Mapping the Cost of Non-Europe. 2014-2019 In Billion EUR/year

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Single Market

1.Digital single market Potential efficiency gain: 260 billion euro per year

Key proposition

A deeper and more complete the single market in the digital field could raise the long-run level of EU28 GDP by at least 4.0 per cent - or around 520 billion euro at current prices. However, the regulatory complexity of de-compartmentalising the existing markets in this field suggests that such a potential may take a sustained period of time to realise. A plausible assumption is that, with the right policies in place, around half that gain to the European economy could be achieved in coming years. A detailed Cost of Non-Europe Report on this sector has recently been commissioned by the European Parliament’s Committee on the Internal Market and Consumer Protection. It will look at specific dimensions, such as cloud computing and digital payments, and first results of this research are expected in May 2014.

More detailed analysis

A fully-functioning digital single market would bring significant gains over time, promoting:

  • higher productivity, due to the faster flow of information, benefitting in particular knowledge service industries which depend on information for their services;
  • structural changes in the EU economy, with activity moving away from manufacturing and traditional service sectors towards knowledge services;
  • efficiency improvements and reduced transaction costs in traditional sectors, such as the free movement of goods and services.

However, the current situation in the digital field is still largely one of the fragmentation of an incomplete single market into essentially 28 national markets. There is a relatively low level of cross- border e-commerce at a time when such activity within individual Member States has been growing rapidly, admittedly from a low base. Too many barriers still block the free flow of goods and online services across national borders.

The most serious impediments relate to e-privacy, e-payments, VAT payments, consumer protection and dispute resolution, data protection and geographical restrictions (access to products sold electronically which are restricted to certain geographic areas). There is a clear need to update EU single market rules for the digital era, establishing a single area for online payments, e-invoicing, protecting intellectual property rights, clarifying VAT requirements, generating trust in e-commerce, and affording adequate protection to EU consumers in cyberspace. The complexity of the necessary action means that the full potential of action in this field can only be realised in the long term, but equally suggests that approximately half of the potential gains should be achievable in coming years.

Other estimates of Cost of Non-Europe

There are several studies which confirm the size of the potential gains to be expected from the realisation of the digital single market. Detailed work undertaken by Copenhagen Economics in 2005, 2007 and 2010 estimates the long-term increase in GDP - as a result of an acceleration of the digital economy, involving increased use of online services, improved digital infrastructure and improved e- skills - to be over 4.0 per cent.

A recent Conference Board study argues that there is an urgent need for an integrated single digital and telecoms market to mobilise the potential of the digital economy, innovation and services. It develops four scenarios that show that information and communications technology (ICT) can be a major source of growth for the European economy (up to half of GDP growth in the Union). Andrea Renda of CEPS points out that the achievement of a more integrated digital single market will require a major re-think of the regulatory framework . The European Commisison estimates that moving from the current stuation where electronic invoices account for five per cent of ‘B2B’ transactions towards widespread acceptance would, of itself, bring benefits of 40.0 billion euro per year. These savings would be enhanced by the operation of the Single European Payments Area (SEPA)

According to the European Commission’s latest Consumer Conditions Scoreboard , EU consumers are still considerably more likely to purchase online from national providers (41 per cent per cent) than from those located in other EU countries (11 per cent). The main issue is one of consumer confidence. A recent study for the European Policy Centre (EPC) by Fabian Zuleeg and Robert Fontana-Reval points to the lack of effective pan-European legislation to protect consumers from fraud, rogue trading and identity theft as a failure in the provision of a public good. They conclude that there is economic justification for intervention by government authorities to put in place a legislative framework to protect consumers at EU level. The should represent a ‘win-win’ situation for both consumers and businesses, since the status quo is sub-optimal for society as a whole.

EP position in this field

The European Parliament takes the view that completing the digital single market would be a crucial means to help stimulate growth and create employment in the European economy. It believes that fragmentation and lack of legal certainty are primary concerns in this field, and that inconsistent enforcement of existing EU rules in Member States also needs to be addressed. Fragmentation is also partly due to the poor or late transposition of existing directives by Member States, a factor which should be subject to more rigorous scrutiny by the EU institutions. The Parliament has called for targetted legislative proposals to strengthen consumer access to, and trust in, products and services traded online, and to offer consumers a simple one-stop shop for solutions. It favours developing European standards to facilitate cross-border e-commerce, backed by a European financial instrument for credit and debit cards. It has recognised the potential of cloud computing and called on the Commission rapidly to propose a European strategy in a market worth some 160 billion euro.

EP resolution of 11 December 2012 on Completing the digital single market (2012/2030(INI))

Rapporteur: Pablo ARIAS ECHEVERRÍA (EPP), IMCO Committee
For: 604
Against: 45
Abstentions: 15

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Single Market

2. Delivering and completing the existing Single Market for consumers and citizens Potential efficiency gain: 235 billion euro per year

Key proposition

The existing single market for goods and services has already contributed significantly to economic growth and consumer welfare in the European Union. The European Commission estimates that progress in this field over the period 1992-2006 raised EU GDP and employment by 2.2 per cent and 1.3 per cent, representing figures of 233 billion euro and 2.8 million persons respectively. It is estimated that a further deepening of this 'classic' single market could still yield very significant additional gains for EU consumers and citizens, raising EU28 GDP by a further 2.2 per cent annually over a ten year period, if remaining barriers could be eliminated.

A research paper on this subject, commissioned by the European Parliament in 2013, is available for download at: http://www.europarl.europa.eu/RegData/etudes/etudes/join/2013/494463/IPOL-JOIN_ET(2013)494463_EN.pdf The Parliament’s Committee on the Internal Market and Consumer Protection has recently commissioned a set of Cost of Non-Europe Reports on the continuing completion of the single market in public procurement, free movement of goods, free movement of services, and the consumer acquis, as well as in the digital single market (see point 1 above). The first results from this research are expected in May 2014.

More detailed analysis

The single market has already reached a high level of economic integration in what is now the largest combined marketplace in the world – based on the successful removal of most non-tariff barriers to the free movement of goods and services, so eliminating the majority of physical, fiscal, legal and technical (product standard) obstacles to intra-EU trade. Despite the largely successful adoption and implementation of over 3,500 individual single-market measures over the last three decades, there are significant remaining challenges and 'missing links' . These include the potential for:

  • further easing of the cross-border provision of services, which generate some 70 per cent of value added in the EU but account for only 20 per cent of intra-EU trade;
  • a more effective consumer protection regime at European level;
  • improved market surveillance of the product market;
  • greater cross-border public procurement: although the compulsory advertising of public contracts above a certain threshold has made public-sector contracts more competitive, less than 4.0 per cent of all contracts are awarded to foreign bidders in the EU;
  • better transposition, implementation and enforcement of existing single-market legislation.

A cautious analysis of the potential for continued efficiency gains in the European economy suggests lower-bound gains in the region of 1.8 per cent of long-term EU GDP (some 235 billion euro per year), compared with the staus quo. A complementary on-going study on the EU consumer acquis considers that the consumer detriment from not having a ‘complete’ single market is in the order of 58.0 billion euro per year, evidenced in a comparison of price convergence in the EU and United States.

Other estimates of Cost of Non-Europe

While substantial gains have been achieved so far, a number of studies point out that a fuller and deeper single market could yield even greater benefits. In 2010, the Monti Report suggested that half of all single-market directives face implementation difficulties of some kind. Still significant 'missing links' in the single market included not only those mentioned above – but also the comprehensive implementation of the Single European Payments Area (SEPA) for cross-border financial transfers, which alone could add another 0.9 per cent to GDP

One recent studyon the benefits of the single market estimates that if all remaining barriers to trade in the EU were fully eliminated within the European Union, the level of EU GDP could be as much as 14 per cent higher in the long run relative to a scenario of no further integration. Based on this approach, another study deduces that even a more modest objective of reducing the remaining trade barriers in the EU by only 50 per cent would raise the long-run level of EU GDP by 4.7 per cent. A further study identifies areas in which the single market needs to be further developed and suggests corresponding policy options. Econometric analysis of six key sectors suggests that completing the single market in these sectors could boost them by 5.3 per cent, and EU GDP by 1.6 per cent over the longer term.

EP position in this field

The European Parliament believes that freedom of movement of goods, capital, services and people still has an untapped potential for both businesses and citizens in terms of efficiency, growth and job creation. It considers that the single market is in significant need of a new momentum and calls on the European Commission to bring forward legislation accordingly. Such pressure led to the Commission’s proposals for the Single Market Act and Single Market Act II. It is also concerned that the environmental and social dimensions should be properly integrated in the single-market strategy, on the following basis:

  • support the creation of a sustainable single market based on Article 11 TFEU through the development of an inclusive, low-carbon, green, knowledge-based economy, including measures to further any innovation in cleaner technologies;
  • put the consumer interests referred to in Article 12 TFEU and social policy based on Article 9 TFEU at the heart of the single market;
  • ensure the protection of services of general economic interest on the basis of Article 14 TFEU and Protocol 26; and
  • improve the informal problem-solving mechanisms (SOLVIT) in the single marke.

