This is due to the intensified international division of labour and the fact that almost all goods and service markets are now international, or have some kind of international spillover. In Europe, the EU sets the rules and levels the playing field.

The European Union implements policies across all sectors of the economy. Some of these policies (the common agricultural policy, competition policy) date back to the foundation of the European Community. In other areas, such as environmental policy or Cohesion Policy, the role of the European Community developed over time as the benefits of closer co-operation and coordination among Member States became clearer, international spillovers became more obvious, or the discrepancy in standards of living across countries widened as a result of successive enlargement rounds. In other domains, such as energy, much responsibility has remained with the Member States, and, for example, it was only in 2007 that the European Council adopted an ‘energy policy for Europe’.

The role of DG ECFIN

In all of these sectoral areas, DG ECFIN supports the development of policies that are cost-effective – meaning they achieve their goals at the least cost to society while supporting sustainable development and stimulating economic growth and employment.

To do this, we provide economic analyses to support the design of policies, and we encourage other Directorates-General to look for policy options that deliver the intended results by improving how markets work, rather than by placing unnecessary obstacles in their way.

This means that, as a rule, we prefer solutions that, for example, put a price on harmful activities such as pollution, and leave it to individual economic actors to change their behaviour accordingly, rather than intrusive measures that prescribe particular production techniques or directly regulate the type of goods that may be produced. This is because these more flexible, hands-off policy instruments have been shown to deliver the same or better results than more intrusive approaches.