Opinion of the Economic and Social Committee on 'Economic Reform: Report on the functioning of Community product and capital markets'
C 209/28 EN 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. 22. 7. 1999 EN Official Journal of the European Communities C 209/29 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. C 209/30 EN Official Journal of the European Communities 22. 7. 1999 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 22. 7. 1999 EN Official Journal of the European Communities C 209/31 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. C 209/32 EN Official Journal of the European Communities 22. 7. 1999 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. 22. 7. 1999 EN Official Journal of the European Communities C 209/33 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. C 209/34 EN Official Journal of the European Communities 22. 7. 1999 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