EP resolution of 20 May 2010 on Delivering a single market to consumers and citizens (2010/2011(INI))

Rapporteur: Louis GRECH (S&D), IMCO Committee
For: 578
Against: 28
Abstentions: 16

EP Resolution of 25 February 2014 on Single Market Governance (2013/2194(INI)).

Rapporteur: Sergio Gaetano COFFERATI (S& D Group), IMCO Committee
For: 607
Against: 64
Abstentions: 9

Other significant reports in this field in the 2009-2014 Parliament include:

A Single Market for Europeans (2010/2278(INI)).

Rapporteur: Antonio CORREIA DE CAMPOS (S&D Group), IMCO Committee

A Single Market for Enterprises and Growth (2010/2277(INI)).

Rapporteur: Cristian BUSOI (ALDE Group), IMCO Committee

Governance and Partnership in the Single Market (2010/2289(INI)).

Rapporteur: Sandra KALNIETE (EPP Group), IMCO Committee

Motion for a Resolution of 14 June 2012 on Single Market Act: The Next Steps to Growth.

Rapporteur: Malcolm HARBOUR (ECR Group), IMCO Committee

Twenty main concerns of European citizens and business with the functioning of the Single Market (2012/2044(INI)).

Rapporteur: Regina BASTOS (EPP Group), IMCO Committee

The Governance of the Single Market (2012/2260(INI)).

Rapporteur: Andreas SCHWAB (EPP Group), IMCO Committee

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Financial Markets

3. Banking Union to avert a new Financial Crisis Potential efficiency gain: 35 billion euro per year

Key proposition

The establishment and completion of a fully-functioning system of Banking Union has the potential to help avoid siginificant recapitalisation costs and GDP loss in coming years, by playing a key part in averting and containing any future financial crisis. Initial research on this subject suggests that a reasonable assumption is that the potential gain to the European economy, compared to past experience, lies in the area of 35.0 billion euro per year.

A research paper by the European Parliament on this subject is available for download at: http://www.europarl.europa.eu/RegData/etudes/note/join/2012/494458/IPOL-JOIN_NT(2012)494458_EN.pdf

More detailed analysis

The cumulative GDP loss from the recent economic and financial crisis was very substantial indeed - estimated to have at least 2.12 trillion euro within the EU - over the period 2008-2012. Putting in place effective measures at all levels to avert or attenuate the recurrence of any such a crisis would thus bring considerable welfare gains in the future. The proposals for a ‘Genuine Economic and Monetary Union’, first developed by four Presidents of EU institutions in June and December 2012, involve several major initiatives in this direction. The establishment and completion of a fullyfunctioning system of Banking Union has a critically important part to play in this process.

In a counter-factual analysis on the effect of the crisis if the bail-in rules agreed in June 2013 had already been in place in September 2008, Jacob Funk Kirkegaard of the Peterson Institute concluded, after examining the balance sheets of the two largest bank failures in the eurozone - Bankia (18.0 billion euro) and Anglo-Irish Bank (34.7 billion euro) - that:

  • Bankia creditors would have faced larger losses and thus the Spanish government would have avoided the need to inject public capital in Bankia and resort to ESM financial assistance;
  • the Irish government would have bailed in senior bank creditors (in addition to junior bondholders), as well as unsecured depositors above 100,000 euro, but this would have been insufficient, and a further contribution from taxpayers or the ESM would have been required. In addition, the flexibility granted to governments to bail out up to 5.0 per cent of the bank's total assets using taxpayers' money or a national resolution fund may have continued to add further costs.

Although the overall cost of bank recapitalisation in the euro area since 2008 cannot be construed as an accurate estimate of the cost of averting a further financial crisis, as an approximation, circa 10 per cent of that overall cost would have been avoided had the bail-in rules been in place.

If it is assumed that the discount rate equals the average long-term government bond yield for the euro area over the pre-crisis period, the recapitalisation cost of banks could be 177 billion euro, and if the probability of a repeat crisis is 10 per cent - namely of a crisis roughly every decade - then the annual cost saved would come to 17.7 billion euro.

To this should be added:

  • a risk-weighted cost of default, including Cyprus and Slovenia, of 26.1 billion euro per year;
  • risks related to bilateral loans, risks related to the establishment of the European Financial Stability Mechanism (EFSM)/ European Stability Mechanism (ESM), and risks related to the Securities Markets Programme (SMP) conducted by the ECB between 2010 and 2012, with a 10 per cent probability of default of one country, or 34.9 billion euro per year;
  • the impact of a financial crisis of the same magnitude as the present one on EU GDP, with the same 10 per cent probability, which can be estimated at 51.9 billion euro per year.

The above costs averted come to a total of 130 billion euro per year. It is however plausible to assume that, even if the EU were to implement all the measures proposed, there can be no absolute certainty that a crisis could be averted. Equally, not all the expected benefits attributed to EU-wide action might accrue. Applying an appropriate discount rate and taking into the current strengthening of economic governance and other reforms envisaged, the 130 million figure (per year) could sensibly be scaled down very substantially to around a provisional figure of 35.0 billion euro per year.

EP position in this field

The European Parliament believes that the governance of the Economic and Monetary Union should take place within the institutional framework of the Union, which is a precondition for its effectiveness and for filling the current political gap between national and European policies. It stresses the need for further integration within the EMU to prevent future crises and sovereign default.

The steps towards a Genuine EMU should combine integrated financial, fiscal and economic policy frameworks, including a Social Pact. The Parliament has called on the Commission to propose measures to address, in a true Community framework and with genuine accountability, the resolution of failing banks, guaranteeing a common rule book, as well as a common set of intervention tools and triggers, whilst limiting taxpayers' involvement to a minimum, through the creation of harmonised, self-financed industry resolutions funds. It also favours a cross-border framework for Insurance Guarantee Schemes across Member States.

EP Resolution of 20 November 2012 with recommendations to the Commission on the report of the Presidents of the European Council, the Commission, the European Central Bank and the Eurogroup "Towards a genuine Economic and Monetary Union", Legislative initiative report under Rule 42 (2012/2151(INI)), based on THYSSEN report.

Rapporteur: Marianne THYSSEN (PPE), ECON Committee
For: 482
Against: 160
Abstentions: 35

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Financial Markets

4. Completing Financial Markets Potential efficiency gain: 60 billion euro per year

Key proposition

The potential efficiency gain from having a fully integrated and effectively regulated EU-wide set of financial markets could be of the order of 60.0 billion euro per year, measured in interest savings alone.

A European Parliament research paper on this subject is available for download at: http://www.europarl.europa.eu/RegData/etudes/note/join/2012/494458/IPOL-JOIN_NT(2012)494458_EN.pdf

Market integration implies convergence of prices at lower levels, as has been the case in the motor car industry and other sectors. Applying this basic concept to the euro area, convergence could imply interest savings in the residential mortgage market alone of an estimated 63.0 billion euro per year, based on prevailing rates. About 75 per cent of euro-area firms rely on banks for external funding. Savings for SMEs - which account for 99.8 per cent of EU companies and 70 per cent of all employees - could be in the order of 53.0 billion euro, after a successful phasing-in.

However, given that language barriers and some other significant constraints - together with lockingin effects, vertical integration and possible country-risk pricing - will undoubtedly persist, even with the further integration of financial markets, the potential gain of 116 billion euro would need to be significantly discounted, leading to a more modest figure of some 60.0 million euro per year.

Other estimates of Cost of Non-Europe

The financial crisis has revealed weaknesses in regulatory coordination across the European Union. Research has pointed to how asymmetric policy implementation aggravated irresponsible risk-taking behaviour among financial institutions, while evidence also indicates that those financial institutions deemed 'too big to fail', which operated outside and across national regulatory supervisory regimes, were the ones most prone to engage in highly-leveraged, risky lending.

In the absence of barriers and asymmetric costs, market integration will imply price convergence at lower levels, as shown in a core studyon market integration for cars in the EU, which found that prices tend to converge at purchasing power parity. Another author argues that greater EU financial integration is needed, as the harmonisation of single market rules does not cover all the interventions required to deal with government ‘moral hazard’ when driven by competition for capital. An imperfect banking union can undermine citizens’ welfare in a currency union, thus threatening the stability of the euro area.

EP position in this field

The economic, financial and fiscal crisis in the EU has significantly broadened economic and social disparities among Member States and regions, resulting in an uneven distribution of inward and outward investment across the European Union. The European Parliament considers it is necessary to establish a consistent framework of stability within monetary and fiscal and trade policy, in order to facilitate the flow of direct investment in all Member States and EU regions, thereby contributing to correcting the EU's macroeconomic imbalances.

