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Vice-President of the European Commission, EU Commissioner for Justice
Gearing the Single Market for Growth: How Justice Policies can help
EPP Group Session: 'Exploiting the potential of the single market', Dubrovnik, Croatia
12 April 2013
The Single Market is the crown jewel of the European Union.
For twenty years it has transformed the way Europeans live, work, travel, do business and study. It has opened up opportunities for businesses to expand and learn how to become successful globally.
It has also allowed for human, cultural and social contacts across borders in a way, most of us could not have imagined. Today we take the Single Market freedoms for granted because they are such an integral part of the daily lives of 500 million European citizens and of the more than 23 million European businesses.
But we must not stop admiring this achievement. We must make the best use of the Single Market and make it the main European engine enabling growth and jobs.
The greatest economic, financial and social crisis the European Union has faced since its creation is not over. Promoting a return to growth and competitiveness has been the focus of the European Commission's work.
Much needs to be done: Public finances must be put on a more solid footing; we need a more stable and responsible financial sector at the service of the real economy; we need stronger economic governance and discipline; European governments must pursue their efforts to deliver structural reforms for competitiveness; and we must continue to support our Member States in resolving problems and delivering solutions for Europeans.
All these efforts must be accompanied by measures making our Single Market work for European businesses and citizens. And this action combined is the core of the Commission’s strategy to deliver growth and enable the necessary conditions for investment and jobs.
The European Single Market exists, it is working but is not yet complete. The free movement of goods, services, capital and people does not always happen smoothly. There is no truly integrated European market in some fields. Pieces of legislation are missing. And administrative obstacles, technical bottlenecks and enforcement loopholes leave the full potential of the Single Market unexploited.
After decades of European integration, 9 out of 10 EU companies still do not export. The majority of those who do export – 62% in business to business and 57% in business to consumer transactions – do so to no more than three EU countries. The fact is that there are still a number of barriers standing in the way of cross-border trade in the EU.
The Commission has been taking action to strengthen the Single Market. We have put in place the Single Market Acts I and II, setting out levers to boost growth and strengthen confidence and exploit the potential of the Single Market as an engine for growth.
But we have been doing much more than that.
As Justice Commissioner I have made it one of my priorities to gear many of the proposals in my portfolio responsibilities to strengthen the European Single Market.
Today I will give you just three examples from the sector for which I am responsible in the Commission: the Justice portfolio.
They are the reform of the EU rules on Data Protection, the Common European Sales Law and the Reform of the European Insolvency rules.
The first example is the reform of the EU Data Protection rules.
There are three reasons why the data protection reform is so important:
First, data protection is a fundamental right in the EU. The reason for this is rooted in our historical experience with dictatorships from the right and from the left of the political spectrum. They have led to a common understanding in Europe that privacy is an integral part of human dignity and personal freedom.
Second, the data protection proposal will open up the EU’s the digital market. It meets the expectations of business to have a true digital single market with one single law for data protection. The implementation of the current 1995 Directive is fragmented and complicated. I say complicated: the 1995 Directive is 12 pages long, but it is implemented in 27 countries. In Germany, for example, the current data protection law is 60 pages long. Take those 60 pages and multiply by 27 Member States, and you'll get an idea of what the term "regulatory complexity" means in practice. We will replace this mountain of paper with one law that is 91 articles long and valid in all of Europe.
The world has changed since 1995 – the year the existing EU data protection framework was adopted. We now live in a world of immense communication possibilities. We can update our friends and family on every move and in real time. We have access to an infinite pool of knowledge through highly refined search engines and we can entrust our private data to a cloud service provider without ever having to worry about storage space.
This has enormous implications for the European economy. In 2011, McKinsey predicted a potential economic surplus of 120 billion euro in Europe by 2020. Last year, the Boston Consulting Group saw a potential 1 trillion euro of added GDP in 2020. We need a fully functioning digital single market to make this work, to unlock that growth potential.
That is why I proposed a Regulation: one continent, one law and one coherent regulator delivering consistent enforcement. That’s what I call simplicity. That’s what I call opening a market and making the best of the potential for growth and innovation of the Single Market.
Third, we need to ensure that the same rules apply to all businesses providing services to EU residents. Non-European companies, when offering services to European consumers, will have to apply the same rules and adhere to the same levels of protection of personal data.
Marielle Gallo in JURI, Sean Kelly in ITRE and Lara Comi in IMCO have prepared opinions that will be considered in the leading Committee on these proposals – the LIBE Committee. I count on you to contribute very actively to the swift adoption of the proposals.
