Apart from geopolitical developments, economic policy took centre stage at the European Council in April. A “new European competitiveness deal” was presented, which aims to increase sustainable and inclusive growth, ensure innovation and resilience and favour the transition to digital sovereignty and climate neutrality. During the Council, Enrico Letta, President of the Jacques Delors Institute, presented his long-awaited Report on the Future of the Single Market. The report on European competitiveness by Mario Draghi, former President of the European Central Bank and former Italian Prime Minister, which is due to be published in June, was also discussed.

The tenor of the European Council's Conclusions is that Europe urgently needs a paradigm shift in economic policy. The key issues of the “new European competitiveness deal” are economic resilience, industrial renewal, global competitiveness, the EU's technological leadership and its attractiveness as a business location, whereby a fully integrated Single Market is to play a key role. The European Council identifies the ‘key competitiveness drivers’ and calls for work to be taken forward ‘decisively and swiftly’.

Deepening the Single Market and completing the Capital Markets Union
Letta had already presented the initial interim results of his report in February, emphasising that the integration of the Single Market in the field of financial services, energy and electronic communications was key to future economic growth. A fifth dimension, namely research and innovation, is to be added to the Single Market freedoms. The Conclusions of the European Council are in favour of removing remaining market barriers, including in the cross-border provision of services.

The deepening of the Capital Markets Union, which has been under discussion for 10 years, was also addressed again. Specific proposals comprised steps towards the harmonisation of insolvency frameworks, a revival of the securitisation market, more financial literacy for citizens and a broader range of cross-border financial products, including pension products for retail investors. According to European Council President Charles Michel, it is the aim to channel private savings into European companies and thus promote private investment. Disputes between member states predominantly concerned the issue of strengthening the European supervisory authorities.

Industry, Research and Innovation, Energy, Circular Economy and Digital
The heads of state and government are calling for the industry to be decarbonised in a ‘competitive manner’. In addition, the competitive advantage in digital and clean technologies should be expanded, strategic supply chains diversified and the basis of the European defence industry strengthened. Furthermore, reference was made to increase investment in research and development in order to reach the spending target of three per cent of GDP. Also ‘achieving a genuine energy union’ to ensure the supply of ‘abundant, affordable and clean energy’ and ‘ambitious electrification using all net-zero- and low-carbon solutions’ are addressed. The aim is also to improve the circular economy, for example by tapping into the potential of the bioeconomy. The realisation of a ‘true Single Market’ in digital services and data and the facilitation of investments in digital infrastructure should support the digital transition.

Cutting red tape - a threat to the social dimension
According to the European Council, the European Commission should apply the ‘Think small first’ principle when drafting new legislation and carry out ‘competitiveness checks’ for important legislative proposals. An ‘over-transposition’ of EU legislation should be avoided. Letta argues that Regulations should take precedence over Directives for Single Market integration, as the use of Directives leads to ‘gold plating’. This refers to rules in national law that provide for better or stricter standards than those stipulated by EU law, for example in the social and environment sector. The business side often presents such rules as an ‘administrative burden’. According to Letta, this would also lead to the fragmentation of the Single Market and hamper competitiveness.

However, Letta's proposal and the Conclusions actually jeopardise social and environmental standards or trade union and civil rights. member states could be prevented from introducing higher standards in the workplace. Wolfgang Katzian, President of the ÖGB and ETUC, refers to the EU Working Time Directive as an example and warns that, in the worst case scenario, this could mean only four instead of five weeks' holiday per year in Austria.

What does this mean for employees?
Overall, the Conclusions include some positive approaches, but also highly problematic aspects. Under no circumstances should the deepening of the Capital Markets Union jeopardise financial market stability. The Conclusions focus on the further integration of the Single Market and on the corporate side. In contrast, there is hardly any mention of good wages and good working conditions, social protection and a fair distribution of economic profits. Social issues are mentioned in passing, all above when it comes to the qualifications and mobility of employees. There is a lack of awareness of the need for a new, ambitious social action programme to take significant steps towards social progress.

The same applies to the provisional priorities of the EU strategic agenda 2024–2029, which is to be adopted in June 2024. Commitments to a comprehensive just transition are nowhere to be found. However, in the long term, the EU will only be economically strong and competitive if workers are involved and the socio-ecological dimension of the Single Market is significantly strengthened compared to market freedoms. A one-sided approach to competition that does not take workers fully into account will not be successful and poses a threat to the future of the EU itself.

Further information:
AK Vienna: EU-Marktfreiheiten in der Krise: 30 Jahre EU-Binnenmarkt – Zeit zum Feiern? (EU market freedoms in crisis: 30 years of the EU Single Market - time to celebrate?)  (German only) 
AK EUROPA: Capital Markets Union: Strategy for retail investors
AK EUROPA: Policy Brief: Retail Investment Strategy
Enrico Letta: Much More Than A Market