A single-market celebration

Yet the EUs state-aid rules forbid members from engaging in such subsidy wars. On October 16th the competition commissioner,Neelie Kroes,announced in effect that she had proof of cheating. Ms Kroes,a tough Dutchwoman,said there were significant indications that aid promised to Opel was conditional on Magna buying the firm,and on business plans that set out where future production would be based. She invited Germany to pledge that its money would be available to any investor. The government in Berlin issued a letter saying just this.

To many,the commission intervention looked terribly late. Rival bidders walked away long ago. European governments that had demanded a probe of the Opel deal,notably Britains,have now negotiated side deals with Magna to preserve jobs at home. And the commission could have done a lot more. A smoking gun was found among the 300 pages of papers delivered by the German government,making explicit references to Magnas success being a precondition for German state aid. That would normally be enough to launch a formal state-aid investigation. Under EU rules,governments can subsidise jobs for specific,narrow purposes: eg,they can assist a firm to move to an economically depressed region,in return for pledges to create jobs that must last a given number of years. Moreover,during the credit crunch,governments may offer help to firms unable to raise capital by themselves. But governments making loans may not push firms towards mergers or investments for political reasons. Opel was supposed to make a purely commercial decision on its buyer.

Ask EU officials why Germany is not facing a full-scale probe,and they talk of the need for urgency. Push Opels sale into legal limbo and factories could start to close,or the firm could collapse. That would help nobody,say the Eurocrats. In any case,Germany has had to clarify that its state aid would be equally available to any investor with a decent business plan. That,it is being said,sets a valuable precedent for the future.

This is a reasonable argument,but it is also an uncomfortably political one,given that EU competition watchdogs are supposed to be ferocious guardians of the rules,immune to lobbying. An analogy springs to mind. Renaissance popes used to annul the marriages of Catholic monarchs on technical grounds. Such annulments left the popes authority intact and preserved the sanctity of marriage,at least in theory. Yet in truth,everybody knew a temporal ruler had been given special treatment. Has Germany dealt such a blow to the sanctity of the single market?

That question leads to a second,more charitable view of the Opel saga. The EUs single market may be under attack and it is also incomplete. But it is still an authentic miracle of free-market liberalism. Just consider the charges in the Opel case: that the German government wanted to spend taxpayers money to keep carmaking jobs in Germany,when it ought to have extended its support equally to Opel plants in Spain,Belgium,Hungary or Britain. That is an astonishingly liberal rule. Try telling Congress it cannot favour carmakers in America when doling out American money,or ordering Japan,Russia,South Korea,India and China to extend state aid to the neighbours on equal terms.

Those amazingly liberal Europeans

Europes single market needs defending chiefly because it is so ambitious. It is true that too many European governments hand out too much state aid Germany is among the biggest offenders. Some European leaders also like to lash out at globalisation. But the truth is that the EUs eastward enlargement brought globalisation inside the borders of the single market. EU carmakers produce lots of cars in places like Slovenia or Slovakia,especially the small cars that are a European speciality. To that extent,the liberal argument for the single market is won.

This does not mean backsliding is not a menace. Banks are an immediate headache. In the coming months the commission will have to demand the restructuring of huge banks that have been given huge sums of public money in places as varied as Britain,Belgium,Germany and the Netherlands. A different free-trade fight looms with France,which is pushing for a carbon tax to be imposed at Europes borders,though the details are unclear. Some French sources say their plan would involve highly polluting foreign steelmakers,for example,having to buy EU carbon-emissions credits. On October 16th President Nicolas Sarkozy mysteriously vowed that an EU carbon tax would mean that at last,imports will pay for our social model.

Europes liberal projectto dismantle barriers to the free movement of people,goods,services and capitalneeds work,as the shabby tale of Opel shows. But it is a great project that has so far survived the economic crisis,as the Opel case also shows. Europe cannot afford complacency. Yet Europeans should be proud of what they are trying to build.

The Economist Newspaper Limited 2009