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Topic - European Economic Policy

The European economy and the internal market

Introduction

The European Union (EU) is a guarantor of peace, stability, safety and not least of prosperity in Europe. It provides invaluable benefits for Germany, its citizens and its companies, especially access to the EU internal market, which forms the foundation of the EU.

The EU internal market is the world's largest single market. Its principle is quite simple: it guarantees free movement of goods, services, capital and persons for all citizens and companies in Germany and throughout the EU. Within the internal market, EU citizens can live and work in other EU states, and enterprises can freely produce and sell their goods and services. A German citizen, for instance, can open a travel agency in Belgium and have a bank account at a Dutch bank. Standards that apply throughout Europe guarantee a broad range of products at low prices.

Our export-oriented enterprises also benefit from the internal market. Thanks to free market access, German companies can import goods from and export products to other EU states without tariffs. The share of Germany's trade with other EU countries has risen to almost 60 per cent. This shows that without the EU internal market German businesses would be far less successful than they are today. For more information about the history and the functioning of the internal market, click here.

More than just an economic community

But the EU is more than that: it is also a community of fundamental rights and values. The EU Charter of Fundamental Rights entered into force at the end of 2009. It is the EU's first written catalogue of basic rights that summarises the civil, political, economic and social rights of Europe's citizens and of all persons living in the territory of the European Union.

After the UK's referendum on a possible exit from the EU, we must make the key promises of European unity, including peace, democracy and prosperity, more visible and fill them with new life. We must conduct a constructive debate for a better Europe. In particular, we must overcome the employment and investment crisis in Europe so that Europe can provide more economic and social stability in the future.

Four figures on the European Economic Policy

508
Symbolicon für Menschen

million inhabitants
live in the 28 Member States forming the European internal market (2014 figures).

24
Symbolicon für Besprechung

official languages
are spoken in the EU.

27.400
Symbolicon für Geld

euros
is the average gross domestic product (GDP) per inhabitant (2014 figueres).

15.9
Symbolicon für Dampfer

per cent
is the share of the EU28 in global exports of goods (2014 figures).

The European internal market

A common market for 500 million people

The European internal market is the core of the EU. Trade among the Member States accounts for more than 60 % of total trade of the EU Member States.

Article 26(2) of the Treaty on the Functioning of the European Union (TFEU) defines the internal market as "an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties".

Travelling and working, buying and selling goods and services across borders

Today, we tend to take for granted that we can transport goods across the internal borders of the EU and that no restrictions apply to travellers or EU citizens taking up residence in another EU Member State, or indeed, (for the most part), in the European Economic Area (EEA), which comprises Iceland, Liechtenstein, and Norway. It is easy to forget just how long it took us to get to this point. In fact, the work on the implementation of these freedoms started when what was then the European Communities were still in their infancy.

The ‘Completing the Internal Market’ White Paper, which was published by the European Commission in 1985, gave fresh impetus to the Single Market and set 1992 as the deadline for its completion. Some remarkable progress has been made in the more than twenty years since the completion of the internal market. The single currency, the euro, is a visible sign to the outside world of how the markets in Europe have been growing together to form a single European internal market.

Governance and monitoring of the internal market

Individuals and companies can only make effective use of the opportunities offered by the internal market if every individual internal market directive is fully and correctly implemented by the Member States within the specified deadline. In order to monitor the Member States’ performance in this regard, the European Commission publishes the Single Market Scoreboard online. Various instruments are used to measure each Member State's performance in this area. The relevant criteria include the number of internal market directives that the Member State has failed to implement within the deadline and the performance of the country’s SOLVIT centres.

Development of the Economic and Monetary Union

The eurozone has successfully been stabilised in response to the economic and financial crisis. However, the work on the sustainable institutional strengthening of the Economic and Monetary Union has not yet been completed.

The aim is to lastingly strengthen the resilience of the euro and consolidate the preconditions for a high level of growth, competitiveness and employment, and for sound public finances. In June 2015, the five Presidents of the European institutions presented ambitious plans to reach this aim. Former Federal Minister for Economic Affairs Sigmar Gabriel and his French counterpart Emmanuel Macron advocated the development of the Monetary Union towards a Social Union. You can find a joint article with specific proposals on the development of the Economic and Monetary Union here.

Contact

Advice and information about the EU for citizens and companies

The Federal Ministry for Economic Affairs and Energy helps citizens solve cross-border problems in the EU internal market in the context of the SOLVIT network and, together with business, analyses current EU projects in terms of their significance for SMEs.

The SME monitor for EU initiatives strengthens the involvement of SMEs in important EU projects. Small and medium-sized enterprises (SMEs) can thus find out at an early stage about relevant projects of the European Union and feed their interests into ongoing consultation procedures. For more information, please click here.

SOLVIT: unbureaucratic support for citizens and companies

SOLVIT is a network where all EU and EEA members work together to find pragmatic solutions for the problems of citizens and companies that are caused by the wrong application of internal market provisions by authorities.

You can find out more about how to submit a complaint or contact SOLVIT and about the work of the SOLVIT network here.

Freight depot; Quelle: Getty Images/querbeet

© Getty Images/querbeet

Common trade policy

Europe as a trading partner

Responsibility for trade policy rests with the EU. This applies unreservedly to trade in goods. When it comes to services and intellectual property, power is shared between the European Union and the Member States.

