Opinion of the Economic and Social Committee on 'Economic Reform: Report on the functioning of Community product and capital markets'
Date: 1999-05-26
Institutions: European Economic and Social Committee
Subjects: action programme, capital market, commodities market, economic policy, single market

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Official Journal of the European Communities

22.7.1999

Opinion of the Economic and Social Committee on ‘Economic Reform: Report on the functioning
of Community product and capital markets’

(1999/C 209/09)

On 23 February 1999, the Economic and Social Committee, acting under Rule 23(2) of its Rules of
Procedure, decided to draw up an opinion on ‘Economic Reform: Report on the functioning of
Community product and capital markets’.

The Section for the Single Market, Production and Consumption which was responsible for preparing the
Committee’s work on the subject, adopted its opinion on 18 May 1999. The rapporteur was Mr V. Cal,
the co-rapporteur, Mr J. Simpson.

At its 364th plenary session (meeting of 26 May 1999) the Economic and Social Committee adopted the
following opinion by 77 votes with four abstentions.

N.B.: In the course of the drawing-up of this opinion the Single Market Observatory decided also to deal
with the following two documents of the Commission:

Assessment of the Single Market Action Plan, June 1997-December 1998 and Economic

and

Structural Reform in the EU (Cardiff II).

Introduction

The Committee welcomes the opportunity to make its views
known on a series of documents on the single market: the
evaluation report on the action plan,
the report on the
functioning of Community product and capital markets (Card-
iff I) and the report on economic and structural reform in the
EU (Cardiff II). As the Committee has always pointed out, the
assessment of the single market programme should look into
both legal and economic aspects at the same time and should
not be confined to listing the directives which have been
transposed into national law.

European Monetary Union, the efforts of Member States to
meet the convergence criteria, and the setting up of the Growth
and Stability Pact and the national obligations within that
framework.

1.3.
As this Assessment of the Single Market Action Plan
points out, contemporaneously, many other features of the
single market were steadily evolving.

The Assessment reports on actions taken for each of

1.4.
the four strategic targets as set out in the Action Plan:

— making the rules more effective;

1. Assessment of the Single Market Action Plan, June

— dealing with key market distortions;

1997 - December 1998

1.1.
After the meeting of the European Council in Amsterd-
am in June 1997, the Commission published its Action Plan
for the Single Market (CSE(97) 1). This contained a series of
important actions aimed at further significant improvements
to the functioning of the single market by 1 January 1999.
The most recent assessment of the progress of the plan
(COM(99) 74 final), prepared at the end of 1998, builds on
the earlier Single Market Scoreboard assessments, the third of
which was published in October 1998 (1). Each has also been
examined by the ESC. The Opinion on the third was adopted
on 24 February 1999(2).

In the last 18 months, much of the focus in the
1.2.
evolution of the single market has been on major macro-
economic topics such as the preparation for and launch of the

(1) SEC(1998) 1889.
(2) OJ C 101, 12.4.1999.

— removing sectoral obstacles to market integration; and

— delivering a single market for the benefit of all citizens.

A large number of the Action Plan commitments are
1.5.
briefly reviewed. These reflect a range of legislative initiatives
and policy reviews as well as a series of particular initiatives
related to the strategic targets. The ESC, in earlier opinions,
has acknowledged both the value of this approach and the
wide ranging nature of the topics which are reviewed. In this
Opinion, the ESC wishes to acknowledge the useful work
which is reported in the Assessment and to identify a limited
number of topics for further comment.

1.6.
The review of the Action Plan by the ESC has been
made easier by the style of presentation of the Commission
assessment. In particular, the Committee welcomes the analyti-
cal presentation, in Annex II, of the degree of progress on each
of the identified topics with its own explicit acknowledgement
of areas where progress has been disappointing.

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1.7.
The comments of the ESC reflect, first, an acknowl-
edgement of some of the important achievements during the
period of the Action Plan, second, a number of significant
short-comings are identified and, third, some suggestions are
made on relevant topics which have emerged from the Action
Plan on which the Committee recommend further work by the
Commission.

