This report provides an in-depth analysis of the state of integration and competitiveness, and their main drivers in the EU and its Member States.
It deals with 4 key horizontal issues that are vital for the microeconomic performance of the EU: investment, competitiveness and innovation, the integration of EU firms in EU and international value chains, and the financing of the real economy.
The report contributes to the European Commission's Single Market Strategy and provides evidence for the coordination of economic policies in the EU.
Structural reforms are contributing to an increase in competitiveness and integration in the EU, but the pace of reforms remains sluggish. This report outlines a number of new insights for the reform process:
- The process must jointly take into account competitiveness, equity and inclusiveness issues to ensure improvement across the board and that the slower performers catch up with the best performers in the EU.
- Investment in equipment and machinery should be encouraged, taking into account 2 important elements:
- Structural reforms should steer investment towards occupations that can improve the EU's total factor productivity performance by increasing innovation, the adoption of digital technologies and higher human capital accumulation.
- During monitoring of the reform process attention should be paid to the efficient allocation of resources at country and Single Market levels to avoid the costly misallocations observed before the crisis. The monitoring process should consider not just aggregate data but micro-data as well.
- In different areas, progress can be observed in the removal of restrictions to integration, investment and productivity growth in countries that needed those most. This applies for instance to measures improving the business environment of firms and to the removal of certain restrictions to trade in services. However, leading EU economies with relatively better business environments and/or lower trade services restrictions are not seeing an improvement in their situation. In fact, in some cases some of these countries are taking new restrictive measures.
- The Single Market reforms that are underway will improve the performance of the Single Market by making it more resilient to crises and more competitive. Product, services and labour markets remain relatively rigid to allow the Single Market to absorb asymmetric shocks more effectively. Common perceptions on the relative functioning of capital and labour markets at EU level may have to be re-evaluated. The Single Market should provide the right incentives to an efficient allocation of resources that can allow upward convergence across and within EU countries.
- Business services, public procurement and markets in the construction value chain warrant closer monitoring.