What-if scenarios are not simply fantasies that have no attachment to reality – rather, they reflect on reality and help in planning a better future. 

The times we are living in automatically fuel some what-if examples. What if we knew beforehand that the pandemic would hit Europe and the world? And what would have happened to individual countries without the support and solidarity that the EU has afforded in the fight against COVID-19?

Following the marathon five-day European Council meeting that ended Tuesday, July 21, during which a €750bn deal was struck for a the post-coronavirus recovery package, another what-if possibility presents itself. What if Europe didn’t have a single market? And what if member states didn’t have access to various EU funds?

What would the future, post-pandemic, look like?

To understand the role that the single market plays, and will play, in recovering from the impacts of COVID-19, it is important to size up the contribution that it gives to Europe’s economy. 

Generally considered as one of the biggest achievements of the EU, the single market comprises some 450 million people and over 20 million enterprises. It is the largest integrated market in the world – and by removing barriers to trade, safeguarding fair competition, and boosting efficiency and economies of scale, it has huge effects on the EU economy. 

Several studies show that the Single Market has increased employment and growth. The effect of the single market deepening since 1990 has been quantified by 3.6 million new jobs and the average EU citizen gains €840 more per year thanks to the Single Market.

Individual European economies are, through the single market, highly integrated – two-thirds of the EU’s total trade in goods takes place on the single market, through a network of supply chains, trade relationships and financial connections.

In 2018, the single market was worth €14 trillion and accounted for more than 15 per cent of global imports and exports. 

In 2019, the European Commission estimated that, mainly due to the removal of tariff and non-tariff barriers to trade, the EU’s GDP is eight to nine per cent higher than if the single market did not exist. Moreover, the European Central Bank calculated that since its inception, the single market has raised real GDP per capita by between 12 and 22 per cent. 

Maltese businesses also acknowledge the importance of the single market. In a 2019 study conducted by the Malta Business Bureau, 89 per cent of Maltese businesses said they were better off since Malta joined the EU and the single market. 

The impact that COVID-19 has had on the single market has been significant, when considering that the pillar on which it has been built – the free movement of persons, goods, services and capital – was disrupted. Border closures and bans on international passenger transport affected the transit of goods as well as labour mobility – particularly of the 1.5 million cross-border workers. 

In the midst of the upheaval, the European Parliament evoked the importance of the single market. In a resolution on April 17 , the EP stressed how the single market is best positioned to deliver a response to the coronavirus pandemic. MEPs came out strongly in favour of strengthening EU industry, so that it becomes more resilient, while reintegrating supply chains in the EU and stimulating EU production. 

On May 27, in the Next Generation communication, the Commission said that member states have shared the gains from the single market for almost three decades. Intra-EU trade amounts to over 70 per cent of exports, European industrial ecosystems are increasingly integrated and connected, while research, engineering, manufacturing, assembly and servicing often take place in different parts of Europe, allowing businesses to be more competitive and focus on what they do best. “Exactly what is needed for Europe’s recovery”, the Commission says

The Council also weighed in, highlighting in June that “restoring and reinforcing the Single Market will be one of the criteria for the success of the European economic recovery”.

The European Policy Centre - describing the Single Market as Europe’s hidden weapon in combatting COVID-19 - underscores this by noting that “as state involvement and attempts to shield strategic sectors will become the global norm, EU member states will become even more reliant on their common market.”

“In evaluating the success of the European project, the argument often put forward is to juxtapose the 80 peaceful, prosperous years succeeding 1945 with the turbulent decades preceding it,” said MEP David Casa. 

“The goalposts have shifted as Europe faces its biggest challenge since its conception. As the world comes to terms with the necessary measures to keep a handle on the coronavirus, another potentially more severe threat looms in the not-so-distant future. 

“The global economic depression comes around a decade after the last financial crisis. The EU has shown itself keen to apply the hard lessons learnt from a decade ago, and EU leaders have this week committed to an unprecedented €1.8 trillion budget to save the 27 economies that make up the internal market: the largest of its kind.

“€750bn will be invested within the next two years, and the investment thereof falls squarely under the responsibility of member states. The only strings attached are that these be used effectively to improve the multiple spheres in the societies of each member state. Funds will be used to mitigate the negative impact on various industries in the EU, and to help revive the economy and its growth by investing in development and the (re)creation of job opportunities.

“The internal market is of essence in getting out of the pandemic. By using the toolkit of the internal market, the production of PPE can bolster the supply chains of essential goods in the EU. The freedom of movement that it allows for the free flow of those goods enables products to go where they are most needed. Medical staff can similarly seek training and be mobilised as necessary. 

“Emerging quickly from the brunt of the pandemic is a key step to economic recovery. It isn’t just tangible assets that permit the EU to do so; the legal and political foundations of the EU are playing a key role, too.”
MEP Alfred Sant noted that Malta has done quite well from the “deal” that the European Council finally reached last Tuesday, but, he added “I doubt whether the same thing can be said for Europe as a whole.

“I am far from being a ‘federalist’ but given the coronavirus pandemic, anything short of a pan-European response of the ‘shock and awe’ variety is, in current circumstances, less than adequate.

“The European Council did not provide such a response despite all that is being said to the contrary. That this is the case is shown by the 22 per cent cut in the grant component of the recovery programme that had been drafted by the European Commission, on the basis of a Franco-German proposal. On the recovery programme and on the EU budget for 2021-2027, the Council settled for the least common denominator to maintain ongoing political and economic cooperation within the Union. The best thing going for this compromise is that no agreement would have been a worse option

“The most important asset of the EU is the single market which given its continental dimension gives it worldwide clout. In past years it has performed quite sluggishly while internal divergences have been growing. Ambitious targets are now being set for it such as by way of the Green Deal and digitalisation. COVID-19 presents a double threat, since it has struck at both supply and demand. The reaction to it is straining government budgets and will continue to do so for the foreseeable future.

“I hope I am wrong but the significant cuts in spending on crucial programmes at European level in the Council’s “deal” send the wrong signals and do not augur well for the future.”

Photo: Shutterstock

The European Parliament, in a position taken in an extraordinary plenary session on Thursday - held in response to the Council conclusions on the proposed long-term budget for the EU - welcomed the Council deal but said it must be improved for Parliament to accept it. The cuts made to future-oriented programmes will “undermine the foundations of a sustainable and resilient recovery” Parliament says, and flagship EU programmes for climate protection, digital transition, health, youth, culture, research or border management “are at risk of an immediate drop in funding from 2020 to 2021". 

The deal reached in Council is part of the process for agreeing on a long-term budget for the EU - the proposals must now be negotiated with Parliament for a final agreement. Parliament is aiming to reach this with Council by the end of October to enable the new budget to start in January.  

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