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Article - European Economic Policy

European Economic Policy


The European Union (EU) is a guarantor of peace, stability, security and not least of prosperity in Europe. The Single Market is the main driving force for the EU.

The EU is a success story: more than 60 years after the signing of the Treaties of Rome, it brings more than 400 million people together, and its internal market is one of the largest cohesive economic areas in the world.

Time and again, however, this unprecedented project faces major challenges. Confronted with the withdrawal of the United Kingdom from the EU, the rise of populist movements and the COVID-19 pandemic, which has vividly demonstrated just how close our relations have become, the EU must always be resolute in making the key promises of European unity, including peace, democracy and prosperity, visible for its citizens and fill them with new life.

Citizens continue to place a high level of trust in the strength of the EU. This was demonstrated not least by the latest European elections that took place on 26 May 2019. The leap in voter turnout in Germany from 48.1% (2014) to 61.5% sent out a clear signal in favour of a vibrant Europe. The governments of the EU’s 27 member states and representatives of EU institutions reaffirmed their commitment to actively shaping a democratic, sovereign and united Europe. What should the EU look like – or rather, what must it look like – ten or twenty years from now so that it can pass on its promise of peace, freedom and prosperity to future generations? The Conference on the Future of Europe will provide a major forum for this debate, which will be shaped by the active participation of citizens.

The European internal market

A common market for 500 million people

The European internal market is the core of the EU. Trade among the Member States accounts for more than 60 % of total trade of the EU Member States.

Article 26(2) of the Treaty on the Functioning of the European Union (TFEU) defines the internal market as "an area without internal frontiers in which the free movement of goods, persons, services and capital is ensured in accordance with the provisions of the Treaties".

Travelling and working, buying and selling goods and services across borders

Today, we tend to take for granted that we can transport goods across the internal borders of the EU and that no restrictions apply to travellers or EU citizens taking up residence in another EU Member State, or indeed, (for the most part), in the European Economic Area (EEA), which comprises Iceland, Liechtenstein, and Norway. It is easy to forget just how long it took us to get to this point. In fact, the work on the implementation of these freedoms started when what was then the European Communities were still in their infancy.

On 25 March 1957, the signing of the Treaties of Rome by Belgium, France, Italy, Luxembourg, the Netherlands and the Federal Republic of Germany established the European Economic Community (EEC) to promote a common economic policy in the context of European integration – an important step on the road to today’s European Union. Marking the 60th anniversary of the Treaties of Rome, the Economic Affairs Ministry published the brochure entitled “Prospects for an economically strong Europe”, which discusses in detail the achievements of and current fields of action for the European Union. The brochure can be downloaded (in German) here.

The ‘Completing the Internal Market’ White Paper, which was published by the European Commission in 1985, gave fresh impetus to the Single Market and set 1992 as the deadline for its completion. Some remarkable progress has been made in the more than twenty years since the completion of the internal market. The single currency, the euro, is a visible sign to the outside world of how the markets in Europe have been growing together to form a single European internal market.

The European Economic Area in figures

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After the Brexit referendum: An overview of important information

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Common trade policy

Europe as a trading partner

Responsibility for trade policy rests with the EU. This applies unreservedly to trade in goods. When it comes to services and intellectual property, power is shared between the European Union and the Member States.

The EU Member States continue to be responsible as regards the GATS and TRIPS Agreements as long as the Community has not adopted any internal rules. However, case law from the EU Court of Justice dictates that the European Commission and the European Member States work closely together in order to ensure that Europe speaks with one voice, particularly at the WTO.

The European Commission organises trade policy in close coordination with the Member States. This coordination takes place on a weekly basis, at the meeting of the European Council’s trade policy committee. The Federal Ministry for Economic Affairs and Climate Action is responsible for setting out Germany’s position on a number of trade policy issues and for representing the German government at European and international level. Reducing trade barriers and strengthening the multilateral trading system play an important role for export-oriented German businesses. Find out more.

EU concept paper on the modernisation of the WTO

More than two decades have passed since the founding of the World Trade Organization in 1995. With a view to equipping the WTO to respond appropriately to the challenges of the 21st century, the European Commission presented a concept paper in September 2018 with proposals for a modernisation of all three pillars of the WTO: rulemaking, monitoring and dispute settlement. The Federal Government fully supports the Commission’s initiative.

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Promotion of foreign trade and investment

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Europe 2020 Strategy

A common strategy for a European decade

The Europe 2020 Strategy for employment and smart, sustainable and inclusive growth aims to enhance the economic strength of and social cohesion in Europe on a long-term basis. The Member States regularly report to the European Commission on their progress and national measures.

