Brussels, 20 January 1999
Commission adopts report on economic reforms of product and capital markets
A Communication on the functioning of goods, services and capital markets, which highlights priority areas where structural weaknesses in the supply side of the European Union (EU) economy should be tackled, has been adopted by the European Commission. The Communication, prepared at the request of the June 1998 European Council in Cardiff, aims to assist the Council of Economic and Finance Ministers (ECOFIN) in the preparation and consideration of the EU's Broad Economic Policy Guidelines. In particular, the Communication examines the extent to which markets are already integrated and efficient, with a view to identifying structural reforms needed at both national and EU levels to improve their flexibility and performance. Economic reform is not an end in itself, but a tool to achieve increased prosperity, economic stability and, above all, create jobs. This analysis will contribute to the development of the Guidelines as an effective instrument of economic policy co-operation, by ensuring that the ECOFIN Council has an integrated view of macroeconomic indicators, the labour market, the functioning of the Single Market, and other structural issues. This will reinforce the Guidelines as an instrument for prompting structural change essential for the success of Economic and Monetary Union (EMU).
"Following the introduction of the euro, it is more vital than ever to improve markets' flexibility and efficiency and so ensure the success of EMU. In view of this, the Commission and the Council have established a regular monitoring of economic and structural reforms, to begin in 1999. This report is the first element of such a new process. The Single Market represents the fundamental pillar of Economic Union and therefore we must ensure it functions efficiently and all its potential benefits are exploited to the full", said Single Market Commissioner Mario Monti. "Economic reform and removing market rigidities are a means to create jobs and ensure the EU remains globally competitive. We need to establish regular monitoring by selecting the relevant indicators and by improving statistical flows. This report is fundamental to identifying policy areas where action is needed to achieve the benefits EU citizens and business expect from EMU".
The Single Market is a very useful spur to economic reform. Such reform has become all the more important in the context of EMU because, with exchange rate realignments no longer an option, market efficiency and flexibility are a crucial adjustment mechanism in the case of asymmetric shocks. Indeed, economic integration and structural reform, by increasing their diversity, render European economies more resistant to asymmetric shocks.
Moreover, the Single Market, by facilitating the integration of capital markets, can help to cushion disturbances affecting local financial systems and enhance the performance of European financial markets. The report draws attention to the role public authorities should play in enhancing the efficiency of markets by reducing administrative burdens to the minimum and by ensuring legislation (e.g. anti-trust rules) is applied effectively.
Trends in products and capital markets highlighted by the report include:
The report recommends that:
In addition to the contribution that the report is intended to make to the Broad Economic Policy Guidelines, its findings will assist the Commission as it considers priorities for action in the Single Market, following the successful implementation of the Single Market Action Plan. The Commission will define these priorities before the June 1999 European Council in Cologne.
Table 1 - The importance of intra-EU trade in goods relative to GDP (1992-97)
|Large Member States*||23.4%||21.3%||22.9%||24.9%||24.8%||25.2%||23.8%|
|Small Member States**||49.1%||47.7%||50.1%||54.4%||54.3%||56.3%||52.2%|
* Germany, France, Italy, UK and Spain (ranked according to GDP average 92-97)
** All other Member States
As of 1993 a revised methodology has been used for the collection of EU trade data, which explains the discontinuity in the time series between 1992 and 1993
|Private final consumption||21.9%||15.9%||15.9%|
|Government final consumption||25.4%||25.9%||27.2%|
|Gross fixed capital formation||12.8%||14.5%||13.5%|
|Machinery and equipment||9.1%||6.7%||7.7%|
|Gross Domestic Product||20.1%||16.2%||16.3%|
Unweighted, including excise and value added taxes
Table 3 - Total amount of (non-agricultural) State Aids (1995 prices)
State aid expenditure has gradually declined since 1990 and represented 1.4% of non-agricultural GDP between 1994 and 1996, down from 1.6% between 1992 and 1994. Over the 1994-96 period, France, Germany and Italy accounted for more than 75.6% of the total amount of state aids to manufacturing in the EU, down from 81.7% over the 1992-94 period. On the other hand, Member States like Spain and the UK, which had very much lower aid volume, experienced an increase, although the UK (along with Sweden) is the Member State with the lowest aid levels when expressed as a proportion of value added.
The full text of the Communication will be available on the Commission's World Wide Web site: http://ec.europa.eu/dg15