Beyond the establishment of a more secure banking sector through the progressive realisation of a Banking Union, the Parliament considers it important also to reduce structural imbalances in the financial markets. Those imbalances are partly responsible for substantial disparities in interest rates, access to credit and cost of provision of financial services.

It has called on the European Commission to secure a general proposal on legal certainty in securities law to ensure a smoother and more secured functioning of the securities markets and their central depositories. It has called on Member States to ensure the full implementation of Capital Requirement Rules (CRD III), as well as revised rules based on best international standards (CRD IV), with the new set of rules compiled in a single rulebook. It has also addressed the issue of remuneration policies in the financial sector. The overall purpose is to prevent junk financial institutions, using a high level of leverage on limited own assets, to operate in the market and put customers at risk.

The Parliament has stressed the need to adopt and fully implement new rules on financial markets operations aimed at better practices in the management of money market funds and 'short-selling' operations. Such rules seek to address the problem of complex (less liquid) products, which nonetheless a have a vast volume of trade and a potential effect on market volatility: over the counter (OTC) derivatives and Credit Default Swaps (CDS). Finally, the Parliament has recalled the importance of implementing a more transparent framework for state aids to the financial sector (following the temporary framework introduced as result of the financial crisis in 2008) to prevent distortion within the single market, as well as excessive public spending. (The new framework entered into force in August 2013 and has still to be evaluated).

EP resolution of 3 July 2012 on attractiveness of investing in Europe (2011/2288(INI))

Rapporteur: Rodi KRATSA-TSAGAROPOULOU (EPP), ECON Committee
For: 546
Against: 58
Abstentions: 48

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Social Issues

5. Common Minimum Unemployment Insurance Scheme for the euro area Potential saving: 15 billion euro

Key proposition

The creation of a common minimum unemployment insurance (or re-insurance) scheme for the euro area could act as an automatic stabiliser during any future periods of serious downtown. Analysis of the potential benefits during the recent crisis suggest that such a scheme would have attenuated the GDP loss in the most affected Member States by 15.0 billion euro in one year.

More detailed analysis

Many benefits can reasonably be expected from such a scheme, once certain conditions are met, such as the fact that the scheme would only fund short-term unemployment, and be limited in time, to avoid permanent financial transfer to certain Member States. Under these conditions, a scheme would, inter alia:

  • limit severe economic crisis, through its stabilising effect on disposable income and hence private consumption and aggregate demand;
  • ensure well-targeted stimulus, because the insurance scheme would intervene in areas where unemployment rates are higher;
  • cushion individual disposable income, and therefore, serve an insurance function which would have a direct positive welfare effect for risk-averse agents;
  • reduce the pressure for using social policies as a variable of adjustment in the case of asymmetric shocks (avoid the so called ‘race to the bottom’).

The European Parliament is undertaking a detailed analysis to quantify more precisely the potential benefits of such an unemployment insurance scheme for the euro area. Proposed solutions will be also assessed in order to focus on cross-country stabilisation aspects. Different simulations will be used to assess the required financial flows and the distributional effects across the different categories of stakeholders. Depending on the model used, as well as on the assumptions made to build the model - for example, number of eligible employees; size of the contribution to the system; size and length of contribution paid by the system; annual balance at national level - the results might vary. There are also inherent costs in establishing and operating such a scheme and these would need to be discounted in any calculation of the efficiency gain.

Other estimates of Cost of Non-Europe

Existing simulations suggest that stabilising effects of such a scheme would be significant. A study presented in 2012 by S. Dullien suggested that a common insurance scheme would have reduced economic fluctuations in some euro-area countries: in Spain - the fourth largest economy in the euro area - such a fund could have mitigated the downturn by almost 25 per cent. If so, the cost of the crisis would have been reduced in Spain by approximately 11 billion euro. Stabilisation of at least 10 per cent would also have occurred in Ireland and Greece, potentially resulting in a reduction of the cost of the crisis by 1.6 and 2.3 billion euro respectively. These savings total 15 billion euro.

The estimates of the stabilisation effect, the only variable that has been quantified, found in the extensive literature on unemployment insurance schemes. Chimerine et al (1999) and Vroman (2010) focus on the impact during a recession and are based on an analysis of marginal stabilisation in times of deepest crisis. They estimate the stabilisation effect of an unemployment insurance scheme at between 15 and 20 per cent of the initial drop of GDP. Vroman (2010) finds a stabilisation effect of almost 30 per cent of which up to half can be attributed to extended and emergency unemployment benefits and the rest to regular unemployment benefit. Italianer and Vanehukelen (1993) argued that a stabilisation mechanism would automatically operate for asymmetric shocks of all sizes.

There have been similar findings in the United States. The Congressional Budget Office (CBO) found that the US unemployment insurance (UI) system, which provides temporary weekly benefits to workers who lose their job and are seeking work, has allowed households to better maintain their consumption while household members are unemployed. When emergency unemployment compensation was extended at the end of 2012, the CBO estimates that GDP adjusted for inflation was 0.2 percent higher (and full-time-equivalent employment will be 0.3 million higher) a year laster than it would otherwise have been.

EP position in this field

The European Parliament considers it important to further investigate the potential role of automatic stabilisers within EMU, especially when facing asymmetric shocks. It also considers it important to avoid excessive depletion of national welfare states and hence strengthen the EMU’s sustainability as a whole. It stresses the need to define concrete steps in terms of building a genuine social and employment pillar as part of the EMU, on the basis of the Community method. Growth and employment policies, including combating youth unemployment and long-term unemployment, and creating lasting jobs which are not precarious, are especially important, with the necessary flexibility of the labour market balanced by adequate levels of social protection.

EP resolution of 23 October 2013 on the European Semester for economic policy coordination: implementation of 2013 priorities (2013/2134(INI))

Rapporteur: Elisa FERREIRA (S&D Group), ECON Committee
For: 476
Against: 96
Abstentions: 25

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Financial Markets

6. Improved Coordination of Fiscal Policies Potential efficiency gain: 31 billion euro per year

Key proposition

Unless fiscal policies are effectively coordinated, there can be significant negative 'spill-over' effects between the Member States participating in Economic and Monetary Union (EMU), and across the European Union more widely. The upper limit of the size of such spill-over effects has been estimated to be 0.25 per cent of GDP. For the EU as a whole, this implies a potential total cost from poor coordination or non-coordination of fiscal policies of some 31.0 billion euro per year. The relevant EP research paper is available for download at: http://www.europarl.europa.eu/RegData/etudes/note/join/2012/494458/IPOL-JOIN_NT(2012)494458_EN.pdf

Other estimates of Cost of Non-Europe

In a recent staff discussion note, the International Monetary Fund (IMF) has explored the role that deeper fiscal integration can play in correcting structural weaknesses in the EMU system, reducing the incidence and severity of future crises, and lending long-term credibility to the crisis measures in train. Although country-level adjustment and support via the European Stability Mechanism (ESM), European System of Financial Supervision (ESFS) and OMT backstop, together with progress towards Banking Union, are important achievements, a clearer ex-ante approach to fiscal discipline and transfers is very important to further strengthen EMU and help ensure the stability of the euro area.

EP position in this field

The European Parliament has called for a comprehensive overhaul of the framework for economic governance in the EU, with the strengthening of fiscal surveillance and the effective application of strengthened rules for the Stability and Growth Pact. It believes that an integrated fiscal framework is an essential part of a Genuine EMU - based on a functioning Six-Pact and Two-Pack, a Fiscal Compact under the Community method, a European Budget funded by own resources, a gradual roll-over of bad debts in a redemption fund, and measures to fight tax evasion accompanied by better practices in taxation. In a Genuine EMU better ex-ante coordination of economic and fiscal policies (through an improved European Semester process) should also be the rule. A new Social Pact at European level, with binding minimal requirements, is also considered an important element of a new integrated economic framework and a step towards crisis prevention.

EP Resolution of 20 November 2012 with recommendations to the Commission on the report of the Presidents of the European Council, the Commission, the European Central Bank and the Eurogroup "Towards a Genuine Economic and Monetary Union", (2012/2151(INI)).

Rapporteur: Marianne THYSSEN (PPE), ECON Committee
For: 482
Against: 160
Abstentions: 35

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Financial Markets

7. Common Deposit Guarantee Scheme Potential efficiency gain: 30 billion euro per year

Key proposition

The potential benefit of a instituting a common deposit insurance scheme (DGS) within the euro area is estimated at 13.0 billion euro per year for three vulnerable countries (Greece, Ireland and Spain). This figure could potentially rise to 30.0 billion euro, if other vulnerable states (Portugal, Italy, Cyprus and Slovenia) were included. The relevant EP research paper is available for download at: http://www.europarl.europa.eu/RegData/etudes/note/join/2012/494458/IPOL-JOIN_NT(2012)494458_EN.pdf

More detailed analysis

As a result of the crisis, bank deposits have decreased significantly in certain Member States since 2010 - by 11 per cent in Spain, 30 per cent in Greece, four per cent in Ireland, and 29 per cent in Cyprus (compared to June 2012). A DGS could help prevent deposit flight and bank-runs, thereby reducing the risk and burden of bank recapitalisation. The impact of a common scheme on preventing deposit transfers outside crisis countries (with their large impact on recapitalisation needs) needs to be further assessed. (Equally, the opportunity cost for Member States or financial institutions providing for the scheme is not discounted). A study in one affected Member State has estimated the cost in terms of lending foregone as a result of the status quo at around 0.9 per cent of GDP.