Assessment of the achievements

1.13.
Plan have been:

Other achievements within the ambit of the Action

a)

b)

the intervention mechanism to deal with serious obstacles
to the free movement of goods

the specific proposals to simplify national and Community
rules affecting the single market

c) problem solving mechanisms through the establishment

of contact and co-ordination centres

The Commission believes that the Action Plan has
1.8.
been a success. To quote from the introduction,
‘in most,
though not all, cases, the progress sought by the Action Plan
has been achieved.’ The ESC would wish to endorse this
comment and accepts that the discipline instilled by the Action
Plan has been constructive and beneficial. Nevertheless, since
the Commission is assessing its own achievements, the ESC
recognises that an external assessment might have been more
critical.

d)

the code of conduct on harmful tax competition

e)

the completed review of the guidelines for state aids

f)

rules to allow the liberalisation of gas supply

g)

refinement of the Working Time directive

1.9. Many of the achievements of the Action Plan are
necessarily contributions to the evolution of policy rather than
completed discrete steps. It is, therefore, not sensible to try to
assess the longer term impact of the Action Plan since many
of the commitments accepted are parts of a wider range of
actions which will evolve over a much longer period.

1.10. Whilst there are exceptions to any general overview,
the Committee notes that, within the Action Plan, the Com-
mission has made good progress in meeting its targets for
preparing and publishing its conclusions related to new and
amended Community legislation. Member States also seem to
have improved the work of implementing their legislative
obligations. Progress with making the existing rules work
more effectively has been recorded but with less comprehen-
sive success.

1.11.
Directives: The reduction in the backlog of transpo-
sition of Directives into national legislation is welcome and
overdue. Yet the remaining backlog is a cause for concern. The
ESC agrees with the Commission that a system of timetables
and monitoring continues to be needed even after the end of
the Action Plan period.

h) he introduction of the Business Test Panel to improve the

quality of proposed regulations

i) proposals to modernise and rationalise the application of

VAT.

However, the intervention mechanism to deal with
1.14.
serious obstacles to free movement of goods is a Council
compromise and has still to prove that it will work in practice.

The SLIM can only be considered a partial success.
1.14.1.
A further evaluation and assessment is needed to find out
whether SLIM is an efficient instrument to simplify legal
measures. Many of the proposed directives have not been
adopted by the Council and very few have been endorsed and
brought into effect. The ESC suggests that the Commission
should monitor and review the methodology and success of
this initiative.

The proposals to modernise and apply uniform
1.14.2.
VAT rules are welcome since they can make the work of
businesses easier. At the same time they would only be a first
step in the direction of the envisaged VAT system based on
country of origin. The ESC has already expressed its support
for these proposals.

Deficiencies

1.12.
Public procurement: The complex issues to ensure a
more open market in the areas of public procurement are
illustrated in two contrasting ways. The Commission notes
that progress in applying public procurement directives has
been ‘particularly slow’. This negative comment contrasts with
the Commission’s own achievement of publishing a Green
Paper on public procurement follow-up. The ESC is concerned
that Community policies and decisions are not being
adequately reflected in the legislation and actions of some
Member States.

1.15.
The Commission acknowledges that in some areas
progress has been disappointing. Where this is indicated, as in
Annex II, the ESC agrees with the Commission and would ask
the Commission to give an assurance that efforts will continue
to remedy these deficiencies.

Airport slots: One deficiency which particularly con-
1.16.
cerns the ESC is the lack of any reported progress in suggesting
new rules to determine the allocation of airport slots.

