One of the European Union’s greatest achievements has been to scrap non-tariff barriers to trade in goods and services. But the “single market” remains incomplete and faces new threats. The European commissioner responsible for it is blocking further liberalisation of services – even though the Commission as a whole is economically liberal. The biggest danger is that the euro crisis will lead to a two-speed Europe that fractures the single market.
Nobody can be sure of the euro’s future, as the recent drama in the Slovak parliament reveals. But one plausible outcome is that the currency will survive, minus one or a few members. The Germans will demand a price for putting more money into bail-out funds: a new treaty, imposing much tighter fiscal discipline on countries in the euro. The new eurozone club will have its own institutions and exist alongside the broader European Union.
Deprived of market-friendly governments that are outside the euro, such as the UK, the Czech Republic, Denmark, Poland and Sweden, this club would be likely to pursue illiberal policies. Formally, all 27 member states would still vote on single market rules. In practice, the euro countries would caucus and perhaps settle much of the argument before the 27 met. And when this smaller group discussed how best to promote economic growth, some big EU economies would be absent and unable to influence the discussion.