EP position in this field

The European Parliament notes that the eurozone is in a unique situation, with participating Member States sharing a single currency but no common budgetary policy or common bond market. In that context, it proposed an EU financial stability fund for the banking sector and a Common Deposit Insurance Scheme. Schemes at European level are intended to reduce risks for households and to limit the need for national public money to recapitalise failed banks. The use of public money in Member States to recapitalise national banks in turn increases the burden of public debt and the risks of sovereign debt, with important cross-border effects. The Parliament considers it essential to further investigate the feasibility of a Common Redemption Fund for bad debts and the common issuance of eurobonds, suggestions which have not been followed up with legislative proposals so far.

EP resolution of 16 January 2013 on The feasibility of introducing stability bonds (2012/2028(INI)).

Rapporteur: Sylvie GOULARD (ALDE Group), ECON Committee
For: 361
Against: 268
Abstentions: 33

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Defence EU

8. Common Security and Defence Policy Potential efficiency gain: 26 billion euro per year

Key proposition

The efficiency gain from closer cooperation at European level in the area of security and defence policy is thought to range from some 130 billion euro, at the high end, to at least 26.0 billion euro per year, on a more cautious estimate. If Member States were to operate in a more integrated manner, they would need to spend significantly less than their current collective defence budget of 190 billion euro. The European Parliament's Cost of Non-Europe Report on this subject - prepared ahead of the European Council of 18-19 December 2013, which was devoted in part to Common Security and Defence Policy (CSDP) - is available for download at: http://www.europarl.europa.eu/RegData/etudes/etudes/join/2013/494466/IPOL-JOIN_ET(2013)494466_EN.pdf

More detailed analysis

The cost of non-Europe in security and defence derives, in the first instance, from the lack of integration of the military structures of the Member States. EU armed forces, despite participation in multinational contingents, are organised on a strictly national basis. Secondly, costs arise from the lack of a truly integrated defence procurement market, partially exempted from the single market. The existence of 28 compartmentalised national markets, each with their own administrative burden and regulated separately, hinders competition and results in a missed opportunity for economies of scale for industry and production.

The upper figure of 130 billion euro was calculated in the past by comparing United States and European costs, assuming European efficiency levels to be only 10 to 15 per cent of those in the US. That estimate assumed a hypothetical single EU defence system, with the same cost structure, operating conditions and budget efficiency as the US one. This would have permitted a European budget of 62.9 billion euro, instead of the 193 billion euro actually spent.

Efficiency gains through greater cooperation Amount in euro per year (billion)
Efficiency gains in industry 10,000
Certification of ammunition 500
Standardisation of ammunition 1,500
Offsets 6,610
Efficiency gains in land forces 6,500
Efficiency gains in infantry vehicles 600
Efficiency gains in air-to-air refuelling 240
Efficiency gains in basic logistic support 30
Efficiency gains in frigates 390
Total Cost of Non-Europe 26,370

An alternative ‘bottom up’ figure, used in the Parliament’s Cost of Non-Europe Report, can be constructed by calculating a specific efficiency gains field by field. With 10 per cent industrial efficiency gains, due to greater cooperation, the figure comes in at least 26 billion euro per year (at 2011 prices).

Other estimates of Cost of Non-Europe

There is a growing literature on this subject. A recent study by the Istituto Affari Internazionali analyses the potential for gains from reducing the duplication or multiplication of operational structures, stocks and research activities and programmes at 120 billion euro annually. A study by the Bertelsmann Stiftung argues that there is potential for significant economic gains from having smaller, consolidated land forces: the potential saving to the EU Member States would be some 6.5 billion euro per year.

EP position in this field

The European Parliament has requested political action in three dimensions of security and defence policy: visibility, capabilities and industry. Overall, the Parliament has drawn attention to the changing global strategic landscape and to reduced defence budgets, accelerated by the economic and financial crisis. It has urged Member States to reinforce EU industrial cooperation, by developing and producing efficient military and security capabilities, using the most advanced technologies. A European defence industyl strategy should have the aim of optimising Member State capabilities, by coordinating the development, deployment and maintenance of a range of capabilities, installations, equipment and services.

EP resolution of 21 November 2013 on the Implementation of the Common Security and Defence Policy (based on the Annual Report from the Council to the European Parliament on the Common Foreign and Security Policy (2013/2105(INI)).

Rapporteur: Maria Eleni KOPPA (S&D Group), AFET Committee
For: 421
Against: 104
Abstentions: 80

EP resolution of 21 November 2013 on the European Defence Technological and Industrial base (2013/2125(INI)).

Rapporteur: Michael GAHLER (EPP Group), AFET Committee
For: 451
Against: 103
Abstentions: 67

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International trade

9. Transatlantic Trade and Investment Partnership (TTIP) Potential efficiency gain: 60 billion euro per year

Key proposition

There could be significant potential gains for the European economy from the Transatlantic Trade and Partnership (TTIP) Agreement currently being negotiated between the European Union and the United States. Based on an independent report of 2013, the European Commission estimates that the EU economy should be boosted by 0.5 per cent of GDP, or 120 billion euro annually, once such an agreement were fully implemented, bringing a gain to each household of 545 euro.

In this paper, a more cautious approach is adopted, assuming only half of the asserted potential benefits from the TTIP. The final figure retained is thus 60 billion euro per year.

More detailed analysis

A study published in 2013 by the Commission, in the framework of its impact assessment , reviews the importance of the bilateral economic relationship and provides computable general equilibrium (CGE)- based estimates for the economy-wide impact of reducing both tariff and non-tariff barriers (NTBs).

The analysis uses the non-tariff barrier (NTB) estimates made in an earlier study of 2009 (see below). It investigates different policy options for the deepening of the bilateral trade and investment relationship between the EU and US. These range from partial agreements limited in scope to a fullyfledged free trade agreement with a comprehensive liberalisation agenda, covering simultaneously tariffs, procurement, NTBs for goods and NTBs for services. The results suggest positive and significant gains for both economies. Under a comprehensive agreement, EU GDP is estimated to increase by between 68.2 and 119.2 billion euro, and US GDP by between 49.5 and 94.9 billion euro (under the less ambitious and more ambitious scenarios respectively). EU exports of goods and services to the US would go up by 28 per cent, equivalent to an additional 187 billion euro. Overall, total exports would increase by 6.0 per cent in the EU and by 8.0 per cent in the US. Reducing NTBs would be a key part of transatlantic liberalisation, with as much as 80 per cent of the total potential gains coming from cutting costs imposed by bureaucracy and regulations, as well as form liberalising trade in services and public procurement.

Other estimates of Cost of Non Europe

The 2009 Ecorys study estimated that eliminating half of the NTBs caused by regulatory divergence could increase EU GDP by 0.7 per cent in 2018, compared to the baseline scenario of doing nothing. This would represent an annual potential gain of 122 billion euro.

A report for the Atlantic Council estimated that the TTIP has the potential to increase transatlantic trade and investment flows substantially and to create as many as 750,000 new jobs in the US alone. Moreover, by lowering the costs of trade and driving job growth in a range of industries, American households are estimated to gain approximately USD 865 annually, while their European counterparts would gain USD 720 (equivalent to 526 euro).

A 2013 CEPR study in Britain estimated that a successful TTIP would yield an increase GDP in the United Kingdom of between 0.14 and 0.35 per cent (equivalent to GBP 4.0 and 10.0 billion annually). Most of the likely gains are attributed to lowering of NTBs in goods. Aggregate exports (to all countries) would be expected to increase by 1.2 and 2.9 per cent, and imports by 1.0 and 2.5 per cent. The sector most strongly affected would be motor vehicles, where output increases by as much as 7.3 per cent.

A CEPII study, also published in 2013, suggested that that trade in goods and services between the EU and US would increase by approximately 50 per cent on average, including a rise of 150 per cent for agricultural products. Eighty per cent of the expected trade expansion would stem from lowered NTBs. There an annual increase in national income could be USD 98 billion for the EU and of USD 64 billion for the US.