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1.17.
For a number of proposed actions, the Commission
appears to be rather more complacent than the ESC would
believe is merited. In particular, the Committee draws attention
to the modest achievements in respect of

growing recognition of the need for a two-way dialogue
between the Community (and its institutions) and the people
and enterprises which are the key players.

i)

initiatives for Mutual Recognition,

ii) plans to remove technical problems which are delaying

standardisation of construction products,

iii) elimination of distortions caused by differences in indirect

taxation,

iv) proposals for a Community framework in the area of

energy taxation,

v) a tenth company law directive on cross-border mergers,

vi) regulations on European statutes for co-operatives, associ-

ations and mutual societies, and

vii) measures to eliminate border controls on people at the

internal frontiers within the Community.

1.18.
The Action Plan clearly confirms that a great deal still
remains to be done on many other key issues as well as those
mentioned above. This includes work on the Community
patent,
the European company statute, merger rules for
companies, the removal of double taxation at Community
level, a definitive system of VAT, and the prevention of
Member States introducing new national obstacles in the single
market.

Follow up on the Action Plan

1.19.
The Action Plan, for the period to the end of 1998,
proved to be a useful method of setting objectives for the
Commission to enhance the single market. The setting of
objectives has then made it easier to monitor and assess the
effectiveness of the work of the Commission and the related
actions of the other institutions, including the Governments of
the Member States.

1.20.
The ESC is convinced that the valuable lessons learnt
from the Action Plan should find expression in a new form of
assessment of the evolution of the single market and the wider
range of inter-related issues which illustrate the progress of the
Community.

1.21.
The emphasis for the Commission in the recent past
has been mainly on the instruments to build a single market
and the related and supporting measures. In the future, this
will change so that the focus for attention is more on the
continued effective and efficient working of the single market.
There will continue to be a need for monitoring by the
Commission and feedback to it on many topics. There is a

1.22.
The ESC commends to the Commission the concept
of a periodic process of review, monitoring, dialogue and
analysis. From this iterative process, the Commission can
develop a series of strategic objectives for the further evolution
of the single market and the basic assumptions which under-
pin the concept.

1.23.
The value of the Action Plan and the linked reports
known as Cardiff I and II has been that a structured review has
been undertaken of the progress of all the relevant Community
policies and actions so that strengths and weaknesses can be
identified. As a consequence, it is possible to further develop
these processes as, what has been described as, a vehicle for
reaching new goals. The beneficial result can be the clearer
statement of an overall philosophy to guide and influence the
setting of Commission objectives.

1.24.
The ESC would support the proposal from Com-
missioner Monti, who reported to the European Council in
February 1999 in the following terms: … we do not need
another Action Plan ’to complete the single market’ but we do
need clearly defined objectives — as do companies to direct
their policy towards their investors; objectives that we agree,
say, for a three year period, with a review at the end of each
year to ensure that we are meeting these objectives and
following through with modifications if need be …

However, it notes that the Commission has put forward an
Action Plan specifically addressed to the financial sector and
endorses the need for specific treatment in this key area.

The periodic setting of strategic objectives must be
1.25.
made in consultation with the relevant partners, including the
ESC, and must be seen as directly relevant to the needs of
citizens, enterprises, employment and social and economic
development. From this should be designed a more functional
series of operational objectives which, in turn, set the perform-
ance indicators to allow the further monitoring of progress and
the identification of risks, failures or inadequate co-operation.

1.26.
Emerging from the setting of objectives and the
dialogue with relevant partners would be a three year cycle of
strategic objectives. These would be used to set out
the
shorter-term implications which would be part of the agenda
and performance indicators for the further annual ‘Cardiff’
type reports and the twice yearly scoreboard.

1.27.
To ensure that the Commission takes appropriate
action on the conclusions drawn from these reports, the ESC

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agrees with the suggestion from Commissioner Monti that the
first Internal Market Council of each year should review the
position and identify immediate priorities for action.

1.28.
The ESC awaits with interest the statement expected
from the Commission in the preparation for the June 1999
Internal Council meeting which it hopes will deliver a state-
ment of the objectives of single market policy for the next
three years.

