Marco Ziliotti, Administrative Director of the european college of Parma Foundation
For more than thirty years – more than a generation ago, – in a prevailing area of the European continent, which has in the meantime expanded from twelve to twenty-seven states.
People (Schengen Treaty, 19 June 1990), financial capitals (EEC Directive of 1 July 1990) and goods (European Single Market, 1 January 1993) have circulated without borders. For more than twenty years, payments in twenty of these countries have been settled with a common currency, the Euro.
The economic, social, political and cultural effects of the European integration project (a unique experiment in history, because it was not imposed by a hegemonic state, but by the voluntary cooperation of all the member states) have been, and are, undeniably profound, pervasive and to a large extent irreversible. But the road ahead for Europe, if only from an economic point of view, to truly become a common home, capable of fully exploiting its extraordinary potential, is by no means finished.
As far as the movement of goods is concerned, despite the fact that the single market and the single currency have enormously strengthened the supply chains on a continental, to date the total value of intra-EU trade in goods accounts for little more than a quarter of the total value produced; on the other hand, this interchange is worth 60% among the United States of America,.
In Europe, language barriers, the heterogeneity of the legal value of educational and professional qualifications, and the lack of integration between different pension systems still represent serious obstacles to labour mobility. Although an increasing number of young people, choose to – or are forced to seek job opportunities abroad, on average only three out of every hundred Europeans live and work permanently in a Member State other than their country of birth; in the USA, one in four.
Integration with regard to trade in services is still largely unfinished: for instance, the telecommunication and energy sectors have remained, from the outset, outside the Single Market. Partly as a result of this (as strongly highlighted in Mario Draghi’s recent speech at La Hulpe), the failure of European utilities to exploit economies of scale and the poor interconnection between national networks make the bills of European businesses and households much higher than those of the United States, and not only there.
But the most striking example of potential European competitive advantages that remains unexploited due to persistent fragmentation of rules and institutions is the capital market. On the one hand, the historical capacity of private savings, of households in particular, which in Europe remains at a level more than double than that of American households (the saving rates on disposable income in the EU varies between the member states from 10 to 15 per cent; in the United States, recent historical series show it at between 3 and 5 per cent – except for the peak of ‘forced savings’ during the pandemic). Yet 250 billion euros of financial flows leave Europe every year.
The capitalisation of European stock exchanges remains a sub-multiple not only of the American ones (Nyse and Nasdaq), but also of the Asian ones (Tokyo, Shanghai, Hong Kong, Singapore). The reason is obvious: when an Italian company is listed in Milan, it is in fact accessing predominantly domestic savings (stock market capitalisation of the Piazza Affari stock exchange: 800 billion euros; stock market capitalisation – ‘market cap’ – of the Nyse on Wall Street: 25 billion dollars, of which almost one third are non-American companies).
Once again, the key word in the problem is integration: it is very true that a German saver can buy shares in Italy and vice versa, but this remains a ‘foreign investment’. The Italian and German capital markets are controlled by different supervisory authorities (Consob and BaFin; the European authority ESMA has only coordinating powers); the rules governing the operation of German and Italian companies (company law; crisis and insolvency codes) remain distinct; just as the taxation on business income produced in Italy or Germany, or any other European state, is different, with a variability across Europe – from 9% in Hungary and 12% in Ireland, to 35% in Malta – that is unparalleled among the various US states (with a minimum tax rate of 21% and a maximum of 30%).
Despite the extraordinary progress made, given its democratic rules of governance, Europe is still in limbo. In today’s competitive and geopolitical environment, returning to its original values would be disastrous for its individual member states. All that remains is to move forward, with the utmost determination and with the awareness that the “particular” disadvantages of integration are far outweighed by the advantages of general interest.