European Economy Series: Developing the Single Market: Services and the Banking Union

The European Union (EU) has long been a pioneering model of regional integration and the internal market has served as a cornerstone to this success. However two key components still require significant attention and development: the single market for services and the banking union.

Developing the Single Market for Services

While the EU has made significant strides in removing barriers to the free movement of goods, services remain significantly under-integrated.

Regulatory fragmentation: National regulations on licensing, professional qualifications, and standards often diverge widely. Harmonizing rules across professions and sectors such as legal, and business services could bost economic integration and growth. This could include enhancing mutual recognition of professional qualifications and streamlining authorisation procedures.

Digital barriers: Inconsistent rules on digital services hampers rhe growth of digital platforms and cross-border innovation. Accelerating digital integration and development with an emphasis on interoperable digital infrastructure will further improve integration and growth.

Limited enforcement: Even when EU rules exist, they are not always implemented or enforced uniformly across member states. A key example of this was where member states did not meet the financial rules that already existing in the run up to the financial and Eurozone crises'. If properly enforced they may not have prevented the crises' but they could have limited the impact.

The Banking Union

Banking Union: The 2008 financial crisis exposed vulnerabilities in Europe’s banking system. In response, the EU launched the Banking Union in 2012 built on three pillars: the Single Supervisory Mechanism (SSM), the Single Resolution Mechanism (SRM), and the European Deposit Insurance Scheme (EDIS) with EDIS, a mutualized deposit insurance scheme, protecting savers and bolster trust in the banking system.

Regulatory supervision: At the same time, centralised supervision under the European Central Bank (ECB) has strengthened oversight and reduced systemic risk.

Capital Markets: Fragmented capital markets limit the ability of banks to diversify risks across borders. Deeper integration of capital markets can complement the banking union and reduce over-reliance on banks for financing.

Conclusion

In a world increasingly shaped by digital disruption and geopolitical realignment, a more integrated services market and banking system will help determine the EU’s future economic competitiveness and strategic autonomy.

Completing these projects can:

- Boost productivity and innovation while reducing waste and bureaucracy, and helping unleash the potential of Europe’s service economy.

- Create a more level playing field for businesses and consumers across member states and boost competition.

The EU single market for services and the banking union are not merely technical projects, they are vital components of a stronger, more cohesive European single market. With the right political will and coordinated reforms, the EU can unlock their transformative potential. However this will involve member states ceeding some of their sovereignty to do so, something unpalatable to some.