The second example is the Regulation introducing an optional Common European Sales Law
The Common European Sales Law aims to give consumers and businesses the option of using a single sales law for cross-border contracts. It also gives an incentive to expand to those three quarters of European companies who currently do not sell across borders. The aim is to provide a single cross-border sales law that can be used with one IT platform and one set of model contract terms. Traders would simply have to fill in the deal-specific details.
One of the guiding principles in designing the proposal was the need to respect Europe's different national legal traditions. Europe's diversity is its biggest source of strength and must be preserved. The optional Common Sales law will co-exist with national contract laws and not replace them. It will provide an alternative harmonised set of rules available in each national legal order, which make cross-border transactions easier and cheaper for those that are interested.
This optional approach fits well with the principle of freedom of contract. Nobody will be forced to use the Common European Sales Law. Both parties to a contract have to agree on its application and nobody will be obliged to use it. Companies that decide to use the optional instrument would only do so if the economic advantages outweigh the costs. Those who do not want to use it will continue to conclude contracts under existing national contract laws.
I count on the combined work of JURI and IMCO to advance the work on this proposal in the next months.
The third example is the reform of the EU Insolvency Laws.
Businesses are essential for growth and jobs, but setting one up – and keeping it going – is tough, especially in today’s economic climate. Around half of businesses do not survive beyond their first five years, meaning that there are around 200,000 firms going bankrupt across the European Union each year. And most importantly, 1.7 million jobs are lost to insolvencies every year.
We have had European rules to manage cross-border business insolvencies since 2000 but they are too oriented towards liquidation.
I proposed to modernise the Insolvency Regulation so that the rules support the restructuring of business in difficulties and create a business-friendly environment. This is particularly important in times of crisis: we need to lend a helping hand to our businesses when the going is rough.
Shifting the focus to restructuring can also serve creditors because restructuring a business that owes them money can mean that they are more likely to get their money back – money that might otherwise be lost in a winding-up.
We want to increase legal certainty for companies, by providing clear rules to determine jurisdiction, and ensuring that when a debtor is faced with insolvency proceedings in several Member States, the courts handling the different proceedings work closely with one another. We will also strengthen the transparency and confidence by obliging Member States to publish key decisions – about the opening of insolvency proceedings, for example. Most Member States have online registers but this should be the case in ALL – soon to be 28 Member States so that this court information can be easily accessed throughout the EU.
All in all, these changes will improve the efficiency and effectiveness of cross-border insolvency proceedings, affecting around 50,000 European businesses a year.
This is a first step towards an EU "rescue and recovery" culture to help companies and individuals in financial difficulties. In the future, there could be separate rules for honest entrepreneurs and for cases where the bankruptcy was fraudulent or irresponsible.
When an honest entrepreneur goes bankrupt, a shortened discharge period in relation to debts and the legal restrictions stemming from bankruptcy would make sure entrepreneurship does not end up as a "life-sentence" should a business go bust.
We should not be stifling innovation: one failure should not stop any future entrepreneurial activity but should be seen as an opportunity for learning and improving. 'Second starters' are more successful and survive longer than average start-ups; they grow faster and employ more workers. Failed entrepreneurs also learn from their mistakes and are generally more successful the second time around. Up to 18% of all entrepreneurs who go on to be successful failed in their first venture.
And we should not forget SMEs – which represent 99% of all businesses in the EU! Restructuring can be extremely costly for them. In the future we could have alternative procedures – such as out of court mechanisms – especially for SMEs. One size does not necessarily fit all – procedures should be proportionate to the size of the business.
I expect the Legal Affairs Committee (JURI) to work on this proposal as a matter of priority.
The scale of the economic crisis is ample proof of how interlinked and interdependent our economies have become, and I believe it is also proof of how closely we need to work together to overcome it. We must use these links to our advantage and use them to build a stronger and more united European economy. The Single Market is the bedrock of our economy. If this bedrock is fragmented, any private or public initiative is made less effective.
I know very well that Jacques Delors always used to say that nobody would fall in love with a single market. And I have to say that the single market we have today still has far too many flaws for businesses and end-consumers, to be truly lovable.
My simple message today is we can do so much more by working together and taking advantage of our crown jewel: A Single Market of more than 500 million consumers.
I therefore believe that Europe urgently needs to continue to re-invigorate our single market – for the sake of enhanced productivity and generate growth. And in order to demonstrate credibly to our citizens that the single market is Europe’s strongest asset in our striving for economic recovery and global competitiveness.
From my part I made sure that initiatives in the field of Justice form part of a comprehensive package of measures to unlock the potential of the Single Market by removing trade barriers, ensuring both better cross-border market access and creating the appropriate investment conditions for European businesses and citizens contributing to maintaining Europe the leading economy in the world.
And Europe’s economic and financial situation tells us that we cannot afford to waste this opportunity.