The EU Member States continue to be responsible as regards the GATS and TRIPS Agreements as long as the Community has not adopted any internal rules. However, case law from the EU Court of Justice dictates that the European Commission and the European Member States work closely together in order to ensure that Europe speaks with one voice, particularly at the WTO.

The European Commission organises trade policy in close coordination with the Member States. This coordination takes place on a weekly basis, at the meeting of the European Council’s trade policy committee. The Federal Ministry for Economic Affairs and Energy is responsible for setting out Germany’s position on a number of trade policy issues and for representing the German government at European and international level. Reducing trade barriers and strengthening the multilateral trading system play an important role for export-oriented German businesses. Find out more.

Construction of a building symbolises regional policy; Source: mauritius images / Maximilian Weinzierl / Alamy

© mauritius images / Maximilian Weinzierl / Alamy

Europe 2020 Strategy

A common strategy for a European decade

The Europe 2020 Strategy for employment and smart, sustainable and inclusive growth aims to enhance the economic strength of and social cohesion in Europe on a long-term basis. The Member States regularly report to the European Commission on their progress and national measures.

Two aspects play a key role for the new strategy: the experience with the Lisbon Strategy, which expired at the end of 2010, and the lessons learnt from the financial and economic crisis. However, where action is needed is not so much in the content of the strategy – after all, the final version of the Lisbon Strategy was targeted toward the overriding objectives of growth and jobs – but rather in the consistent and vigorous application and monitoring of the existing legislative framework.

You can find out more about the European Commission's Europe 2020 Strategy here (PDF: 373 KB, in German).

The targets of the strategy

The Europe 2020 Strategy has introduced five EU-wide, measurable headline targets. In their National Reform Programmes, the Member States report on the progress that they have made in reaching these targets.
Through its five headline targets, the European Union aims:

  • to increase the employment rate to 75 % among women and men aged 20-64, including through the increased labour market participation of young people, older workers and low-skilled workers as well as the better integration of legal migrants;
  • to improve the conditions for research and development – in particular by aiming to raise combined public and private R&D investment levels to 3 % of GDP;
  • to reduce greenhouse gas emissions by 20 % compared to 1990 levels; to increase the share of renewable energy sources in final energy consumption to 20 %; and to move toward a 20 % increase in energy efficiency;
  • to improve education levels – in particular, by aiming to reduce school drop-out rates to below 10 % and by increasing the share of persons aged 30-34 who have completed tertiary education or equivalent to at least 40 %;
  • to promote social inclusion – in particular through poverty reduction, with the specific aim of lifting 20 million people out of the risk of poverty and exclusion.

An overview of the progress on the targets of the Europe 2020 Strategy can be found at the European Commission's website. Germany has adopted additonal national targets that are even more ambitions than the five EU 2020 headline targets. These targets are listed in the country's National Reform Programme.

The European Semester

The common roadmap: the European Semester

Once pan-EU targets have been agreed and national targets defined, it is time for implementation. The European Semester maps out a binding timetable for the monitoring of economic, employment and fiscal policy in Europe. The European Semester runs in parallel with the Europe 2020 process, the Stability and Growth Pact and the mechanism for monitoring macroeconomic imbalances. The annual cycle of the European Semester, which coincides with the first half of the calendar year, is as follows:

  • Each autumn (usually in November), the European Commission presents its Annual Growth Survey for the following year, laying out the key challenges the EU faces in terms of its economic, employment, and fiscal policies, and mapping out the recommended routes for action. In recent years, the focus has been squarely on implementing the measures agreed to stabilise the situation in the eurozone – mostly by means of boosting growth.
  • Each February, the European Commission publishes a country report for each Member State on the economic situation of the respective country.
  • In April, the Member States submit their Stability and Convergence Programmes as well as their National Reform Programmes to the European Commission. The Stability and Convergence Programmes outline developments in fiscal policy. The National Reform Programmes represent the structural policy agendas of the Member States.
  • Based on these programmes, the Commission makes country-specific recommendations in May for each Member State that address the specific national challenges.
  • The country-specific recommendations are approved by the heads of state and government at the European Council in the middle of each year. This is when the European Semester ends.
  • You can find a timetable of the European Semester drawn up by the European Commission here.

National Reform Programmes

For growth and employment in Europe

In the National Reform Programmes, the Member States desribe the measures they have taken to meet the challenges that their economies face and to implement the country-specific recommendations made by the Council. Furthermore, they outline what they have already achieved in terms of the EU 2020 targets and what measures they have taken to make further progress.

The National Reform Programmes refer to

  • the respective country report by the European Commission in which the Commission analyses the economic policy of the respective country and outlines major overall economic policy challenges in the Member State,
  • the respective country-specific recommendations, which are usually adopted by the Council of the European Commission in July of the preceding year,
  • the most recent Annual Growth Survey by the European Commission, and
  • the guidelines for growth and employment in the context of the Europe 2020 Strategy.

You can find the recommendations and documents published by the European Commission on the European Semester here.

Further information

  • 23/02/2017 - Press release - European Economic Policy

    Press release: Minister Zypries visiting Paris to hold economic policy talks

    Open detail view
  • 30/06/2016 - Press release - European Economic Policy

    Press release: Federal Minister Gabriel visiting Athens

    Open detail view
EU flag symbolizes European Economic Policy; Source: iStock.com/instamatics