EP position in this field

In March 2013, the European Commission sent a draft negotiating mandate to the Council on TTIP. In May 2013, the European Parliament adopted a resolution calling on the Council to follow up on the recommendations contained in the final report of the High Level Working Group on Jobs and Growth which was established by the EU-US Summit in November 2011, and to authorise the European Commission to start negotiations for an agreement with the US. The Parliament also reiterated ‘its support for a deep and comprehensive trade and investment agreement with the US that would support the creation of high-quality jobs for European workers, directly benefit European consumers, open up new opportunities for EU companies, in particular small and medium-sized enterprises (SMEs), to sell goods and provide services in the US, ensure full access to public procurement markets in the US, and improve opportunities for EU investments in the US’.

European Parliament resolution of 23 May 2013 on EU trade and investment negotiations with the United States of America, P7_TA(2013)0227.

Rapporteur: Vital MOREIRA (S&D Group), INTA Committee

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Infrastructure of single Market

10. Integrated Energy Markets in Europe Potential efficiency gain: 50 billion euro per year

Key proposition

A more economically and physically integrated single market in energy could result in efficiency gains of some 50 billion euro. This figure takes into consideration both the European Parliament's own assessment of the situation in specific four dimensions of the market - amounting to a minimum gain of 15 billion euro - and a series of estimates from other sources detailed below. The Parliament's recent Cost of Non-Europe Report can be downloaded at: http://www.europarl.europa.eu/thinktank/en/documents.html?word=%22Single+market+in+energy%22&documentType=STUDIES&id=&body=EAVA&dateStart=&dateEnd=&action=submit

More detailed analysis

The European Parliament’s analysis has so far focussed on potential gains in the following four fields:

  • Regulated prices: A ‘tariff deficit’ is accumulated for each kWh of electricity supplied at a regulated tariff. In countries like Spain or Poland with approximately 15 million domestic consumers with an average annual electricity consumption of 3,000 kWh, of which 80 per cent are supplied at the regulated tariff, the total tariff deficit would be around 720 million euro per year. This could mean a 9.5 billion euro per year for the Union as a whole.
  • Development of hubs and exchanges: To assess ‘non-Europe’ and a 'physically integrated' situation, the costs of non-integrated generation portfolios in six countries (Germany, France, Luxemburg, Netherlands, Belgium and Austria) was compared with a physically-integrated situation. This showed that, over the whole area, 16.5 GW less generation capacity was required, roughly 8.0 per cent less than would be required in separate portfolios. Capital costs thus avoided were estimated at 1.2 billion euro per year and fixed operational costs at 448 million euro per year. This indication of the cost of non-Europe for the six countries would translate into more than 3.0 billion euro per year in the long term at EU level.
  • Lack of market coupling: In a situation where two markets are already connected, physically as well as commercially, market coupling increases the efficiency of capacity allocation. A case study looked at the border between France and Italy, estimating the efficiency loss by comparing the cost of capacity bookings to the value of the capacity; the cost of explicit auctions between France and Italy both for the day-ahead and the intraday auction results; the cost of implicit auctions, and, finally, the cost difference was estimated. The efficiency loss was estimated to be 78 million euro per year on the border of Italy and France.
  • Balancing market: Transmission System Operators (TSOs), whose area of responsibility is usually defined along national borders, generally manage their balancing operations separately. Working together would reduce required back-up capacity and the amount of energy used. The International Grid Control Cooperation, involving six TSOs and with Germany at his centre, saves around 300 million euro per year.

Other estimates of Cost of Non-Europe

There is an extensive economic literature on the untapped potential of the closer cooperation in energy policy in Europe. The table below provides a short summary of the most recent calculations, some calculating the gain at almost 200 billion euro:

Sectors Amount in euro (billion)
Gas and Electricity:
Study on the benefits of integrating the energy market 12.5 - 40
A report on the cost of not having an integrated EU energy market for gas estimates that full implementation of the third energy package in 2015 compared to 2012 could reach a maximum of 8 billion euro per year 8 - 30
EU consumers could save about 13 billion euro in total if they switched to the cheapest electricity tariff they could find 13
Savings equivalent to 15 billion euro per year are possible if uncompetitive price differentials between EU MS are addressed 15
Renewables:
Gains of 16 billion to 30 billion euro are available in the period 2015-2030 under the coordinated renewable investment scenario 16 - 30
Total renewable production could increase to 238 Mtoe by 2020, and with unchanged fuel prices, would enable avoided imported fuel costs of 50 billion euro in 2020 50
Total gross value added of the RES sector in the EU in 2020 would amount to 99 billion euro (0.8 per cent of total GDP). Based on the Accelerated Deployment Policy scenario the value would amount to 129 billion euro (1.1 per cent of total GDP) or 197 billion euro by 2030 if combined with optimistic export expectations 99 - 197
EU-wide renewable energy trading and achieving the 20 per cent renewable energy target cost efficiently in all MS would reduce costs in overall energy system by up to 8 billion euro 8
Energy efficiency:
By 2020 a 20 per cent increase in energy efficiency in buildings could save 32 per cent primary energy in Europe, 2.6 billion barrels of imported oil per year and 193 billion euro per year 193
Energy efficiency could cut EU’s energy bill by about 200 billion euro per year. 200

EP position in this field

In November 2012, the European Commission presented a Communication entitled 'Making the Internal Energy Market Work', accompanied by an Action Plan (COM(2012)663). In that context, the European Parliament has stressed the need to progress in the implementation of the Third Internal Energy Market Package, particularly its effective transposition. It also stressed the importance of providing comparison tools for consumers, allowing transparent pricing and billing and emphasised the need to reinforce security of supply, end the physical isolation of several Member States in the energy market, and pay attention to the needs of vulnerable consumers.

EP Resolution of 10 September 2013 on Making the internal energy market work (2013/2005(INI)).

Rapporteur: Jerzy BUZEK (EPP Group), ITRE Committee.
VOTE: Show of hands

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Social Issues

11. Equal Pay for Equal Work Potential efficiency gain: 13 billion euro per year

Key proposition

There is important evidence that closing the gender pay gap (GPG) is not only desirable in its own right, but would have a positive effect on economic growth. A European Added Value Assessment 54 on the application of the principle of equal pay for equal work of equal value, drafted in support of a legislative initiative in the European Parliament on this subject, found that each one per cent reduction in the GPG would result in an increase in GDP of 0.1 per cent. A European-level initiative in this field, if it led to a reduction of the GPG of only between one per cent across the EU, would boost EU GDP by 17 billion per year. For the purposes of this paper, a more cautious figure of 13 million euro has been retained.

The European Parliament’s recent European Added Value Assessment on this subject, undertaken for its Committee on Women’s Rights and Gender Equality (together with its annexes) are available fordownload at: http://www.europarl.europa.eu/RegData/etudes/etudes/join/2013/504469/IPOL-JOIN_ET(2013)504469_EN.pdf and http://www.europarl.europa.eu/thinktank/en

More detailed analysis

Work was undertaken on the potential economic gain from a proposed revision to Directive 2006/54/EC on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation. The minimum and maximum levels ofimpact of such legislative action on reducing the GPG were assessed to lie be between one and three per cent. On the basis that every one per cent reduction in the GPG would result in an increase in GDP of 0.1 per cent, it follows that a two per cent reduction in the GPG would increase GDP by some 34 billion euro (or 67.71 euro per capita across the EU), and a one per cent reduction in the GPG would increase GDP by approximately 17 billion euro. These estimates do not take into account the heterogeneous situation across EU Member States in terms of GPG, given that some states have already partly implemented some of the Parliament’s recommendations. This is why the final figure retained here is 13 billion euro per year.

Other estimates of Cost of Non-Europe

According to economic literature, the benefits of reducing the GPG are numerous, including not only an increase in female wages, but a reduction in low income benefit payments, a change in the fertility rate, and an increase in female employment. A 2012 OECD study concluded that on average a 50 per cent decrease in the gender gap in labour force participation rates leads to an increase in the GDP per capita annual growth rate of 0.3 per cent. If full convergence occured by 2030, the increase would be 0.6 per cent (equivalent to an overall increase of 12 per cent in GDP over 20 years).

Specific national studies support these conclusions. In 2010, the National Centre for Social and Economic Modelling (NATSEM) in Australia estimated that their 17 per cent GPG costs the Australian economy 8.5 per cent of GDP, representing AUD 93 billion each year. The same study argued that the Australian economy would grow by 0.5 per cent of GDP - AUD 5.5 billion - if the gender wage gap was reduced by only one per cent. A United Kingdom study in 2006 found that a combination of factors, such as job segregation between the sexes, lack of part-time roles in senior posts and hidden pay discrimination, contributed to an avoidable loss of between 1.3 to 2 per cent of GDP (GBP 15 and 23 billion) each year.

EP position in this field

In May 2012, the European Parliament adopted a resolution based on a legislative initiative report on equal pay (Bauer report), calling on the European Commission to review Directive 2006/54/EC on the implementation of the principle of equal opportunities and equal treatment of men and women in matters of employment and occupation before February 2013.

