The EU and the internal market

By Nina Hyvärinen, Senior Adviser Rud Pedersen Public Affairs Finland

What metrics will be used to measure Europe’s success in the new term?

The European Parliament elections and the election of the new Commission will determine who will wield the sceptre of power and in which direction Europe will be taken in the coming years. Of course, this does not happen in a vacuum, as Europe is part of the global playing field and geopolitical power struggle. For the companies operating on the international markets, it is not irrelevant what kind of global role the new EU leaders seek. Will they take an active role, or will the EU fall into the role of a bystander?

Europe is feverishly looking for new ways to succeed. Many have announced that churning out new initiatives and legislation cannot be the primary way. Geopolitical and economic uncertainties will not disappear, rather the opposite. Europe’s strategic position, competitiveness and the internal market are important when the direction of the EU is decided as the power changes in Brussels.

The devil is in the details in internal market reforms

The April meeting of the European Council announced a New European Competitiveness Deal and outlined the preparation of a new horizontal strategy for the internal market by June 2025. Various reports have been ordered as inputs.

Former Italian Prime Minister Enrico Letta’s April report on the development of the internal market has served as a good opening for discussion, and we should have a look at the proposals in it, whether we like them or not. Some of them will also appear in the work programme of the next Commission. The report contains things that Letta seems to have included based on the discussions with some Commission experts. It is useful for companies to take a look at the rather massive report and see if there is anything they want to promote, or on the other hand, to prevent.

Another Italian, Mario Draghi, is currently preparing his report on European competitiveness. This is expected to be an even clearer input to the Commission’s work programme, as he draws it up at the request and with support from the Commission team. In his April speech, Draghi outlined his approach at a general level. The speech shows ambitions to unite national players into larger, but less numerous, European operators. Draghi mentions telecom operators as an example.

The internal market is the EU’s strength, but in many places companies still face 27 separate markets and sets of rules. The absence of a functioning capital market has been raised as one of the obstacles to obtaining financing for companies and the movement of capital within the EU. Companies and industry associations are the best at opening up the challenges and necessary reforms that concern them.

It’s easy for many companies to agree on major policy priorities, and they may not necessarily impact the business of individual companies. But the devil is in the details and that is where the problems often arise. The challenges are long preparatory processes and institutional negotiations, where small amendments can cause big problems in practice. These negotiations and decision-making processes can be challenging for individual companies and organizations to follow and keep up with.

Will the new Commission focus on implementation of the avalanche of legislation the EU has passed, or will it start producing new proposals?

In the EU, several large legal packages have been issued during the current term, and the implementation is only at the beginning. Companies are adapting to the required changes. This takes time.

Another challenge for companies is that different laws may contain overlapping, and sometimes even conflicting, requirements. The cumulative effects of the requirements can also be significant for some companies. One regulation here and another there, and suddenly the regulatory burden on companies is really heavy.

Industry associations and companies play a key role in clearing the regulatory jungle, as they have concrete information and insight into how different regulations affect and what should be clarified and perhaps dismantled completely. The forest industry is one example that is affected by dozens of different laws and regulations.

It will be interesting to see by what metrics Europe’s success will be judged at the end of the next term. Will the number of legislative and policy initiatives in the Commission’s work programme also be counted in the coming term? All we know is that there will continue to be initiatives and changes affecting the business environment of companies. Companies should actively participate in the discussion in Brussels and build networks before they are needed. This is a perfect time for building relationships.

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