2. Community Product and Capital Markets (Cardiff I)
(COM(99) 10 final) and Economic and Structural
Reform in the EU (Cardiff II) (COM(99) 61 final)

2.1.5.
Cardiff II takes up once again some of the points
dealt with in the first report concerning the product (goods
and services) and financial markets and looks in detail at
labour markets (based on the Member States’ national reports
under the Luxembourg process) and public finances, especially
social security spending and taxation.

All

2.1.6.
these points are then incorporated into the
Commission’s recommendation on the broad guidelines of
economic policy (Treaty Art. 99, ex Art. 103), thereby allowing
various interconnected issues to be dealt with together. This is
a significant step forward in the coordination of economic
policies within the EU (1).

2.1.

Introduction

2.2. General Comments

2.1.1.
The Cardiff European Council, which met on 15 and
16 June 1998, felt that economic policy should focus on
promoting growth and employment and on securing macro-
economic stability and the efficient working of labour, product
(goods and services) and capital markets. The Council wel-
comed the decision to establish a procedure under which
Member States and the Commission would produce short
year-end reports within their areas of competence on product
and capital markets. This procedure would complement the
information already available in national employment plans.
The Council also welcomed the Commission’s proposal to
produce a report on structural issues and policies drawing on
this material for consideration by the ECOFIN and other
formations of the Council (Presidency Conclusions, point 11
— unofficial translation).

2.1.2.
Significantly, these conclusions were included in the
section on the broad economic guidelines (Art. 99(2), ex
Art. 103, of the Treaty, a clear signal to broaden the scope of
the guidelines. The European Council also emphasised the
importance of structural and economic reforms in the fight
against unemployment.

2.1.3.
On 20 January 1999 the Commission published a
first report in response to the conclusions of the Cardiff
European Council. This report was called Cardiff I and it was
followed by a second report, Cardiff II, on 17 February 1999.
On 30 March the Commission approved its recommendation
on the broad economic policy guidelines — COM(1999) 143
final — which for the first time included guidelines for each
Member State not only in matters pertaining to the budget but
also in respect of markets in goods and services and the labour
market.

Cardiff I looked at the current state of the internal
2.1.4.
market and put forward 16 priorities regarding the regulatory
framework of
the single market. The stated objective of
these measures is to improve the efficiency of the European
economy, by making markets more flexible and improving the
way they operate. As the Commission puts it ‘The aim is not
to dismantle national regulations but to improve the economic
efficiency of these regulatory environments.’

2.2.1.
The reports do not seem to provide sufficient
coverage, or evidence, of any improvement in the economic
situation, increased economic and social cohesion or more
employment in the EU as a result of measures taken in the
process of establishing the internal market. The economic
integration indicators examined in the reports go no further
than intra-EU trade in goods, cross-border trade in services,
movement of capital and direct
foreign investment and
free movement of workers. In many cases, the effects of
globalisation in economic and, especially, financial relations
may be behind the restructuring of sectors and companies
which is cited as an example of the impact of the internal
market.

2.2.2.
It would appear that the competitiveness of the
European economy has been boosted by the deepening of the
single market and foreign direct investment between European
countries has increased significantly. Intra-Community trade
has also risen but at a slower rate between 1995 and 1997
than between 1993 and 1995.

2.2.3.
It is also something of an exaggeration to cite price
convergence and falling prices as evidence of results achieved
to date with the single market, or as evidence of ground still
to be made up in the process of integrating certain sectors. As
is clear from the second report, comparing the situation in the
EU with that in the USA reveals that consumer prices are
higher in the EU than in the USA, but that this is largely due
to differences in indirect taxation rather than a less efficient
wholesale and retail distribution network or higher margins in
the EU.

(1) See the Opinion on the Annual Economic Report 1999,

CES 133/99 fin.

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2.2.3.1. Within the EU, price dispersal also reflects the
differences in per capita living standards and rates of indirect
taxation. The argument that price dispersal for services is twice
that for goods appears to ignore the fact that the wage burden
is generally greater in the case of services, and that wage and
productivity dispersal, from 1 to 5 between the Member States,
is much greater than the price dispersal highlighted by the
Commission. This is an important point which is not tackled
in the Commission reports.

