Chapter News

A Reform Agenda for Post-Brexit Europe

Following Brexit, it is even more important that the European Union focus on further integration. It can do this by completing the Digital Single Market and the Capital Markets Union, concluding the Transatlantic Trade and Investment Partnership (TTIP), pursuing a larger European budget, and introducing Eurobonds.

Although it is highly uncertain which direction a European Union without the United Kingdom will take, we will lay out two possible scenarios. The first scenario will leverage European citizens’ fears that free movement of labour will limit job opportunities for locals, that free movement of people will increase terrorist attacks and destabilise local communities, and that free movement of capital will lead to foreign acquisitions of domestic companies. All these fears will induce voters to elect representatives who will work to curtail European integration and the role of EU institutions, which may not break up the Union per se but will render it ineffective.

A second scenario is that EU member states realise that they can only create more jobs and play a larger role in the globalised economy by enacting more coordinated policies. We focus on this second option, which may not be likely in the medium term, but we are convinced will create better conditions for sustained economic growth. Completing the single market and advancing the fiscal union are two milestones for a more efficient Union.

The Digital Single Market (DSM) was introduced in 2015 and is designed to remove regulatory barriers and market fragmentation while supporting e-commerce and intellectual property rights. If implemented properly, it could add as much as €415 billion to the EU economy each year. Key challenges facing this process include ending “geo-blocking”, which restricts user access or charges extra to use a website based in another EU country; and reforming European copyright law so that products made in different EU countries can be used and shared across borders. For example, online education regulations should be harmonised across Europe so that teachers can provide quality education without running into legal snares.

While integrating, the EU should avoid overregulating. In such a large Union of sovereign states, regulation is essential to guarantee evenhandedness and provide a common framework across countries.

On his very first day as the new Commissioner for financial services, European Commission Vice President Valdis Dombrovskis spoke at the Washington-based Atlantic Council about the relevance of creating a Capital Markets Union (CMU), a goal European Commission President Jean-Claude Juncker has also made one of his key priorities. Integrated capital markets will strengthen cross-border risk sharing through the deeper integration of bond and equity markets. This results in a broader range of funding sources, which can become a sorely needed shock absorber. CMU can also develop financing tools to fuel growth of small and medium enterprises (SME), infrastructure projects, competitiveness, and long-term investment financing to foster economic growth.

Compliments of the World Financial Review