TAILIEUCHUNG - STEPS TOWARDS A DEEPER ECONOMIC INTEGRATION: THE INTERNAL MARKET IN THE 21ST CENTURY

In regard to the long-term debt problem, in an economy operating close to potential output, government borrowing to finance budget deficits will in theory draw down the pool of national saving, crowding out private capital investment and slowing long-term growth. However, the . economy is currently operating well short of capacity and the risk of such crowding out occurring is therefore low in the near term. Once the cyclical problem of weak demand is resolved and the economy has returned to a normal growth path, mainstream economists’ consensus policy response for an economy with a looming debt crisis is fiscal. | EUROPEAN ECONOMY EUROPEAN COMMISSION DIRECTORATE-GENERAL FOR ECONOMIC AND FINANCIAL AFFAIRS ECONOMIC PAPERS ISSN 1725-3187 H http economy finance index N 271 January 2007 Steps towards a deeper economic integration the Internal Market in the 21st century A contribution to the Single Market Review by Fabienne Ilzkovitz Adriaan Dierx Viktoria Kovacs and Nuno Sousa Directorate-General for Economic and Financial Affairs Economic Papers are written by the Staff of the Directorate-General for Economic and Financial Affairs or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by the staff and to seek comments and suggestions for further analyses. Views expressed represent exclusively the positions of the author and do not necessarily correspond to those of the European Commission. Comments and enquiries should be addressed to the European Commission Directorate-General for Economic and Financial Affairs Publications BU1 - -1 13 B - 1049 Brussels Belgium KC-AI-07-271-EN-C European Communities 2007 Steps towards a deeper economic integration the internal market in the 21st century A contribution to the Single Market Review Fabienne Ilzkovitz European Commission Université Libre de Bruxelles ICHEC Adriaan Dierx European Commission Viktoria Kovacs European Commission Nuno Sousa European Commission Abstract The aim of this paper is to analyse the effects of the implementation of the Internal Market Programme and to propose ideas on how its potential can be better exploited. First the paper offers a broader perspective to the analysis of the Internal Market by exploring its close links to the rapidly changing economic environment. Second it puts together a comprehensive body of empirical evidence based on the analysis of trade FDI M A prices and regulation data which allows for a thorough stock taking exercise of what has been achieved in terms of European economic integration. Thirdly

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