In 2010, the European Union presented its Europe 2020 strategy – a three-pronged approach to economic policy. The strategy sets out a vision for Europe’s social market economy in the 21st century and describes Europe’s ambition to play a more important role on the global stage. The strategy provides guidance for both the EU and its Member States and will be key to how the EU budget will be spent and important policy areas such as investment and cohesion designed.

Two aspects play a key role for the new strategy: the experience with the Lisbon Strategy, which expired at the end of 2010, and the lessons learnt from the financial and economic crisis. However, where action is needed is not so much in the content of the strategy – after all, the final version of the Lisbon Strategy was targeted toward the overriding objectives of growth and jobs – but rather in the consistent and vigorous application and monitoring of the existing legislative framework.

You can find out more about the European Commission's Europe 2020 Strategy here (PDF: 373 KB, in German).

The targets of the strategy

The Europe 2020 Strategy has introduced five EU-wide, measurable headline targets. In their National Reform Programmes, the Member States report on the progress that they have made in reaching these targets.

Through its five headline targets, the European Union aims:

  • to increase the employment rate to 75 % among women and men aged 20-64, including through the increased labour market participation of young people, older workers and low-skilled workers as well as the better integration of legal migrants;
  • to improve the conditions for research and development – in particular by aiming to raise combined public and private R&D investment levels to 3 % of GDP;
  • to reduce greenhouse gas emissions by 20 % compared to 1990 levels; to increase the share of renewable energy sources in final energy consumption to 20 %; and to move toward a 20 % increase in energy efficiency;
  • to improve education levels – in particular, by aiming to reduce school drop-out rates to below 10 % and by increasing the share of persons aged 30-34 who have completed tertiary education or equivalent to at least 40 %;
  • to promote social inclusion – in particular through poverty reduction, with the specific aim of lifting 20 million people out of the risk of poverty and exclusion.

An overview of the progress on the targets of the Europe 2020 Strategy can be found at the European Commission's website. Germany has adopted additional national targets that are even more ambitions than the five EU 2020 headline targets. These targets are listed in the country's National Reform Programme.

The European Semester

The common roadmap: the European Semester

In order to earlier identify and effectively counteract undesirable developments on the financial markets or in the real economy, the “European Semester” introduced a monitoring process that combines and interlocks the Europe 2020 process, the Stability and Growth Pact together with the Fiscal Pact and the procedure for monitoring macroeconomic imbalances.

The European Semester maps out a binding timetable for the monitoring of economic, employment and fiscal policy in Europe. The annual cycle of the European Semester, which coincides with the first half of the calendar year, is as follows:

  • Each autumn (usually in November), the European Commission presents its Annual Growth Survey for the following year, laying out the key challenges the EU faces in terms of its economic, employment, and fiscal policies, and mapping out the recommended routes for action. In recent years, the focus has been squarely on implementing the measures agreed to stabilise the situation in the eurozone – mostly by means of boosting growth.
  • Each February, the European Commission publishes a country report for each Member State on the economic situation of the respective country.
  • In April, the Member States submit their Stability and Convergence Programmes as well as their National Reform Programmes to the European Commission. The Stability and Convergence Programmes outline developments in fiscal policy. The National Reform Programmes represent the structural policy agendas of the Member States.
  • Based on these programmes, the Commission makes country-specific recommendations in May for each Member State that address the specific national challenges.
  • The country-specific recommendations are approved by the heads of state and government at the European Council in the middle of each year. This is when the European Semester ends.
  • You can find a timetable of the European Semester drawn up by the European Commission here.

National Reform Programmes

For growth and employment in Europe

In the National Reform Programmes, the Member States desribe the measures they have taken to meet the challenges that their economies face and to implement the country-specific recommendations made by the Council. Furthermore, they outline what they have already achieved in terms of the EU 2020 targets and what measures they have taken to make further progress.

The National Reform Programmes refer to

  • the respective country report by the European Commission in which the Commission analyses the economic policy of the respective country and outlines major overall economic policy challenges in the Member State,
  • the respective country-specific recommendations, which are usually adopted by the Council of the European Commission in July of the preceding year,
  • the most recent Annual Growth Survey by the European Commission, and
  • the guidelines for growth and employment in the context of the Europe 2020 Strategy.

Germany is also making its contribution towards securing stability and growth in Europe. The National Reform Programme 2019 (PDF, 2 MB), which was adopted by the federal cabinet on 10 April 2019, shows that Germany has made major progress on implementing the country-specific recommendations of the Council of the European Union. The Federal Government is resolutely tackling key economic-policy challenges which the European Commission mentioned in its country report.

You can find the recommendations published by the European Commission on the European Semester here.

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