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From Antitrust Law Daily, February 11, 2014

Almunia discusses the role of a Single Market in EU economic recovery

By Linda O’Brien, J.D., LL.M.

In an address before the European Competition Forum in Brussels on February 11, Joaquin Almunia, European Commission (EC) Vice President of the European Commission for Competition Policy, discussed the areas in which competition policy can help realize the potential of the Single Market for Europe’s competitiveness.

Almunia began his remarks, entitled “Fighting for the Single Market,” by stating that competition policy has been a fundamental element of the European Union (EU) from its foundation as competition is instrumental to building an integrated market. The competition policy community can help show EU citizens how competition can make a real difference in their lives by keeping the Single Market open and turning it into a driver of innovation and growth for Europe.

A genuine Single Market, along with strong enforcement of EU competition law, is the main lever the EU has to sustain growth and the steady improvement of living standards, Almunia noted. The interplay between a deeper and broader Single Market and strong antitrust enforcement is at the core of higher productivity and growth across Europe. In Almunia’s view, competition creates incentives for existing firms to become more efficient so that they can stay ahead of rivals. Competition also allows high-productivity companies to replace less efficient operators. Only by permanently promoting the quest for productivity will public policies foster growth across the EU and push firms to innovate and invest.

To accompany this process, labor market and social policies – together with better educational systems – must facilitate the movement of workers within and across sectors and activities, providing them with adequate protection when unemployed and with the right tools to acquire the necessary skills and search for jobs, Almunia stated. The EU also needs to provide the necessary public support to correct market failures that prevent the accumulation of human and knowledge capital. Within this framework, competition policy creates the conditions for well-functioning markets, Almunia observed.

Almunia next discussed the state of competition and integration in telecoms and energy markets and EC actions against selective tax measures as an illustration how these areas contribute to achieve a fully-fledged European Single Market. The prospects for growth in the telecoms and digital sectors are very high and Europe’s competitiveness would greatly benefit if dynamic and innovative players could operate in a truly EU-wide market. Today, Europe’s telecoms markets remain fragmented. This is the market analysis the EC must take into account when it assesses a merger in the industry. The EC has been pushing for the establishment of the telecoms Single Market for a long time, most recently with the legislative package proposed in September last year. Indeed, the fragmentation of Europe’s telecoms market is not only the responsibility of companies. Cross-border barriers in this market are of a regulatory nature and it is mainly the task of national governments, the Council and the European Parliament to remove them, Almunia stressed.

Another sector where vibrant competition would give a powerful boost to the competitiveness of Europe’s economy is that of energy, according to Almunia. Energy policy everywhere has to confront difficult choices to attain several objectives, including the fight against climate change. Since support measures are set up by national governments, energy prices vary largely across the EU and have an influence on investment allocation decisions. A real Single Market for energy would largely fix such issues in a structural way. State aid policy can be used to help EU countries come together in the way they support renewables, finance infrastructure and guarantee security of supply.

Almunia next discussed taxation from the perspective of State aid control. Governments and international bodies around the world are showing a renewed interest in corporate-tax regimes, he noted. Because of the gaps in national tax laws, many of the largest multinational companies pay very low taxes. The present state of affairs undermines the fairness and integrity of tax systems and – in the European context – it has several undesirable implications. From the competition policy perspective, selective taxation is economically inefficient because it distorts the level playing field for the allocation of capital within the internal market, in Almunia’s view.

As a political consideration, Europe’s citizens will vote to elect the new European Parliament, and a new Commission will be in place before the end of the year, Almunia observed. A growing proportion of voters across the EU are dissatisfied after this long crisis and some of them may be tempted by anti-European messages. The way forward is to show how the EU intends to put in practice our democratic values and guarantee the future of our social model through pro-active policies, not defensive ones, both domestically and on the global stage.

More integration of markets and robust competition control is part of this pro-active approach to tackle the today’s challenges because experience shows that competition enhances competitiveness and innovation, creates jobs and drives economic expansion. Fair and vibrant competition in an open internal market is a crucial element of policies that can boost Europe’s growth and bring it up to speed with the rest of the world. If Europe is to change direction, it must regain confidence in a well-regulated and well-functioning Single Market and in its power to generate growth and employment and offer our people brighter prospects for the future, Almunia concluded.

MainStory: TopStory Antitrust

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