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Monti “pessimistic” about future of the single market

Tuesday 13 July 2010 - by Tim Gieles


Speaking at CEPS about his report, and also at the Madariaga Foundation, another Brussels think tank, Monti indicated his concerns about the rise of economic nationalism. Not only citizens and consumers, but increasingly also member states and politicians advocate such nationalism. Monti said: “The single market is less popular than ever, yet it is more needed than ever.”

He advocates new initiatives to strengthen the single market. As examples he mentioned the digital single market and achieving a low-carbon economy. He called the single market “a cornerstone of European integration.”

College of Europe Economics Department director Jacques Pelkmans noted “an unbelievable difference” between the Monti Report and the November 2007 Commission Communication on ‘A single market for 21st century Europe,’ with the Monti Report giving a strategic outline for the future.

But he identified two complexities in the internal market: horizontal issues where gaps such as the energy market and the digital economy remain, and horizontal issues which are sensitive to harmonisation and impact heavily on the socio-economic legitimacy of the internal market, such as taxation and services of general economic interest.


Although tax harmonisation is identified as a very sensitive issue and is seen by member states as a purely domestic issue, the Monti Report addresses the tax dimension of the European single market. In the light of the financial crisis Member States are likely to increase their tax rates to find sources of funding when they are restructuring their budgets, but this will not be done throughout Europe in a coordinated fashion.

Asked about the dangers of this development and how uncoordinated action can be socio-economically harmful, Monti said: “Competition in itself is not necessarily a bad thing, but in the case of taxation it is asymmetric. This might be good for mobile capital, such as corporations and highly skilled professionals, but bad for less mobile capital, for example unskilled labour.”

The danger therefore lies in capital flowing from one to another, cheaper location at the expense of jobs and income elsewhere. Monti has repeatedly stressed that he is not calling for a common tax in the European Union, which due to its sensitive nature could completely stall European integration. Tax cooperation between Member States however is in Monti’s view necessary for a “smooth functioning” of the single market.


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