European firms need fewer barriers to cross-border trade and expansion inside the EU’s Single Market if they are to compete more effectively with global rivals, according to a European Central Bank Executive Board member.
Piero Cipollone said Europe’s “huge” Single Market should allow companies to scale up and reduce costs, but restrictions on the free movement of goods and services still prevent firms from expanding across borders, according to an interview with ilsussidiario.net published on Monday by the European Central Bank (ECB).
He stated that removing internal Single Market restrictions should come first, before other measures, and argued that easier cross-border expansion would allow companies to grow in a market of around 450 million consumers.
Cipollone also said firms should decide for themselves how to expand, in line with European competition law, and that growth does not have to come through acquisitions.
He linked weak domestic demand to difficulties investing in Europe, saying that when it is hard to expand in the European market it also becomes harder to increase investment.
Inflation, energy shocks and the ECB’s role
Cipollone said the ECB’s statutory task is to maintain price stability, which he described as part of macroeconomic stability that reduces uncertainty for businesses and supports planning, according to the interview.
He said interest-rate rises after a supply-side shock — such as an oil shock — can dampen economic growth that has already been hit, and argued that monetary policy needs to be “well calibrated.”
Central banks cannot do much to bring down energy commodity prices directly, but can keep medium-term inflation expectations anchored around the ECB’s 2% target.
On fiscal policy, Cipollone said measures to soften the impact of external shocks should be temporary and targeted, warning they can be costly and hard to design without regressive effects that benefit wealthier households, according to the interview.
He also noted that such measures do not address what he called a structural dependence on fossil fuels, and argued that reducing that dependence would provide more lasting protection for households and firms.
Asked about comparisons between the Strait of Hormuz crisis and the 1970s, Cipollone said the risk of stagflation was “rather remote”, citing signs the crisis could soon be resolved and saying inflation remained in line with the baseline scenario in the ECB’s most recent projections published in June.
Cipollone also addressed privacy concerns around the proposed digital euro after the European Parliament approved a regulation last month, which could allow it to be issued in 2029.
He said a digital euro would not replace cash, but complement it for situations such as online purchases, adding that the ECB has launched a public consultation on the design of new euro banknotes.
He pointed out that the digital euro is designed to function offline, with transaction details available only to the payer and payee, and that the Eurosystem — the ECB and national central banks of euro-area countries — would not be able to identify users making or receiving payments.
Only the banks involved in a transaction would be able to identify users, including for anti-money laundering purposes.
