Product market integration and EU exposure to euro/dollar fluctuations

8. Product market integration and EU exposure to euro/dollar fluctuations Adriaan Dierx, Fabienne Ilzkovitz and Khalid Sekkat* INTRODUCTION The process of European integration in the past decade has been closely associated with the Single Market Programme (now evolved into the Internal Market Strategy) and Economic and Monetary Union. This process has been pushed forward by highly publicised deadlines and target dates (1992 for the SMP, 1999 and 2002 for EMU) giving a first impression of abrupt change in the economic environment. In practice, however, businesses and consumers tend to anticipate such change and modify their behaviour even before the formal change is made. On the other hand, often the full impact of the economic reforms is felt only years after their introduction. This implies that European integration is a continuous process, one in which the speed of progress may be affected by policy initiatives such as the SMP and EMU and which takes place in conjunction with other events influencing the behaviour of economic agents and the performances of the economy, such as globalisation or the ICT revolution. Moreover, while at a superficial level the timing of these key policy initiatives may appear to coincide between EU Member States, in practice it can be quite different. Some Member States for instance have received temporary derogations on key elements of the Single Market Programme. Others have experienced serious delays in implementing all its provisions. Also, the SMP does not concern all sectors equally or simultaneously. To the extent that….