2.2.4.
The reports make insufficient mention of distortions
of competition due to state aids, even though the Commission
publishes statistics every two years on state aids and refers to
them as being very high — in fact, leaving aside the agricultural
sector, state aids amount to more than the total EU budget
every year, around 95 billion euros, or 1,2 % of Community
GDP (1995-1997 average). The concrete, valuable suggestion
made by the Commission on this point, apart from itself
remaining ‘vigilant’, is that Member States fix a timetable for
the reduction of overall aid budgets, as well as modifying the
present
intervention structure which places the emphasis
on ad hoc and sectoral aids. In its recommendation, the
Commission includes a number of concrete and precise
guidelines for the majority of the Member States on how to
reduce state aid.

The issue of universal service obligations has raised
2.2.5.
some of
the most delicate problems in the process of
liberalising network-based markets. Apart from separating
competitive activities from those required by regulation, a
process which is underway in all Member States, there are no
further proposals in the Commission reports to tackle some of
the problems faced by all Member States to a greater or lesser
degree: job losses, the availability of services at ‘affordable’
prices and with assured quality, the definition of universal
service obligations and their financing, and selection of the
enterprises charged with carrying them out. The Commission
acknowledges that ‘acceptance of the liberalisation process
will be greater if its positive effects in terms of prices, choice,
quality and the universality of services are clearly identified
and these benefits are transmitted to industrial users and
consumers without delay’ (Cardiff II, p. 13). The Committee
agrees with these comments, but would draw attention to the
need to comply with the principle of subsidiarity.

Furthermore, the Committee would stress that liberalisation
will only be accepted if, in addition to the issues addressed by
the Commission, appropriate consideration is also given to the
position of workers who may be adversely affected by
liberalisation.

The free movement of workers, which should be one
2.2.6.
of the four pillars of the internal market, is the area where
most ground needs to be made up, both in the regulatory

sphere and in real economic and social life. As the Commission
recognises, the flows of labour across borders are limited,
though they are increasing and may be given a boost by the
the 16 proposals
the euro. But none of
introduction of
presented in Cardiff I, nor the section on labour markets in
Cardiff II, nor the broad economic guidelines tackle this issue.

The survival of SMEs in a more open, competitive
2.2.7.
environment is a key issue affecting employment levels in the
EU. Although it is in this type of enterprise that jobs are
created, the rate of closures is high (less than half of new SMEs
manage to survive more than five years) with a large number
of jobs lost. There has been a succession of initiatives and
reports at Community level and measures have been taken at
Member State level, but the Cardiff reports make no correlation
whatsoever between these measures and the impact on
employment trends in the sector. European companies grow
less than their counterparts in the United States, and do not
become large enough to significantly influence international
competitiveness, especially in highly innovative sectors. The
problem of SME growth must be addressed within the single
market by improving the regulatory framework, with specific
reference to taxation and employment and enhancing the
efficiency of the financial markets. With a view to promoting
growth, the tax system in particular should encourage com-
pany funding from capital and reserves and provide more
favourable taxation of capital gains. Measures to improve the
financial markets should focus on increasing the number of
financial intermediaries of a suitable size; on action to develop
the tax system; and on eliminating the regulatory and currency-
related fragmentation of the markets. SMEs in Europe still
suffer from the lack of own capital and access to more
favourable financing arrangements, the difficulty in accessing
research and development programmes and public contracts,
and the fact of operating in a regulatory and competitive
environment which does not take account of their particular
circumstances. On the whole, support measures for SMEs have
been left up to the Member States.

Tax systems have ‘an important impact on growth
2.2.8.
and employment’ and aim at ‘balancing economic efficiency
and social cohesion’ (Cardiff II, point 4.2). On the one hand,
the Commission says that some degree of tax competition is
it affirms that harmful tax
desirable, while on the other,
competition is a cause for concern, without defining either.
The Commission feels it is necessary to harmonise indirect
taxes and to take legislative action on where VAT is charged,
but still fails to make any proposals on how to guarantee the
corresponding budgetary compensation for the Member States
which will be negatively affected by the introduction of the
definitive VAT system.