In its official response to this report, the European Commission indicated that it did not intend to review the directive to address the specific causes of the current gender pay gap within the timeframe specified, but would instead draw up a report reviewing the practical implementation of the directive at national level. The Committee on Women’s Rights and Gender Equality (FEMM) of the European Parliament asked for a European Added Value Assessment to be prepared as a follow-up and to provide additional justification for the legislative initiative report.

EP resolution of 24 May 2012 on Equal pay for male and female workers for equal work or work of equal value (2011/2285(INI)).

Rapporteur: Edit BAUER (EPP Group), FEMM Committee.
For: 482
Against: 160
Abstentions: 35

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Financial Markets

12. VAT and Action against Tax Evasion Potential efficiency gain: 7 billion euro per year

Key proposition

In addition to being illegal, tax evasion leads to an inefficient and distorted allocation of resources in the economy. Given the extensive shortfall in VAT receipts, a benefit of around 7.0 billion per year could be credibly anticipated from modest action at EU level in this field, notably by the introduction of a standardised European invoice and/or an EU-coordinated or simplified cross-border taxation system. These actions could facilitate the fight against VAT fraud which affects the Union's financial interests and also facilitate cross-border transactions and reduce costs for businesses and citizens.

More detailed analysis

Decreasing the size of the EU's shadow economy, estimated to be at around 20 per cent of the official GDP, would increase the efficiency of the allocation of resources in the European economy. However, this is very difficult to achieve without more effective EU-wide tax cooperation. The total impact of an EU coordinated or simplified cross-border taxation system has yet to be assessed.

According to a recent study on the 'VAT gap' in 26 Member States, an estimated 193 billion euro in revenues (or 1.5 per cent of GDP) was lost due to non-compliance or non-collection in 2011. The VAT gap is the difference between the expected VAT revenue and the VAT actually collected by national authorities. While non-compliance is certainly an important contributor to this revenue shortfall, the VAT gap is not only due to fraud. Unpaid VAT also results from bankruptcies and insolvencies, statistical errors, delayed payments and legal avoidance, inter alia. In the absence of a comprehensive study quantifying the economic gains from a stronger and better coordinated EU tax policy, it seems plausible to estimate that limited new measures at European level, such as the introduction of a standardised European invoice, could bring a benefit of around 7.0 billion euro per year.

EP position in this field

The European Parliament has called on the European Commission to revise the Savings Taxation Directive to put an end to temporary derogation for certain Member States, increase its scope to cover trusts and various forms of investment income, and extend its provision to jurisdictions favoured for tax evasion. It has also stressed the need to review the Parent-Subsidiary Directive and the Interest and Royalties Directive, to eliminate tax evasion via hybrid financial instruments. It has asked for a standardised European invoice to facilitate cross-border transactions and controls. For the time being, only a non-legislative initiative on VAT has been announced by the Commission.

EP Resolution of 21 May 2013 on Fight against Tax Fraud, Tax Evasion and Tax Havens (2013/2060(INI))

Rapporteur: Mojca KLEVA KEKUS (S&D Group), ECON Committee

EP resolution of 13 October 2011 on The future of VAT (2011/2082(INI)) based on the CASA report.

Rapporteur: David CASA (EPP Group), ECON Committee
For: 521
Against: 50
Abstentions: 58

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Social Issues

13. Combatting Violence against Women Potential efficiency gain: 7 billion euro per year

Key proposition

The most recent Europe-wide figures on violence against women indicate that 33 per cent of women have experienced physical and/or sexual violence since the age of 15. A recent European Added Value Assessment on combatting violence against women, drafted in support of a legislative initiative in the European Parliament, has estimated the economic cost of such violence at 69.0 billion euro annually (2011), or 0.5 per cent of EU GDP. This figure includes 45.0 billion euro a year in costs to public services and 24.0 billion euro in terms of economic output foregone. It is difficult to assess what would be the precise impact of an EU policy framework in this field. However, if it were to reduce violence by only 10 per cent, the direct economic costs in the economy could be reduced by approximately 7.0 billion euro per year.

The European Added Value Assessment on this subject, undertaken for the European Parliament’s Committee on Women’s Rights and Gender Equality, is available for download at: http://www.europarl.europa.eu/thinktank/en/documents.html?word=%22Violence+against+women%22&documentType=STUDIES&id=&body=EAVA&dateStart=&dateEnd=&action=submit

More detailed analysis

The estimate in the European Added Value Assessment are based on an extrapolation to the EU as a whole of British figures published by the UK Department of Trade and Industry (DTI) in 2004, and quality-assured by the Office for National Statistics (ONS).

The figures were calculated by identifying the impacts of violence against women (costs); estimating their size; estimating their cost; attributing these costs to different stakeholders; and then scaling up from Member State to EU level.

Three main types of costs of violence against women identified and investigated were:

  • services: the legal system (criminal and civil), health services (physical and mental) and specialised services (costs attributed to the state and public);
  • lost economic output: the effect of injuries on working time and of diminished productivity through reduced concentration at work (costs borne by business and economy);
  • the pain and suffering of the victims: calculated following a methodology used in other domains and based on the estimates of the public’s willingness to pay to avoid harm and injuries (costs borne by the victims).

The following approaches have been retained to ensure best possible reliability of data:

  • surveys - to determine the extent and nature of the major forms of violence against women;
  • administrative data - to determine the extent of use of services by victims of violence against women and to determine the cost of units of service; and
  • parallel studies of injury - use of authoritative studies of the impact of physical injury on: lost working time; use of health care services; and the public’s willingness to pay to avoid such injuries.

The impacts for individuals and wider society for which the precise scale of effects are not known robustly were not included in the cost calculation.

The figures from the 2004 baseline study were then extrapolated to the EU in 2011 by:

  • revising ‘domestic violence against women and men’ to ‘gender-based violence against women’, by deleting violence against men and adding sexual violence by non-partners;
  • up-dating the costs for inflation between 2001 and 2011;
  • extrapolating from England and Wales to ‘United Kingdom’
  • up-dating the rate of violence against women from that found in 2001 to that in 2011.
  • extrapolating from United Kingdom to the EU28 as a whole.

On this basis, the total cost of violence against women for the EU28 was estimated at 226 billion euro annually. This figure includes 45 billion euro a year in costs to public services, 24 billion euro in terms of lost economic output, and 157 billion euro annually as the cost of the pain and suffering of the victims. As the monetisation of the cost of the pain and suffering is difficult, it is retained for the purpose of this analysis. As a result, the cost of violence against women is considered to be at least 69.0 billion euro per year, or 0.5 per cent of EU GDP. It is difficult to assess what would be the impact of an EU policy framework on reducing violence against women. If it were to reduce violence by 10 per cent only, the direct economic costs would be reduced byapproximately 7.0 billion euro per year.

Other estimates of Cost of Non-Europe

In a 2006 study, the Council of Europe provided a rough comparative analysis of the cost estimates for domestic violence among its member states. The study concluded that the costs lay in a range of about 20 to 60 euro for every person in the population per year (2006 prices). Another 2006 study, funded by the European Commission under the Daphne programme, focussed on domestic violence. It estimated the economic cost of the latter at 16 billion euro annually for EU Member States (2006 prices). The numbers, include medical, justice and police, social and economic costs.

EP position in this field

The European Parliament has repeatedly called on the European Commission to propose a specific and comprehensive legal instrument to combat violence against women. (For example: BASTOS report on the Daphne programme: achievements and future prospects (2011/2273(INI)), SVENSSON report on Priorities and outline of a new EU policy framework to fight violence against women (2010/2209(INI)).

The Commission has so far not proposed such a specific legislative measure. In June 2013, the so called-‘Victim's Package’ was adopted. Although clearly a step forward, the Parliament considers this instrument insufficient to comprehensively deal with the problem. It decided to prepare a legislative initiative report, accompanied by a European Added Value Assessment, in order to reiterate its call to submit a proposal for a legislative act establishing measures to promote and support action of Member States in the field of prevention of violence against women. The Rapporteur proposes a combination of legislative and non-legislative measures, including:

  • the adoption of a legal act supporting the action of Member States in the field of prevention of violence;
  • the establishment of a coherent system for collecting statistics on gender-based violence in Member States;
  • the activation by the EU Council of the passerelle clause, by adopting a unanimous decision to include gender-based violence as an area of crime listed under Article 83(1) TFEU;
  • the launching of the procedure for the accession of the EU to the Istanbul Convention;
  • the adoption of an EU-wide Strategy and Action Plan to combat violence against women.

2013/2004(INI) (INL) Report with recommendations to the Commission on Combatting Violence Against Women.

