EU single market creaks under the pressure of the recession

Wolfgang Munchau has an important comment article on the fragility of the EU single market in todays Financial Times.

The banking crisis and widespread difficulties facing airlines, car makers and other industries during this recession has prompted many EU national governments to rise roughshod over state aid rules and the principles of a level playing field built into the four freedoms of the single market. Munchau argues that economic protectionism or economic nationalism by one member state inevitably creates externalities for other countries - safeguarding car makers jobs in one nation almost guarantees that production to will be hit in others. And that politicians are not showing enough regard for the basic principles of a single market

He writes:

“Why does it matter? The reason is that the (EU) single market is far from complete, and thus not nearly as robust as it should be. It works better on the wholesale than the retail side. While there are some cross-border supermarket chains, their offerings change completely once you cross national borders. Last year, as a resident of Belgium, I tried to make an online purchase of a computer in Germany – where some IT equipment costs about 50 per cent less – but my efforts were eventually frustrated. Half the German online retailers do not accept any international means of payment, such as credit cards; the other half does not deliver abroad. The single market is perhaps most visible to ordinary people in the airline industry, where cheap tickets have transformed holiday travel in Europe. Europe’s single market is a work in progress. It comes with a legal and institutional process to extend and deepen it.”

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