On the EU Single Market, on the occasion of the relaunch of the SMA on April 13

Some 3 weeks after the Europlus Pact agreed at the March 25 European Council and less than a week after the raise of the Euro interest rate from 1.0% to 1.25%, comes the Relaunch of the Single Market Act on April 13.

Some thoughts:

1) Does anyone look at the EU as a single yet complex "system"/space and wonder how this system can work better for people & firms, all parts (regions) of the system?

‎2a) How low do POR, IRL, ESP, GR, ITA etc salaries have to go to be competitive with eg Chinese ones when a) Euro is high b) China is in WTO (ie no tariffs and quotas allowed for the EU)?

2b) And how can one expect POR, IRL, ESP, GR, ITA et al workers to be as productive as eg GER, NL ones, when working in POR, IRL, etc?

3) Another example: EU Single Market: What strategic planning at EU level was done eg to address Irish exports' access needs (and costs) to the rest of the EU? Portuguese? Greek? Finn? Lithuanian?

4a) These are the types of inter-policy strategic issues someone in the EU should be looking at before one claims that the EU's or Eurozone's periphery is uncompetitive!

4b) "PIIGS" being "weakest link" is a myth. In EU & Eurozone systemics, the grandstanding by GER, FRA, UK is the "weakest link.

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Plus:

5) EU Single Market Act relaunch: This is one area where the typically British (anti-red tape) approach is needed (as opposed to FR dirigism(e))

6) EU Single Market cannot depend eg on bilateral (OECD based) double taxation avoidance agreements between member states!

7) EU Single Market Relaunch: Professional ID cards? Is this another red tape joke?

Real:

8) In short we need an EU that is, acts and feels like a real Union, for the people & firms that are in it. Such a real Union with common regulations/laws doesn't mean that all regions are copycats, eg Catalonia can still produce different products/services than Attica or Brabant or Baden-Württemberg etc!

9) Except for some "complex" manufactured products, how can Eurozone manufactured goods compete with utra cheap Chinese & mid price US ones?

10) In spite of EU2020, Europlus Pact etc, the EU & the Euro+6 lack a real strategy for competitiveness, growth & employment/ For example how can the Eurozone tourism industry compete in the EU, Europe & the world with an expensive Euro?

Thus:

11) Bottom Line: IMO a real single market and a real single currency need real political union (a single "state").

12) Food for thought: Is it time for plan B: The "economic Fortress EU" option?

Eurozone: That 2% obsession

Update: Also today, the Bank of England has kept its interest rate at 0.5% in spite of 4.4% inflation. The conclusions are yours!

Is the Eurozone a victim of dogmatic economics?

Today the ECB has raised its rate from 1% to 1.25%. This may be marginally good in preserving the purchasing power of Eurozone citizen/consumer but what does it do to his/her chances of finding a job or keeping his/her job in a Eurozone company that is trying to sell products or services (eg tourism) against the expensive Euro?

Is the fixation/obsession with a 2% inflation target one of the main reasons of the problems of the Eurozone? IMO, yes. It did lead to interest rates and thus very expensive Euro for much of the 2002-2009 and still does. Even in the last 2 years, the Euro interest rate at 1% was higher than the UK's (0.5%) and of course the Fed's (0-0.25%)! Even before the increase today, the Euro has been higher than 1.40 USD/Euro.

Dear Mr. Trichet, what is so wrong re eg a 3% inflation target as opposed to the 2% one?

See some economic theory re the 2% inflation target in a recent post of mine: "Why a 2% inflation target for the Eurozone and other myths & realities!" (March 5, 2011)

I strongly recommend reading "Rethinking Macroeconomic Policy", by Olivier Blanchard, Giovanni Dell’Ariccia, and Paolo Mauro, Feb. 12., 2010.

So with the Euro interest rate is up 25 basis points, the US, China, non-Eurozone EU, etc exporters must be having a party to celebrate! How many Eurozone companies can compete in their own markets against US, Chinese, and even non-Eurozone EU economies (UK, Denmark, Sweden, etc) with a 1.3, 1.4, 1.5 USD/Euro rate. If the Yuan is too low for the USD, how much lower it is for a Euro that is 1.3, 1.4, 1.5 USD?

Why, why, why an interest rate increase now in the Euro, when the Fed shows no signs of moving and the inflation is driven by energy and food costs, ie these could prove temporary ones (remember the 2008 world prices crisis in staple foods and oil?)? Marketwatch.com had a very good report, IMO: "Europe leads U.S. in rate cycle — perhaps to cliff"

IMO a Treaty change is needed to make the ECB more like the Fed, ie force it to consider other factors than inflation in its rate decisions.