Rapporteur: Antoniya PARVANOVA (ALDE Group), FEMM Committee.
Adopted in Plenary on 25 February 2014.
VOTE: Show of hands

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Social Issues

14. Information and Consultation of Workers Potential efficiency gain: 3 billion euro per year

Key proposition

More systematic information and consultation of workers, especially at times of restructuring, could bring significant economic benefits - by reducing the severity of industrial conflicts, reducing the rate at which people leave their jobs (the so-called ‘quit-rate’), increasing employability, and/or easing social and health effects and related costs on social welfare systems (notably in health-related treatment). The European Parliament’s recent European Added Value Assessment on the subject65 has analysed how an appropriate initiative at EU level should limit the social costs of structural adjustment, provide an integrated and coherent approach to dealing with restructuring, and help eliminate potential distortions of competition within the single market and inequalities in treatment of workers, resulting from divergences in national regulations. Across the Union as a whole, the measure could generate efficiency gains of around of 3.0 billion euro per year.

The European Added Value Assessment on this subject, undertaken for the European Parliament's Committee on Employment and Social Affairs, is available for download at: http://www.europarl.europa.eu/thinktank/en/documents.html?word=%22Consultation+of+workers%22&documentType=STUDIES&id=&body=EAVA&dateStart=&dateEnd=&action=submit

More detailed analysis

The main objective of the European Parliament own assessment was to provide an estimation of the potential impact of the measures outlined in the Cercas report. In order to do so, first selected information on the existence of these practices at Member State level was used to construct a baseline scenario. The assessment then looked at the impacts at company level associated with the recommendations put forward by the Parliament. The main impacts investigated included: impact on number of redundancies, impact on the employability (prospect of workers finding future employment) and impact on job quality (workers within their current job). The evidence concerning impacts at company level was then combined with information concerning costs, and a simple costeffectiveness analysis was presented. The impact evidence was combined with information concerning the baseline situation, to provide an assessment of the aggregate impact at Member-State level. Finally, compared to the effectiveness of measures at company level, their impact at EU level was further reduced by approximately 50 per cent, to take into consideration the unequal distribution of current performance, as well as planned job reductions across Member State.

The main conclusions were that, distributed over all EU Member States, early consultation would reduce the number of redundancies by approximately 22 per cent, compared to an estimated effectiveness of 43 per cent at company level. Had this taken place in 2011, when there were 464,000 planned reductions, such a measure could have resulted in an estimated reduction of approximately 100,000 redundancies. This data was then combined with labour productivity, a measure often used to estimate how efficient a given population is in producing goods and services.

According to the Organisation for Economic Cooperation and Development (OECD), labour productivity is defined as gross domestic product (GDP) per hour worked. More simply, productivity is a measure of output from a production process, per unit of input. The labour input is defined as total 65 Micaela del Monte, EP European Added Value Unit, European added value of an EU measure on information and consultation of workers: anticipation and management of restructuring processes, European Parliament, November 2012. 35 hours worked by all persons engaged, and the data for labour input comes from the OECD Employment Outlook, Annual National Accounts, and Labour Force Statistics. On the basis of these statistics, the productivity level in Europe - or GDP output per hour worked - varies from USD 26.2 per hour in Poland to USD 77.1 per hour in Luxembourg, with the eurozone having a labour productivity of around USD 51 per hour. Based on a cautious assumption of the average of labour productivity per hour at EU28 level of USD 26 per hour, the economic added value of the proposed measure was estimated to be around USD 40 950 per year per unit labour. This figure was obtained by multiplying the labour productivity by the labour hours in a given week and then by the labour weeks in a year (26USD*35H*45W). This figure, multiplied by the number of estimated reduction of redundancies in 2011, gives a figure of approximately USD 4.0 billion, equivalent to 3.0 billion euro.

Other sources for the Cost of Non Europe

There is evidence showing that the success of redeployment depends very much on the past career of the workers concerned and how much they benefitted from training and career guidance in the transition process. In terms of the benefits of information and consultation, it is seen that advance notification of redundancies encourages successful redeployment, especially where it is accompanied by job-search assistance and training.

EP position in this field

The European Parliament has requested the European Commission to submit, on the basis of Article 225 TFEU and after consulting the social partners, a proposal for a legal act based on its 14 recommendations for strategic restructuring operations of companies and group of companies. It calls on the Commission to ensure that dismissals are seen as a last resort, after having considered all possible alternatives, without this diminishing the competitiveness of enterprises. Moreover, the Commission is called upon to assess whether it is necessary to take steps at Union level to supervise the activities of companies, in order to prevent abuse of any kind with prejudicial effects, particularly on workers.

In its response to this report, the Commission indicated that it did not intend to present a legal act but would put forward a Communication on establishing a Quality Framework for restructuring and anticipation of change. The Communication was presented by the Commission in December 2013.

EP resolution of 15 January 2013 on Information and consultation of workers, anticipation and management of restructuring (2012/2061(INI)).

Rapporteur: Alejandro CERCAS (S&D Group), EMPL Committee
For: 503
Against: 107
Abstentions: 72

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Infrastructure of single Market

15. Single European Transport Area Potential efficiency gain: 2.5 billion euro per year

Key proposition

Substantial progress has made over the last quarter century in putting in place a common transport policy within the European Union, by removing barriers, increasing competition, and improving quality of service and safety, especially in the road, rail and air transport sectors. However, substantial further efficiency gains could be made from further action to create a more fully integrated transport sector. Existing studies suggest that the minimum economic benefit from a further deepening of the single market in transport in its various forms would be at least 2.5 billion euro per year. Further work on the subject, in the form of a Cost of Non-Europe Report, is currently being undertaken for the European Parliament’s Committee on Transport and Tourism.

More detailed analysis: methodology and detailed explanation

There is at present no comprehensive estimation of the Cost of Non-Europe in the overall single market in transport. However, an assessment is being undertaken by the European Parliament in the form of a Cost of Non-Europe Report, from which a preliminary figure should be available in April 2014. . It will analyse and quantify costs and benefits in selected sectors of transport and tourism, in particular, notably road, rail, air and water transport, and tourism and passengers’ rights.

Existing studies, however, do already point to significant gains from tarhetted action in specific sectors. In railway transport, a quantitative impact assessment69 has estimated the net gains from further market opening, from greater open tendering for public service contracts and from continued unbundling to be in the range between 18.0 and 32.0 billion euro over a 17-years period from 2019 (when the full effect can be expected). If the lower figure is retained for the purpose of a cautious estimate, this would means benefits in the region of one billion euro per year.

Further economic benefits can be expected from the revision of the institutional framework in which the European Railway Agency (ERA) operates and facilitating the creation of a Single European Railway70. Benefits would arise principally from savings in safety certification and rolling authorisation. It has been estimated that the benefits from shared competencies of the ERA and National Supervisory Authorities (NSAs) in these fields could bring 508 million euro over the period from 2015- 2025, or some 50.0 million euro per year.

In water transport, significant benefits are to be expected from the liberalisation of the provision of port services and the increased financial transparency of ports71. The reduction in total port-related costs is estimated to be around 7.0 per cent. This represents savings of about 1.0 billion euro annually. In air transport, a 2011 study72 highlighted a number of problems, including less than full use of capacity at some airports and the difficulties faced by carriers trying to grow their operations at congested airports, in order to provide real competition to incumbent carriers. Also identified were the inadequate operation of the slot coordination process and a lack of consistency with the Single European Sky. The study estimated that a review on European slot allocation rules alone could lead to 5.0 billion euro in efficiency gains by 2025, or 334 million euro per year (over a period of 15 years from 2010 to 2025).

In the road sector, further gains are to be expected from the liberalisation of cabotage. Preliminary analysis points to gains in the tens of millions of euro. A figure of 50 million euro per year is retained for the purpose of this analysis.

By adding the potential gains in these four areas, one can already arrive to a total minimum figure of around 2.5 billion euro per year. However, as this estimation only takes account of specifically identified gaps for which figures are already available, and is by no means comprehensive, it is reasonable to assume that it comes in at the lower end of potential economic gains.

Other estimates of Cost of Non-Europe

A recent study for the European Commission has identified a number of shortcomings of the EU transport sector, such as the productivity gap in land transport of freight73. This problem is due to factors such as the poor degree of liberalisation, congestion and infrastructure bottlenecks. Although these gaps are not ‘monetised’, the study finds that the productivity gain attainable in the road freight market is estimated at 231 tonne-km per employee, which corresponds to a reduction of the productivity gap from 36 per cent to 10 per cent.

EP position in this field

The European Parliament has stressed the importance of a single European transport area, with interconnection and interoperability, based on a genuine European management of transport infrastructure and systems, to be achieved by eliminating 'border effects' between Member States in all transport modes. The Parliament has also made a series of recommendations in the specific sectors of road transport, shipping, air transport, and rail transport - such as proposals on a European airspace, a European Rail Regulator and the opening of national rail markets, as well as the separation of rail transport services from infrastructure.

EP resolution of 15 December 2011 on the Roadmap to a Single European Transport Area - Towards a competitive and resource efficient system (2011/2096(INI)).