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2.2.9.
On the taxation of corporate income and interest on
savings, the Commission considers that ‘a certain degree of
co-ordination is important and desirable.’ A proposal was
submitted on the taxation of interest on savings and the ESC
drew up an opinion on it. However, as far as the taxation of
corporate income is concerned, the Commission recognises
that the current situation is most typically characterised by a
wide array of exemptions and deductions which directly affect
the tax bases and, consequently, the differences in terms of
effective taxation of corporate income across Member States
are larger than the differences between statutory rates. The
study announced by the Commission on the discrepancies in
corporate taxation and the related policy interrogatives should
be submitted as soon as possible.

2.2.13.
On the subject of social protection, the Commission
also mentions the reforms under way and the many measures
taken to cut spending, as well as changes to the system of
funding in some countries. Public spending on social protec-
tion in the EU is considered high in terms of GDP, although
there are considerable differences between Member States. The
cohesion countries, together with the United Kingdom, have
the lowest proportion of spending. However, as the report
itself acknowledges, if public and private spending are taken
together, the differences compared with the USA are much
smaller. One direction already taken by social security reforms
in Europe is to increase the share of self-funded pensions in
jeopardising the solidarity
the systems, without, however,
inherent in the present system; this will lead to greater personal
responsibility in the future.

2.2.10.
The tax burden in the European Union in 1998 was
43 % of gross domestic product (GDP) as against 32 % in the
United States of America and 29 % in Japan (see Table 4.2 of
the Cardiff II report). However, these general data mask key
differences in how the data is made up. Social security
contributions as a percentage of GDP are higher in the
European Union because a significant proportion of social
security and health expenditure in the USA is private (see
point 2.2.13 below); direct taxes are lower in the EU relative
to the USA and indirect taxes in the EU are far higher than in
the USA or Japan (14 % compared to 7 % and 8 % of GDP
respectively).

2.2.14.
As well as cutting costs, especially with pensions,
the Commission feels that progress has been made in con-
trolling (public) expenditure on health care although it is
difficult to see how this can continue while still maintaining
the principles of universality and equality in access to services.
It is regrettable that in neither of these reports, which contain
so many references to other Commission documents, is there
any mention of a significant statistic that could expose the link
between social security benefits and income in the Member
States (the First Cohesion Report, for example, cites that
without social security benefits, the number of families below
the poverty line would be almost 40 % instead of the 18 %
currently in that situation).

On tax burden trends over recent years, the Com-
2.2.11.
mission recognises that the average Community burden on
labour is high, and increasing, while taxes on consumption
have remained stable and those on capital have fallen (1). It
points out that ‘with the disappearance of exchange risks,
disparities in tax treatment of capital and financial transactions
will
increasingly emerge as a significant distortion on the
allocation of resources’ (Cardiff I, p. 22), but here, too, there is
a need for more detailed discussion of alternative sources to
compensate the possible loss of tax income from labour,
especially less skilled labour, or of ways of increasing the
efficiency of social security systems.

2.2.14.1.
The relatively high standard of living in the EU,
its dynamic economic growth and the size of its internal
market owe much to these social protection systems, and it is
regrettable that the reports do not touch on this, as such an
examination would point up all the consequences of the
reforms in progress (2).
the Commission does not put
forward a more balanced, comprehensive analysis of all the
consequences of this issue and does not submit proposals
which go beyond straightforward monitoring of costs and
spending cuts, the process of reforming social security systems
will continue to come up against political and social difficulties.

If

2.2.12.
In any case, any analysis of taxation systems must
not only look at ways of reducing tax revenue, it must also
tackle the spending side, as the Commission acknowledges
when it states that ‘public investment bore a disproportionate
share of spending cuts’ (Cardiff II, section 4). However, no
conclusions are drawn from this for the economic policy of
the Member States, particularly those needing to make up
economic ground.

