EU Single Market for Services Could Increase Economic Output by 2.3%

A sweeping removal of barriers in the EU single market for services would increase gross value added by 2.3% or EUR 353 billion permanently (in 2023 prices). This has been shown in an analysis conducted by the ifo Institute and EconPol Europe on behalf of the Chamber of Industry and Commerce for Munich and Upper Bavaria. The calculations were done for a medium- to long-term time horizon of between ten and twelve years. “Although the service sector has played a key role in economic growth in recent decades, EU member states still have to navigate a patchwork of 27 different sets of regulations. As a result, they are missing out on enormous growth potential,” says Florian Dorn, coauthor of the study.

In general, all EU countries would benefit from a reduction in national trade barriers for services in the EU single market. In Germany, economic output would be permanently 1.8% higher in the long term. This corresponds to around EUR 68 billion. In Italy, economic output would go up 1.3%, or EUR 24 billion. In France, it would rise by 1.5%, or EUR 38 billion. The countries with the largest gains include Ireland, with an increase of 6.2% or EUR 30 billion, and Belgium, with an increase of 5.5% or EUR 29 billion.

The calculations are based on a 25% reduction in trade barriers for services in the EU single market. Such a reduction would include, for example, cutting red tape and harmonizing various national regulations. Reducing trade barriers for services by just 10% could increase gross value added in the EU by 0.5%, or EUR 77 billion, and would benefit all EU countries. “Removing barriers in the service sector is in the interests of German manufacturing. Due to the strong synergies between manufacturing and services, German manufacturers would benefit greatly from this,” says study coauthor Lisandra Flach.