Strategy proposes to study the setting up, for example, of national mechanisms that could monitor application of Community law.

Ultimately, the Commission envisages a three-pronged approach: firstly, encouraging Member States to work together to solve problems, for example through the SOLVIT network (see IP/02/1110); secondly, better monitoring at national level of the application of Community law; and finally infringement procedures.

The Commission will also offer Member States its help in implementing Directives into national law, including through a Recommendation on best practice. It will urge the Council to set ambitious new targets for reducing delays in implementation at each Spring European Council and will invite the Council and Parliament to fix a standard period 24 months after adoption - within which all EU laws should be implemented.

Existing infringements need to be cleared up: existing Member States should aim to reduce the number of Internal Market infringements by at least 50 % by 2006. The number of open infringement cases has soared from just under 700 in 1992 to nearly 1600 today. The figure has gone up by 6% during the last year alone.

Integrating services markets

Services represent about 70% of EU GDP and employment but as the Commission's report of July 2002 on the Internal Market for Services (IP/02/1180) showed, integration is very limited and this is costing prosperity and jobs.

The Commission will propose a Directive on services before the end of 2003, based on mutual recognition, administrative co-operation, harmonisation (where necessary) and encouraging European codes of conduct in service industries. The Strategy also emphasises the need to complete the Financial Services Action Plan and for more progress on creating an Internal Market in retail financial services.

Improving the free movement of goods

The Strategy proposes a more structured approach to mutual recognition, whereby conformity with national laws in products' Member State of origin allows them to be marketed everywhere else in the EU. It outlines a new Regulation the Commission will propose to introduce a range of new disciplines (e.g. mandatory notification in cases where mutual recognition is refused, procedures to allow companies to appeal). The Commission will consult Member States and industry before making any proposals.

The Strategy also proposes linking EU funding for standardisation agencies to clear performance criteria, in order to ensure standards are produced quickly and well. It advocates boosting the "New Approach", whereby for some types of goods EU legislation sets essential requirements, but avoids technically detailed standards (see IP/03/643).

Meeting the demographic challenge

A more efficient Internal Market can help generate the growth and employment which will lead to higher government revenues and help pay for state pensions. Rapid adoption of the Pension Funds Directive (see IP/02/820, IP/00/1141 and MEMO/00/62) will secure better protection for pensioners and allow multinational companies to run single EU-wide pension funds. The Commission will also consider action to help people who move between jobs in different countries to take their pension rights with them (following consultations with the social partners). And it will continue to tackle tax discrimination against pension funds established in other Member States.

The ageing of the population will also place health services under additional strain. The Strategy emphasises the need for Member States to comply with recent court judgements, in particular allowing patients to seek treatment outside their own Member State. This can help alleviate the problems faced by national health care systems by allowing the most efficient possible use of resources across the EU.

Better essential services

"Network industries" such as energy, transport, telecommunications and post are crucial to all EU citizens, a significant part of business costs and enormously affect overall economic competitiveness. The Strategy focuses on further opening up markets to competition while ensuring that a universal service continues to be available to all citizens, wherever they live and whatever their income.

The Commission will also study the competition situation in the water sector which remains fragmented and where there are potential gains to be had from modernisation. Following this study, all options will be considered, including possible legislative measures.

The Commission will also clarify how competition and state aid rules apply to private/public partnerships and publish a Green Paper on ensuring that such partnerships are compatible with public procurement rules.

Improving conditions for business

Most policy measures required to foster entrepreneurship and innovation are in the hands of Member States. But there are some areas where the EU must act. For example, the Council and Parliament need to adopt quickly the Community Patent (see MEMO/03/47) and proposed Directives on the patentability of computer implemented inventions (IP/02/277) and on the enforcement of intellectual property rights (IP/03/144 and MEMO/03/20).

The Commission's forthcoming action plans on company law and on statutory audit will help ensure that businesses produce reliable accounts which give investors the confidence to provide the funds Europe's economy needs to grow. The Commission will also propose Directives to facilitate cross border mergers and transfers of company headquarters.

Simplifying the regulatory environment

The Commission will invite Member States to appoint representatives to work with it to implement its Better Regulation Action Plan (see IP/02/825). It will during 2003 consult on the best "legislative architecture" for the Internal Market, to ensure the EU chooses the right approach for each situation: for example, harmonisation or mutual recognition, "new approach" or more detailed rules, regulation or self-regulation, Directives or Regulations.

The Strategy points out that the Council and Parliament, when they amend Commission proposals, and Member States, when they implement Directives in national law, also need to make sure that their lawmaking is clear, simple and effective. The Commission will develop the Parliament's idea of a "compatibility test" for all new national law, to prevent conflict with Internal Market rules.

Reducing tax obstacles

The Commission will propose revisions of the Parent/Subsidiary Directive and of the Mergers Directive, to eliminate double taxation within the EU and reduce certain tax charges. It will also explore different options for introducing a common consolidated corporate tax base at EU level and to simplify VAT rules so that businesses established in one Member State but supplying products and services in several others could pay VAT in their home country only. On vehicle taxation, the Strategy argues for registration tax to be replaced by increased road and fuel taxes.

More open public procurement markets

Procurement represents 16 % of EU GDP. But non-compliance with the rules remains a serious problem. Across Europe, procurement still relies heavily on paperwork. The first step to improving the situation is for the European Parliament and the Council to adopt the legislative package proposed by the Commission in 2000 (see IP/00/461) to streamline award procedures and encourage electronic procurement.

The Commission will in 2004 propose an action plan aimed at ensuring that a significant part of procurement transactions are carried out on an electronic basis by 2006. Generalised e-procurement should be achieved by 2010.

The Internal Market Strategy also advocates that Member States should strengthen co-operation through the recently established Public Procurement Network and reinforce national surveillance authorities, giving them the right to bring complaints before a court empowered to penalise contracting authorities.

Providing better information

For the Internal Market to work, citizens and businesses need to know about their rights and opportunities and how to exercise them in practice. The Commission will step up its efforts in this regard, particularly in the new Member States. It will set up a new web portal for citizens and businesses, as a "one-stop shop" for a wide range of practical information and advice. It will vigorously promote Europe Direct, a web and telephone service providing information on all aspects of the EU and which is accessible via a single freephone number across Europe (00 800 67891011).

But Member States must also assume their responsibility for informing their citizens. The Commission will convene regular meetings of high-level representatives of the Member States specifically to deal with information issues. The Internal Market Scoreboard will also regularly assess Member States' information efforts.

The full text, including an annex listing each of the measures envisaged, will be available at:

See also MEMO/03/100.

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