What future for the single market in the face of global geopolitical changes?

Ladies and gentlemen, dear friends and colleagues,

I am delighted to be here with you today and honoured to have the opportunity to conclude this morning’s discussions, under the auspices of the Jacques Delors Institute and under the enlightened gaze of its president, Enrico Letta.

I have already had the opportunity to talk with many of you, in different contexts, about the challenges and opportunities associated with the internal market. I know, dear Enrico, that your work on the report on the future of the internal market entrusted to you is gathering pace, with more than 100 requests for meetings already made, and I am sure that today’s conference will fuel your reflections.

[Prologue: the internal market or Europe in action]

To ask about the future of the internal market is to ask about the future of Europe. Because the internal market is much more than just a market.

Since Jacques Delors’ plan to abolish borders, the internal market has become one of the European Union’s greatest successes. It is the foundation of our economy and an essential condition for our long-term competitiveness.

The advantages of the internal market are undeniable. We have eliminated customs duties, trade costs have fallen considerably, we have common standards guaranteeing a wide choice of safe (and increasingly sustainable) products, and we are free to study, work or even – one day in the distant future! – retire in another Member State.

Brexit has clearly shown our British neighbours that it is only when we lose these advantages that we realise their value.

Much more than a guarantor of the free movement of services, goods, people and capital for the past 30 years, the internal market has become a driving force that balances and propels Europe forward. In other words, beyond its prescriptive nature – a set of rules to be implemented and respected by ourselves – the internal market has taken on a performative dimension: it is Europe in action, projecting its model and values globally.

However, the ongoing global geopolitical transformations are putting enormous pressure on the internal market, which carries the risk of fragmentation.

In the wake of the unprecedented crises that have unfolded in recent years, we have seen the emergence of fault lines that we must address. I remember the erratic blockages at our internal borders in the early days of the pandemic and the difficult discussions we had to lift the barriers and keep value and supply chains open.

This improvisation, despite its success, left a feeling of unfinished business and showed how much national reflexes still prevailed in times of crisis. However, the European Union exists so that each of its parts can be stronger together. Hence the importance of better crisis anticipation and management, and of responses – including financial ones – that avoid fragmentation. I will come back to this.

But the pandemic, followed by Russia’s war of aggression against Ukraine and the energy crisis, have also revealed the extent of our vulnerabilities to the outside world. These include Europe’s many asymmetric dependencies on raw materials, products and technologies.

We have learned a lesson from these experiences. It is very simple: there can be no jobs, competitiveness or political and economic independence without factories. We must reindustrialise our continent.

This does not mean producing everything in Europe, but rather, in the face of the global race for technology and in a context of growing geopolitical instability, securing our supply chains. We must export our products, but not our jobs. We must avoid replacing our dependence on Russian gas with a dependence on Chinese solar energy. I will come back to this point as well.

This morning’s debates highlighted – to summarise – two major imperatives for the internal market: first, an imperative of modernity – in other words, the ability to function with the times, in all circumstances; secondly, a strategic imperative – in other words, the ability to act on its time, on the course of events.

If you will allow me, I will return to these two areas of reflection.

[Imperative of modernity: an internal market rooted in its time]

Firstly, the imperative of modernity. This morning, we talked about the “internal market 4.0”. Behind this imperative of modernity, I see three needs: a need for simplification, a need for cooperation and a need for anticipation.

Firstly, the need for simplification.

We are adapting the internal market to the digital age in order to simplify its day-to-day functioning for the benefit of our citizens and businesses. For example, with the Single Digital Gateway, thanks to which, from tomorrow [Tuesday 12 December], our citizens and SMEs will no longer need to resubmit documents in different countries. Or with the European digital identity wallet, or the electronic VAT invoicing system.

Secondly, simplifying the lives of our SMEs, which, I would remind you, are the heart and driving force of our internal market.

Firstly, by ensuring that our legislation is appropriate and does not create unnecessary burdens on SMEs. This involves, for example, extending transition periods for SMEs and ensuring that reporting requirements are proportionate.

Hence the Commission’s commitment to reduce reporting requirements by 25% and proposals such as the revision of the Union Customs Code, the revision of the European Statistics Regulation, and various sectoral measures aimed at reducing the burden, for example in agricultural activities.

At the same time, we have tackled late payments, which are responsible for one in four bankruptcies, and we have proposed simplifying taxation for SMEs operating in several Member States.

Of course, this need for simplification goes hand in hand with greater cooperation. That sums up my approach to compliance with the rules. In this regard, the European Commission is fully assuming its role and continues to take regular decisions on infringement proceedings against Member States that fail to transpose or incorrectly transpose internal market rules. We did this last month, for example, in relation to regulated professions, service providers in the construction sector and late payments.

That said, the proper functioning of our internal market cannot be reduced to the “verticality” of the rule. I strongly believe in the power of peer pressure. That is why the European Commission and the Member States must continue and intensify their collective work.

