Internal Market: a decade without frontiers has transformed Europe - but it is only the start

Brussels, 7^th January 2003

About 2.5 million jobs have been created in the EU thanks to the Internal Market, since the opening up of frontiers on 1 January 1993. The European Union's GDP in 2002 is 1.8 percentage points or € 164.5 billion higher than it would be without the Internal Market. Extra prosperity to the value of €877 billion - calculated by adding together the additional annual GDP generated by the Internal Market since 1992 - has been created. That means €5,700 per household on average. The European Commission has published these figures, which are conservative estimates, as part of "The Internal Market Ten Years without Frontiers" a round-up of the achievements of the Internal Market in the decade since the borders came down in Europe, freeing the European economy of a mass of obstacles. The document also looks forward and highlights areas where the full potential of the Internal Market is as yet untapped. It identifies priority areas for further action, in particular services. For the full text of "The Internal Market Ten Years without Frontiers" and further details of the Internal Market a decade after its creation, see MEMO/03/2 and  http://europa.eu.int/comm/10years.

Internal Market Commissioner Frits Bolkestein said: "The Internal Market has transformed Europe beyond recognition in ten years. It has created millions of jobs and hundreds of billions of euros of extra prosperity. It has dismantled barriers and opened doors. Europeans can live, study, work or retire wherever they like in Europe. Consumers have a wider choice of high quality products. Companies have access to much wider markets. Europe is better protected against economic downturns. But we need to make the Internal Market work even better. The next decade will be no less crucial. The Commission will take up the challenge with relish."

More prosperity and more jobs

The benefits of a frontier-free Europe are manifold. Economic modelling by the Commission's Economics and Finance Directorate-General⁽¹⁾ estimates that EU GDP in 2002 is 1.8% or 164.5 billion euro higher thanks to the Internal Market. And employment is 1.46% higher which means that around 2.5 million extra jobs have been created. Over the last ten years, the Internal Market has increased the Union's prosperity by 877 billion euro⁽²⁾. That amounts to 5700 euro of extra income on average for every household in the Union. These figures probably underestimate the full impact of the Internal Market. They do not, for example, take full account of the Internal Market's impact on service sectors.

More competition and lower prices

Firms are exploiting new market opportunities in other Member States. Prices for many goods and groceries have converged to lower levels. A wider range of products from all over Europe are arriving in local supermarkets. Millions have moved across borders to work in sectors ranging from healthcare to information technology.

The existence of a single system makes market access easier for firms from third countries, increasing competition and consumer choice still further. Over the past ten years, imports into the EU like exports from the EU - have grown steadily. New inflows of foreign direct investment (FDI) into the European Union were four times higher in 2001 than they were in 1992, despite the fact that 2001 was a weak year for FDI.

Governments are already saving money as a result of more open and competitive procurement money that is better spent on healthcare, education or providing pensions for the elderly. And there is much more potential for further integration of procurement markets, if the Commission's proposal for a new legislative package on procurement can be adopted quickly.

The Internal Market has been extended into new sectors over the past ten years. As a result, telecommunications and energy costs have dropped, in some cases dramatically. Lower airfares have brought plane trips within reach of many people for whom air travel was previously not an option. Consumer and social protection has been strengthened. And as Europe's economy has become more competitive, its environment has become cleaner.

But tough challenges are ahead

Yet, despite these successes, the Internal Market remains work in progress. Maintaining and building on the successes so far will require constant effort, vigilance and up-dating of the legal framework. There are far more benefits to be gained. Recent research estimated the macroeconomic impact of financial integration at 1.1 % of EU GDP at 2002 prices, with a rise in employment of 0.5 % (see IP/02/1649).

Indeed, there is conclusive evidence (see IP/02/1180 and MEMO/02/178) that in the services sector in general which represents 70% of EU GDP and employment many barriers have yet to fall. Services will be at the centre of the Commission's new medium-term strategy for the internal Market, to be presented in Spring 2003.

After enlargement in May 2004, the challenge will be to ensure the effective operation of an Internal Market of some 452 million citizens. There will likely be a "second harvest" as the Internal Market expands across the continent. But barriers will be more strongly felt and be harder to remove in a Union of 25 Member States.

The second challenge is to meet the Lisbon target of becoming the most competitive and dynamic knowledge-based economy in the world by 2010. That will require far-reaching economic and structural reforms. Those reforms are vital not as an end in itself but as a means to maintaining welfare provision in an inclusive society. It is particularly important if the EU is to cope with the impact of an ageing population.

^{(1)More information, both on the model itself and the inputs used, can be found at: HYPERLINK "http://europa.eu.int/comm/economy_finance/publications/economic_papers/economicpapers123_en.htm" http://europa.eu.int/comm/economy_finance/publications/economic_papers/economicpapers123_en.htm}

^{(2)This figure was calculated by adding together the additional annual GDP generated by the Internal Market since 1992.}