European single market: radical changes forthcoming?

26/04/2024 - The shifting dynamics of global geopolitical relations underscore the critical role of a robust European Union in ensuring the security and competitiveness of the Netherlands like never before. For this to happen, a reform of the European single market seems necessary, as Italian former prime minister Enrico Letta wrote in his recently published report Much more than a market.

Unsurprisingly, topics such as strategic autonomy and industrial policy are high on the agenda of the next European Commission. The discussions on these issues will have an impact on the course of the next Commission, which will be partly determined by the European elections in early June. What can we expect?   

Single market

There is growing concern in the EU about the functioning of the single market: businesses find themselves grappling with varying national implementations of European laws and regulations by member states, while governments are struggling with the implementation of numerous new European initiatives. Prominent (former) politicians, such as Mario Draghi, Thierry Breton, and Enrico Letta, want the next Commission to set out a new path that combats fragmentation in the single market so that European competitiveness can be preserved. This new path would involve further integration of the single market and the removal of barriers for companies to create scale. Appealing as it sounds, it clashes with one of the fundamental principles of the European single market: the principle of competition.  

Competitiveness vs. competition

The principle of competition aims to maintain a level playing field for European companies. At the same time, it hinders European companies from competing with US and Chinese companies. This is clearly reflected in the European telecoms sector: there are more than 100 mobile network operators operating in the EU (average of around 4 million subscribers per network operator), 3 in the US (average of 90 million subscribers) and 4 in China (average of 400 million subscribers). This while operating at scale is what gives return on investment. Therefore, investment in Research & Development in the European telecoms market trails US and China markets significantly, posing challenges for European companies striving to innovate. By removing barriers for telecoms companies, such as a more favorable policy for mergers and the harmonization of spectrum, the EU can create European champions that are able to compete globally.

Radical changes in the single market?

How could the Commission shape such a policy? Considering current geopolitical shifts, the upcoming Commission will prioritize strategic autonomy to a greater extent. Uncertainties surrounding the US elections and the consequences of the wars in Gaza and Ukraine call for a stronger focus by the EU on its own competitiveness, strengthening the single market, and promoting innovation. The EU sees opportunities to ensure its competitiveness and strategic autonomy by strengthening its digital infrastructure and creating European champions in the digital sector. For this to happen, member states will need to relinquish certain aspects of their sovereignty, raising many questions ahead of the upcoming elections. Will nationalists like Wilders and Meloni be willing to give up their crown jewels like KPN and Telecom Italia for the sake of the European single market? And are nationalist parties willing to give the EU more powers to ensure European strategic autonomy and competitiveness, at the expense of their own sovereignty? A possible shift to the right during the upcoming elections make these questions all the more urgent, reminding us that the significance of the European elections are not to be underestimated.