I would say that we are on the right track. I am thinking in particular of the very promising results achieved by the working group on compliance with internal market rules – the SMET Task Force. Together, we have removed many very concrete obstacles: for example, the 300 or so unnecessary prior checks in the field of professional qualifications, or all the work currently being done to end discrimination in relation to IBANs – international bank account numbers – which force citizens and workers to open an account in a Member State other than their own for tax or social security reasons. And we have done this without launching infringement proceedings. Infringement proceedings cannot be used as a proxy for judging whether or not the Commission is active in defending the internal market. This is something I wanted to push for when I arrived. I am pleased that it is bearing fruit.

More broadly, we have proposed that each Member State set up an internal market office. These offices would offer a more structural approach at national level and would make the voice of the internal market better heard by citizens and businesses. After all, each Member State has a national competition authority. These internal market offices must be able to become the equivalent for our internal market.

Finally, as I said in my introduction, the internal market must develop a greater capacity for anticipation. We must learn from successive crises. So that the reflex to turn inwards – within the EU but also among our international partners – does not increase our collective difficulties in the event of a crisis. To avoid shortages of goods. So that our fellow citizens, our services and our goods can continue to circulate and keep our economy running. This is the whole purpose of the Internal Market Emergency Instrument (SMEI), on which I hope the European Parliament and the Council will reach a swift and ambitious agreement.

[Strategic imperative: an internal market that acts in a timely manner]

Ladies and gentlemen, Europe must adapt and use the strength of the internal market to assert itself in what I call the new geopolitics of value chains.

This is a strategic imperative.

I would say that, in an increasingly fragmented world, we need to recognise the true value of the internal market: as a lever of power, both industrially and geostrategically.

Firstly, in the service of a strong industrial policy. The internal market gives us the scale and critical mass to act.

An industrial approach embodied in particular by the three-pronged approach we have proposed in recent months.

Upstream, a regulation on critical raw materials for secure and sustainable access to the raw materials needed for our dual green and digital transition. And downstream, two regulations with parallel objectives: the Chips Act for a strong semiconductor industry and the regulation for a net-zero industry to strengthen our clean tech industrial base.

In each of these initiatives, we are setting manufacturing capacity targets that will guide our efforts until 2030: 20% of the global market share for chips; 40% of our deployment needs for clean technologies; and 10 to 40% depending on the stage of the value chain for critical raw materials.

And in all three initiatives, we are strengthening our research capacity. But we are also raising the issue of support for production in Europe across the entire value chain. Because European industrial policy can no longer be reduced to being the best in research. We have seen this with vaccines, and we are seeing it with semiconductors: being number one in research is no longer enough. We must have the capacity to produce. That is what European industrial policy, or rather “Made in Europe”, is all about. We are positioning the internal market as the driving force behind a new internal policy.

With regard to the Chips Act in particular, our efforts are already beginning to bear fruit: we have already reached more than £100 billion in public and private investment.

We must now accelerate net-zero projects. Because there is an urgent need to do so.

In a context where our solar and wind industries in particular are under enormous pressure – with Chinese overcapacity on the one hand and the US Inflation Reduction Act on the other – we must get ready to accelerate the development and deployment of European clean tech.

To do this, we must give ourselves the means to achieve these objectives, in particular by ramping up our skills, because we are going to need hundreds of thousands of new talents in a very short space of time to drive our green and digital transition. You will certainly have the opportunity to discuss this further this afternoon with my friend Nicolas Schmit.

Moving with the times also means realising that digital is not a separate discipline; it must be an integral part of the internal market. That is why, in recent years, I have been committed to adapting our internal market to new forms of economic models and activities, driven in particular by digital technology.

With the Digital Services Act and the Digital Markets Act, we have – at last – organised our digital internal market to protect our citizens from illegal content and products and to ensure that consumers and businesses benefit from greater online competition. We have then organised the internal market for data for the benefit of our businesses and start-ups, and we are creating an internal market for cybersecurity.

Of course, I must mention the new law on artificial intelligence, on which we reached a historic agreement on Friday evening after 38 hours of negotiations. With the strength of our internal market and clear rules, we have created a launch pad for EU start-ups and researchers, who will lead the global race for trustworthy AI.

The European digital single market is now a reality. From 27 fragmented markets, we have now moved to a European market of 450 million citizens with common rules. And contrary to what I have heard in recent days, if Europe failed to develop large platforms 15 years ago, it was not because there were too many European rules, but precisely because – with 27 different national markets – we did not have an integrated market for personal data! We have learned our lesson and this time we are organising Europe around an integrated industrial data market, enabling innovation while investing in the necessary infrastructure (cloud, computing power, semiconductor pilot lines, etc.).

And we are doing so based on a simple principle that we have incorporated into all our regulations: obligations proportionate to the risks to the internal market, requiring greater intervention at European level to manage systemic risks. When digital platforms pose a systemic risk to society or the economy due to their size or market power, they are subject to more rules (these are VLOPs and gatekeepers); when generative AI systems become so important that a failure would pose a systemic risk to the entire Union, they are more closely regulated; when a cyber vulnerability carries a systemic risk for the internal market, it must be addressed at European level. This is what we have done in the banking sector. This is now what we are doing in the digital internal market.