2.2.15.
On the subject of labour markets too, the Com-
mission recognises that the challenges here are ‘to strike the
right balance between flexibility and security’, to promote
‘agreements between the social partners
to prevent
reductions in non-wage labour costs simply being offset, as so
often in the past, by increases in profits or direct wages’ and to
foster ‘collective agreements [which] are gaining ground as an

...

(1) Trends may, however, differ in some Member States.

(2) See the ESC’s own-initiative opinion on the costs of poverty and

social exclusion in Europe, OJ C 284, 14.9.1998.

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instrument for finding a balance between different interests in
working life, and collective bargaining, though in the midst of
reorganisation, is highly adaptive’ (Cardiff II, point 3.3). The
Committee regrets that the Commission failed to conduct this
analysis in greater depth.

2.2.16.
The reports offer no analysis of the relationship
between employment and unemployment, on the one hand,
and the internal market and economic and structural reform
on the other. This is all the more regrettable as the Commission
endorsed the Cecchini Report which foresaw the creation of
five million jobs with the advent of the internal market. The
year the internal market was established ‘coincided’ with a
deep recession in the EU, resulting in a rise in unemployment
to levels which have remained virtually unchanged ever since.
All the Commission mentions in Cardiff II (point 3.3), in the
section dealing with the labour market, is the Luxembourg
process and the national employment plans, reiterating the
Employment Guidelines which ‘invite the social partners to
negotiate at all appropriate levels agreements to modernise the
organisation of work, including flexible working arrangements,
with the aim of making undertakings productive and competi-
tive’. In passing, the Commission is critical of the reduction in
weekly working time seen in various Member States, claiming
that such reductions, when not agreed with the social partners,
‘are likely to be counterproductive’. It also criticises employ-
ment protection legislation (EPL) while acknowledging that
‘strict EPL should not be singled out as causing the high
European unemployment.’

The failure to examine regional and cohesion
2.2.17.
policies, apart from highlighting their importance [Cardiff II,
point 3.1(3)], is a matter of some concern. Much of the debate
before and during establishment of the internal market and
the creation of the euro centred on the regional impact of
these decisions and the need to find ways of dealing with
asymmetrical shocks. The two Delors packages on the Union’s
financial prospects were in large part based on this. Some of
the studies mentioned in point 1 of this section of the draft
opinion dealt with the regional and economic and social
cohesion aspects. In the Cardiff reports dealing with economic
and structural reforms there is nothing about these issues,
either
the Structural and
Cohesion Funds to internal market measures, or regarding the
regional imbalances made better or worse by the advent of the
internal market and the euro.

regarding the contribution of

2.2.18. With the third phase of economic and monetary
union and the introduction of
the process of
completing the single market will speed up considerably. This
has already happened in the financial markets, where all
government bonds and stock markets in the euro area are

the euro,

quoted in euros. Business restructuring and mergers and
acquisitions have gained a new impetus and involve huge
sums. The biggest firms are better prepared and have more
resources to cope with the new circumstances; many obstacles
are at present making it difficult for small and medium-sized
enterprises to expand their activities beyond their current areas
of operation. All this leads us to the conclusion that work to
consolidate the single market should be stepped up in the next
few years and become an instrument of economic reform.
Coordination of measures is vital to avoid distortions in the
single market.

3. Final Comments

3.1.
The Commission deems a new action plan to be
unnecessary, since a new consolidation phase for the single
market has been achieved. The key issue now is not so much
adoption of new rules but more one of taking steps to ensure
that existing rules are applied to the benefit of firms and the
general public, and that the final objectives of this process are
understood and supported — deeper economic integration,
improved global competitiveness and contributions to job
creation.

3.2.
The Commission feels that the instruments available to
it for monitoring this phase are adequate: the twice-yearly
Single Market Scoreboards, the Cardiff process, feedback from
citizens and business (the Dialogue), improved collection of
relevant data and statistics (see the paragraph on monitoring
in the conclusions of the Cardiff I report).

