Economic surveys and country surveillance

Economic survey of the European Union 2007

 

Contents | Executive summary | How to obtain this publication | Additional info

Published on 20 September 2007. The next Economic survey of the EU will be prepared for 2009.
Bookmark this page: www.oecd.org/eco/surveys/eu.

An Economic Survey is published every 1½-2 years for each OECD country. Read more about how Surveys are prepared. The OECD assessment and recommendations on the main economic challenges faced by the EU are available by clicking on each chapter heading below.

Contents                                                                                                                           

Chapter 1. Key challenges for the European Union

It is fifty years since the Treaty of Rome was signed. The treaty between the six founding members set the goal of ever closer union among the peoples of Europe and established an economic union based on the “four freedoms” that goods, services, people and capital should be able to move freely. The Union has achieved a great deal, but it also faces some significant challenges – especially from globalisation and the ageing of its population – and needs to do more to boost jobs and growth. Europe as a whole has done well out of globalisation but some regions have struggled to adapt, and they need to strengthen their adjustment capacity and innovation levels. Product and labour market reforms are central here. The roles of the EU include strengthening the single market, encouraging stronger competition across Europe and living up to global responsibilities such as trade reform and addressing climate change.

Chapter 2. Ever closer union? Moving forward in the single market

The single market has delivered major benefits for EU citizens. By removing barriers to trade, it has given consumers access to a better range of goods and services, often at lower prices and higher quality. For businesses, it has created a larger pool of suppliers, helping them to be more competitive on world markets. It has helped strengthen competition, contributing to higher levels of innovation, entrepreneurship and growth. It has also been a necessary counterpart to the creation of the euro – the common currency simply could not work without a high level of economic and financial integration. But there are signs that integration is slowing down, and the reform agenda needs fresh impetus. This chapter reviews the internal market. It emphasises the services sector, which is the main area where further progress is needed, and discusses the likely impact of the services directive. It also reviews network industries, including energy, telecommunications and ports.

Chapter 3. Building competitive financial markets

Europe’s financial markets are undergoing a rapid transformation. The renaissance since 1996, when the Investment Services Directive came into force, has been impressive. Bond issuance has more than doubled; equity market capitalisation has tripled; and equity turnover and the value of derivatives have increased six-fold. In some niches, Europe has overtaken the United States. There is unfinished business nonetheless. The main challenges include greater integration of retail banking, deeper corporate finance markets and stronger financial surveillance. The chapter discusses the role that can be played by mortgage market reform, the Single Euro Payments Area (SEPA), the MiFID, mutual funds and banking supervision.

Chapter 4. The regulatory framework at the community level

Effective regulation underpins the single market. EC initiatives have been crucial in facilitating cross-border trade by smoothing out differences in regulations and standards across member states. The challenge in coming years is to keep up the momentum and ensure that interventions are well chosen, effective and implemented at minimum cost. This involves careful thought about whether intervention is necessary, what the measure is trying to achieve and what the best way to meet those objectives might be. Regulation is not always the best option. All interventions have compliance costs, and over-regulation and poorly designed laws can create more problems than they solve. This places a premium on sound regulation in the first place, especially ones based on principles rather than being overly prescriptive so that they are flexible enough to adapt to unforeseen economic and technological developments.

Chapter 5. Strengthening competition policy

Competition policy has a key role in underpinning the internal market. The EU’s competition framework has been shifting towards a more economics-centred system in the areas of antitrust, mergers and state aid. The Commission has been working to encourage greater consistency in the way competition law and policy are applied by the national competition agencies and court systems. The increased emphasis on economic analysis has led to a modernised set of guiding principles, and has encouraged national authorities to apply broadly consistent rules. This chapter discusses these changes and suggests some options for further reform, especially in the areas of leniency programmes, individual and criminal sanctions, abuse of dominance and state aid.

Chapter 6. Reforming agricultural and trade support

EU policies will have a decisive influence on developments in world trade. It is the world’s leading exporter and second-leading importer of goods and is the biggest trader of commercial services. Along with the other major trading blocs, decisions by the EU will have a major influence on whether the multilateral approach to world trade will continue to dominate or whether trade arrangements splinter into regional and bilateral agreements. Agricultural policies in particular will influence whether the Doha round can be concluded successfully, where success is measured by major cuts in trade-distorting domestic subsidies, the elimination of all forms of export subsidies and better market access worldwide. Concerning other trade issues, EU tariffs on manufactured products are relatively low except for certain processed food products, but its complex web of preferential trade deals makes access more difficult for those left out. In services, there is little discrimination against foreigners – except in the professions – but anything that undercuts the internal market for services also hampers provision from outside the EU.

Chapter 7. Making the most of regional cohesion policy

Successive rounds of enlargement have given an increasingly important role to the Union’s regional cohesion policy and its ambitious aim of reducing regional income disparities. But economic disparities across EU regions have barely declined, or at best have fallen at an extremely slow pace. This chapter offers some policy options to raise the impact of regional policy.

Chapter 8. Removing obstacles to geographic labour mobility

The free movement of persons is a key objective of the European Union. A mobile workforce can foster a sense of European citizenship and help the economy operate more smoothly. For example, it can boost productivity growth through better job matching; it can act as a shock absorber for countries that are out of sync with their neighbours; it can lower the structural unemployment rate; and in some cases it can help raise wealth and human capital in the source countries as well if some of the migrants eventually return home. This chapter reviews recent trends in labour mobility in the Union with a special focus on migration from the new member states. It then discusses how policy reforms can help to lower barriers to mobility between EU countries.

 

How to obtain this publication                                                                                      

The Policy Brief (pdf format) can be downloaded in English. It contains the OECD assessment and recommendations.The complete edition of the Economic survey of the EU 2007 is available from:

Additional information                                                                                                  

 

For further information please contact the EU Desk at the OECD Economics Department at eco.survey@oecd.org.  The OECD Secretariat's report was prepared by David Rae, Boris Cournède and Marte Sollie under the supervision of Peter Hoeller.

 

 

 

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