[The internal market: what does the future hold?]

Ladies and gentlemen,

We have worked tirelessly to strengthen and develop our greatest achievement: the internal market envisioned by Jacques Delors.

As we enter a period of forward thinking, in preparation for the European elections and the next Commission, we must also contribute some ideas for the future of the internal market.

I see three areas of focus:

Firstly, the internal market must assert itself as an instrument of resilience and competitiveness in the new geopolitics of blocs.

We must establish Europe as a third bloc, a balancing force between the US and China. No EU country can compete on its own.

The internal market is our main tool, our main strength in the power relations that a geopolitics of blocs presupposes. We must be aware of this and have the political ambition to use it.

The EU remains, of course, an open continent, but on our terms and, above all, aware of the risks to its security, its dependencies and its geopolitical positioning. Managing the risks to which Europe is exposed is the foundation of our resilience.

This is what the United States is doing, this is what China is doing, and this is what we must do: de-risk our relationships so that we do not expose ourselves to a situation of asymmetrical dependence that would work against us. This is a more assertive and less naive position than before, reflecting Europe’s growing influence on issues of economic security.

I consider this to be one of the strong trends that calls for a real adaptation of our political, economic and even societal software. It has begun, but will need to continue in the years to come.

This will require a review of key policies such as trade policy, which will need to be made compatible with the economic security approach, conscious and active in the geopolitics of value chains and capable of preserving the Union’s interests in its economic security. This is a real revolution, including in the type of trade agreements we will conclude.

Next, we must accelerate the internal market in key areas of European competitiveness.

I am thinking, for example, of the telecoms market, where we will have to carry out a major reform to build the digital infrastructure of tomorrow that is necessary to support the digital transition and economic competitiveness. I have launched the work and we will present a white paper by March to set out the areas for action.

We must also consolidate an internal defence market, which is essential for our security. We must develop our European defence industrial base and adapt it to today’s security realities, which require us to produce more and faster.

We have started with ammunition for Ukraine. We must now extend this approach to a large-scale European industrial defence programme capable of supporting the revival of the European industrial base and developing the infrastructure needed to protect contested areas. Here again, we must invest jointly in order to be able to act jointly.

We will also need to consolidate the internal energy market. Energy, access to it, its price and its carbon footprint are key factors in global competitiveness.

As we saw during the energy crisis, only a European response can ensure security of supply, the necessary solidarity between Member States and, above all, moderate costs for businesses and citizens. We have made progress with the market design proposal, but we will need to go further.

Further, to better integrate our decarbonised energies, bringing them from new decarbonised production centres to new consumption centres. Because the battle against climate change will be won by electrifying our continent even more massively. And by developing the new infrastructure needed to support this.

We also have a long way to go to accelerate the single market for capital. Because, let me be clear, we are lagging far, far behind in the completion of the capital markets union. Today, this has become the main obstacle to our competitiveness. We must find ways to better mobilise private investment, to facilitate access to markets for start-ups, SMEs and mid-cap companies, and to finance the immense ambitions and transitions facing Europe

Finally, and this is my third point, I believe we must rethink the budgetary means to achieve our ambitions.

Indeed, in the face of geopolitical turmoil, the prospect of Ukraine’s accession and, in the medium term, a Europe with 30 or even 35 Member States, our current budgetary balances are no longer relevant.

We know that without additional common resources at European level, Member States will act individually, resorting to state aid, which fragments the internal market, because not all of them have the same budgetary margins to make the investments that are needed today.

You know my position on state aid. I have always maintained that if we want to defend the internal market and fair competition, we cannot support national state aid as an alternative to common financing solutions at European level. Without the ability to establish common budgetary instruments, our only alternative is every man for himself, which leads to fragmentation.

In short, in the new geopolitics of value chains, we cannot be both frugal and friends of the internal market.

We must move away from the harmful dichotomies between the “frugal” and the “Club Med”. Because if we look at the efforts made by each country over the last 20 years to contribute to our common goods, namely financial stability, the defence of the continent and the fight against climate change, we realise that European virtue is a more subjective notion than we think.

Everyone must put their own house in order: restore their public finances, catch up on defence investment or eliminate their carbon debt.

This is also why we must give priority to joint actions and European financial instruments. Europe cannot continue to move forward with a budget equivalent to 1% of its GDP. Joint borrowing, as we have done with the recovery fund, must be continued.

[Conclusion]

As you will have understood, ladies and gentlemen, the internal market is, I would say, the be-all and end-all of our European project.

I sometimes hear that there is “internal market fatigue”. I do not believe this.

I think there is rather a lack of focus or willingness to tackle the most difficult issues. Yet the last four years – four years of crisis management – have shown that when the political will is there, we can move forward with determination.

That, in a nutshell, is how I see the present and the future of the internal market. There are many major challenges ahead, but also decisive steps forward that should strengthen our determination to make Europe stronger, more competitive and more resilient.

To move towards a powerful Europe.

Thank you.

Link to the speech on the European Commission website