The Commission rightly refers to the constant threat
3.3.
national
integration. National
regulations by far exceed those in place at European level in
number, scope and complexity.

legislation poses to market

The Committee therefore endorses the call for the Member
States to draft ‘Mechanisms for the assessment of the impact
of national legislation on the single market’. Before drafting
new legislation,
the Member States should undertake to
prepare a regular statement of the likely consequences for the
single market, etc. (cf. Proposal 4 of the Cardiff I Report).

3.4.
For the Internal Market Council in June, the Com-
mission intends to submit a document establishing the single
market policy objectives for the next three years; these will
be divided into areas such as improved efficiency, market
integration, and responses to technological change, to the
public’s needs and to the challenge posed by globalisation. In
the future, the Commission intends its policies in other sectors,
such as public contracts, financial services and taxation, to be
dovetailed with the aims of the single market.

The Economic and Social Committee — with the
3.5.
support of the Commission, Council and European Parliament
— set up the Single Market Observatory, the main aim of

22.7.1999

EN

Official Journal of the European Communities

C 209/35

which is to allow permanent monitoring of the process
of
implementing the single market. The potential of the
Observatory is now starting to be exploited and the ESC, with

the Commission’s support, ought
to look into ways of
incorporating this work into the broader monitoring process
which the Commission is developing.

Brussels, 26 May 1999.

The President

of the Economic and Social Committee

Beatrice RANGONI MACHIAVELLI

Opinion of the Economic and Social Committee on the ‘Commission Communication Financial
Services: Building a Framework for Action’

(1999/C 209/10)

On 28 January 1999 the Economic and Social Committee, acting under the third paragraph of Rule 23
of its Rules of Procedure, decided to draw up an opinion on the abovementionned Communication and
to set up a subcommittee to prepare the Committee’s work on the subject, in accordance with Rules 11 (4)
and 19 (1) of the Rules of Procedure.

The Subcommittee adopted a draft opinion on 20 April 1999. The rapporteur was Mr Burani.

At its 364th plenary session (meeting of 26 May 1999) the Economic and Social Committee adopted the
following opinion unanimously.

1.

Introduction

On 28 October 1998 the Commission addressed to
1.1.
the Council and the European Parliament a Communication
(COM(1998) 625 final) which surveys the current situation of
the European financial markets and proposes a plan of future
initiatives to make the markets more integrated at European
and international level, stronger, better controlled and more
transparent. The Economic and Social Committee — to which
the Communication was not addressed — takes note of this
document and intends to make — with this opinion — a
contribution which, though not requested, may help to arouse
some useful reflections.

in combining the contribution of professionals with that of
the national authorities, users and consumers; consequently it
cannot but endorse, in general terms, the objectives and future
approaches set out in it.

1.4.
The Commission’s objectives are summed up in six
points in the introductory part of the Commission document.
The emphasis is on legislative structures,
the remaining
integration of markets and
regulatory and fiscal barriers,
infrastructures, and coordination of controls. The Committee
would like to draw attention to another basic need in the
background: the need to create a strong European financial
sector, capable of creating jobs, offering competitive and
transparent products and services, and finally of attracting
inward capital investment.

The following comments are deliberately limited to the
1.2.
essential aspects of the Commission document; going into
detail would require a commitment of resources and time
which would probably not be justified, given that we are still
at the preliminary stage of developing strategies. But precisely
for that reason it is important for the basic concepts underlying
the strategies to be clear.

This observation — made by the Commission itself,
1.5.
but with reference to prudential rules alone (1) — should also
apply when individual initiatives are examined: the need to
strengthen Europe’s competitive position in relation to the rest
of the world should become a point of reference. This does
not necessarily mean — as will be further clarified later in this
document — that the rules of the game should be less strict: if
anything the opposite should occur in some cases.

1.3.
The Committee congratulates the Commission on
drawing up an extremely clear document, which has succeeded

(1) See Communication, point 6.