N. Peter Kramer’s Weekly Column
‘Complete the internal market’, former Italian Prime Minister Enrico Letta writes in “The independent High-Level Report on the future of the Single Market”. It was prepared at the request of the Council to address the problem that EU’s economic growth is seriously lagging behind that of the US. The gap has tripled in the last 25 years. When the euro was introduced, the US economy was 11 percent larger, that difference has grow to 30 percent. The difference is even more glaring looking at GDP (gross domestic product): the Eurozone around €15 trillion, the US already at €27 trillion!
Letta’s main advice is completion of the internal market and the reduction of bureaucracy and regulatory burdens. Comparison with the US makes sense. There, the business community is not saddled with restrictive regulations (80% of legislation in the EU now comes from ‘Brussels’), expensive energy and an entrepreneur-unfriendly government policy. In the US the rule is that anything goes unless it’s explicitly forbidden. In the EU it is the other way around: nothing is allowed unless it’s allowed. US business uses their freedom to do business, to make profit by taking risks. Investments are financed with risk-bearing venture private capital. In the EU venture capital is scarce. Therefore Letta is arguing in favour of an EU capital market.
But why tax harmonisation in the EU, as Letta advises? In the US, the states compete with each other on tax issues without any problem. Why an EU industrial policy? The US has no strict industrial policy. The government should not take the place of the entrepreneur.
Who remembers the ‘Lisbon agenda’ (2000!): the EU want ‘to become the most competitive and dynamic knowledge-based economy in the world’. All we got are rules, rules, rules and a giant bureaucracy!
