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Digital economics 18 Apr 2018

The Single European Market 25 years on

The creation of a Single European Market without borders or customs duties is considered one of the greatest achievements of the European Union. The common market is now 25 years old and finds itself at a moment of crucial change in which digital disruption requires new products and services to be regulated.

Moving freely within the EU, setting up a company in a member state or providing a service in the territory of one of the European partners today seem consolidated rights. All of this has been possible thanks to the EU common market.

What were its roots?

In the wake of the oil crisis in Europe in the 1970s, the European Commission, which was then presided by Jacques Delors, gave a push to the economy of the Old Continent, including setting up a single European market in which people, goods, services and capital could circulate freely. This ambitious goal was enshrined in the Single European Act (1986), which set down the steps to be taken and the schedule for their completion.

This was an exacting task for the European partners, requiring as it did the disappearance of any borders and customs duties and homogenizing national legislations. Despite the difficulty of the undertaking, the EU common market came into existence of January 1, 1993 thus giving birth to an economic area that today includes 500 million consumers, has created 3.6 million jobs and has transformed the European Union into a global economic giant.

25 years of the Single Market

In their joint statement on the occasion of the 25th anniversary of this milestone, the representatives of the European institutions undertook to continue to work to reap the full benefit of the single market and to work to strengthen it even more.

The European Single Market is 25 years young. A generation of Europeans has grown up with it and benefitted from it. We will keep making it stronger so that the next generation will benefit even more”

The era of free digital circulation

Despite the big advances made in the past few years in areas such as the integration of payment services, the single market is a project in continuous construction. It evolves in step with the market and the economic sectors. In this sense, the challenge facing the European authorities in the digital era is essentially the same: pulling down barriers. With this goal in mind, the European Commission in 2015 set in motion the strategy for the Digital Single Market, which was revised in 2017.

This plan is based on three pillars of action: better access to digital goods and services, creating a digital environment in which digital networks and services can flourish, and maximizing the growth potential of the digital economy.

The EC estimates that a fully operative digital single market can bring in €415 billion annually to the European economy. To take full advantage of this potential, the institutions aim to regulate the free movement of a new commodity: non-personal data. On this track, BBVA Research has pointed out in a report on the digital economy that “data has become the petroleum of the 21st century”. The study indicates that the removal of existing data location measures would add €8 billion a year to Europe’s GDP.

A study by the Commission put the value of the EU data market at around €60 billion in 2016, a sum that could excee d €106 billion in 2020. The impact on this market on overall GDP in the EU was 2% in 2016, which is equivalent to €300 billion. The EC expects this figure to continue to grow and by 2020 reach €739 billion (4% of the GDP of the EU).

One of the challenges is to improve European levels of digitalization, something that is being achieved bit by bit. According to the latest Digital Economy and Society Index for 2017, the EU improved its digital performance by 3% with respect to the previous year. There is an increasing number of users who buy online (66%), use social networks (63%) and online banking (59%). However, 44% of Europeans still lack basic digital skills.

The Commissions digital strategy has already hit some landmarks. For example, the end of roaming in the European Union, which means that since June 15, 2017, Europeans can use their mobile telephone in any member country without any surcharge.

One of the other big investments to improve connectivity is ‘Wifi4EU’, which has been financed to the tune of €120 million. As of May 2018, EU municipalities will be able to access this high-speed Wifi in public places.

The approval of the Regulation against geo-blocking also figures among recent achievements. This new regulation aims to drive online commerce by removing any type of discrimination against consumers according to their nationality or place of residence.

A number of big challenges still remain, such as blockchain and the construction of the main infrastructure for cloud computing, which are still in the pipeline. Others such as the common regulation in the area of cybersecurity and new legislation on data protection and the regulation on electronic identification have already been approved and will come into force during 2018.

However, there is still a long road ahead in these areas as the European Commission points out in its strategy for cybersecurity and the proposed directive on electronic privacy published last year.

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