Rapporteur: Mathieu GROSCH (EPP Group), TRAN Committee.
For: 523
Against: 64
Abstentions: 37

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Others

16. European Research Area Potential efficiency gain: 1 billion euro per year

Key proposition

Currently some 85 per cent of European publicly-funded research is undertaken at exclusively national level, without transnational collaboration, while only 15 per cent is coordinated either in intergovernmental organisations or spent jointly in the EU’s Research Framework Programme74. The European Research Area (ERA) framework is to deepen cooperation, reducing fragmentation and duplication of research efforts. It is reasonable to assume that such deepening could lead to an efficiency gain of at least 1.0 billion euro per year, over a period of 15 years.

More detailed analysis

The European Research Area (ERA), a political priority explicitly added to the Lisbon Treaty, is intended to promote the best conditions for research in Europe for all the stakeholders involved - researchers, institutes, private sector, Member States and Associate countries. However, it is still far from complete. Strengthening the ERA would mean relocating more national funds to transnationally coordinated research.

The European Commission’s impact assessment75. estimates that the combined effect of the Barcelona target, Horizon 2020 and an increased share of transnational funding would bring about 445 billion euro additional GDP growth and 7.2 million more jobs between now and 2030. This implies an annual growth of an additional 0.25 per cent of GDP. Assuming a uniform distribution of benefits over the years, the potential efficiency gain to the EU economy can be estimated at 2.16 billion euro per year as a result of an integrated European Research Area. However, on a cautious assumption that not all such gains could be easily achieved, a discount rate of one half would bring the final estimation down to around 1.0 billion euro per year.

Recognising that Europe's future growth relies to a large extent on research and innovation, the European Council reaffirmed in March 2010 that the overall investment level for research and development should be increased to 3.0 per cent of EU GDP (the Barcelona target).

Other estimates of Cost of Non-Europe

Other studies indicate that EU-funded research activity has been characterised by a considerable growth in terms of participating entities and participations across successive Framework Programmes, resulting in substantially large networks (creation of critical mass).

EP position in this field

The signatories of a recent, broadly-based ‘Manifesto’ on the subject in the European Parliament advocated that the EU should adopt binding targets for Member States on investment in research and put in place an ERA Framework Directive. The signatories identified the following priorities in this field:

  • De-fragmentation: greater oordination and consistency between national and EU research programmes are required in order to have common priorities in pursuit of common strategic objectives. Coordination is also necessary to prosecute a strategy of internationalisation of European research, making best use of potential global partnerships.
  • Cross-border cooperation: minimum rules for ensuring interoperability of funding schemes, such as common principles and standards, rules for grant/funding applications, evaluation and reporting, as well as synchronisation of calls for proposals. In particular, there is a need for a more efficient ERA instrument for pooling national resources, in order to finance public as well as private research.
  • Research infrastructures: a better synergy between national and EU public research funding and the Structural Funds should be pursued, both for an optimal operation and exploitation of existing research infrastructures and for the realisation and sustainability of new ones. Access by industry as a user and as co-developer of new technologies should also be facilitated.
  • Knowledge sharing: cooperation between industry, public authorities and academia is essential. Private-Public Partnerships (PPPs) should be developed.
  • A European research career: the attractiveness of a research career, at every stage, should be enhanced. Mobility is essential for the realisation of a future generation of European researchers, to be facilitated through portability of national grants, coordinated systems of social security, transparent publication of competitions, and implementation of the Charter and Code of Conduct for researchers.
  • Innovative doctoral programmes: schemes and actions aimed at the realisation of transnational innovative doctoral programmes, such as those within the Marie Curie Actions, should be strongly supported, again in view of creating a new generation of European researchers, by awarding the institutions involved proper EU recognition.
  • ‘ERA Mark’: this status would be awarded to research organisations and programmess which are able to make a significant contribution to a rapid implementation of the ERA.

EP Oral Questions and debate of 13 October 2013 on the the finalisation of the European Research Area (B7-0503/2013 and B7-0504/2013), tabled by Mrs SARTORI on behalf of the ITRE Committee.

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Others

17. Improved EU donor coordination in Development Policy Potential efficiency gain: 0.8 billion euro per year

Key proposition

The European Union and its Member States have in effect three different levels of development policy: i) the European Commission’s supranational development policy; ii) the intergovernmental European Development Fund (EDF), which the Commission coordinates on behalf of the Member States, and iii) the individual development policies of Member States. The potential for European development aid spending is not fully exploited because of duplications and overlaps. Fragmentation and duplication of aid is widespread; competition among EU development agencies and NGOs is still evident; the impact of the EU's development action is not acknowledged or cannot be identified among the populations in beneficiary developing countries; EU procedures are often considered cumbersome and bureaucratic by recipient countries.

These shortcomings involve significant economic and political costs. Economically, it is estimated that as much as 800 million euro (around 1.4 per cent of EU development aid) could be saved annually from improving donor coordination, so reducing ‘donor transaction costs’ 78, on the basis of the current system. These savings could then be used to extend aid activities to the benefit of recipient countries (or for any other purpose). Substantially larger savings could be achieved if the three-tier approach to development aid spending were replaced by coordinated budget.

The recent Cost of Non-Europe Report on this subject, undertaken for the European Parliament's Development Committee, is available for download at: http://www.europarl.europa.eu/thinktank/en/documents.html?word=%22donor+coordination%22&documentType=STUDIES&id=&body=EAVA&dateStart=&dateEnd=&action=submit

More detailed analysis

The calculation that up to 800 million euro per year could be saved from improved donor coordination is based on an update of a study the Bigsten et al. (2011) entitled The Aid Effectiveness Agenda: the benefits of going ahead, which is the most comprehensive and methodologically sound estimation to date of potential savings and economic gains from a better implementation by the EU of the Paris Declaration on aid effectiveness. It shows that lack of, or ineffective, donor coordination has consequences in terms of transaction costs, uncertainty related to future aid flows and inefficient aid allocation. The effects of better coordination would most directly affect transaction costs. Key elements that contribute to the reduction of such costs are the optimisation of division of labour (by concentrating aid on fewer countries and well-designed activities) and the shifting of aid patterns from projects to budget support (which have less administrative costs).

The analysis started with aggregate estimates of administrative aid costs of the EU27 Member States and the European Commission. All administrative costs that the donors report were been included,using data from the Development Assistance Committee (DAC) database, which are the most precise records available. It was then calculated how much of these costs could be saved if donors coordinated their development assistance, for instance through better division of labour, so that each donor concentrated on fewer countries and activities (without affecting the overall level of aid). This was done in two steps. Firstly, by estimating how much could be saved by reducing the number of partner countries for each donor. At present, the average number of partner countries per donor is 101. It is estimated, that a decrease in the number of partner countries per donor by 37 per cent (a standard variation in economics) would lead to a decrease in annual administrative costs for EU donors (EU27 plus Commission) by about 20 per cent, or 498 million euro in 2012 prices. Second, the potential cost savings were estimated by changing the ‘aid modalities’, i.e. by shifting money from projects to programmes (which have fewer administrative costs). To do this, the target set up in the Paris Declaration regarding the proportion of Programme-Based Approaches (PBA) was used as a reference. It was estimated that by increasing the proportion of PBA from the actual level for 2009, of 44 per cent, to 66 per cent (the Paris Declaration target), the administrative costs related to aid delivery would be lowered by 21 per cent. That would represents an annual cost saving of 306 million euro (for the EU27 plus Commission, at 2012 prices). Thus, total savings in transaction costs resulting from concentration on fewer countries and activities for the EU27 and Commission is about 800 million euro per year in 2012 prices. This is equivalent to about 1.4 per cent of EU development aid.

Other estimates of Cost of Non-Europe

An earlier study by the Commission80 sought to identify and measure costs of ineffective and fragmented aid and of potential savings in transaction costs. It looked at the costs of donor proliferation, fragmentation of aid programmes, tied aid, and volatility and lack of predictability in aid flows, as well as shortcomings in the donors’ use of country public procurement systems. It suggested that annual savings could be in the range of 3.0 to 6.0 billion euro. The study did not provide a firm assessment of total savings in transaction costs. However, if one adds together the potential savings from reduction in the fragmentation at country and sector levels, as well as in activities (through a better division of labour), on reaches a figure of least 770 billion euro savings per year.

EP position in this field

The European Parliament has requested the European Commission to submit, no later than the first semester of 2016, on the basis of Articles 209 and 210 of the TFEU, a proposal for an act concerning regulatory aspects of EU donor coordination on development aid, following the adoption and implementation of a road map of preparatory actions to facilitate the entry into force of these regulatory aspects. The regulation should cover in particular joint programming, so as to avoid unnecessary parallel processes, and division of labour at the country level (for example, by limiting the number of EU donors active in sector policy dialogue and cooperation activities) or between countries (by establishing better geographic concentration taking into account ‘darling’ and ‘orphan’ countries).

EP resolution of 11 December 2013 with recommendations to the Commission on EU donor coordination on development aid (2013/2057(INI)).

Rapporteur: Gay MITCHELL (EPP Group), DEVE Committee
Vote: Show of hands

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