The dream of the single market wasn't one of cross-border bailouts, but of prosperity. Ten years ago, the Lisbon Agenda promised that Brussels would make the EU "the most competitive and information-based economy by the year 2010." Fast-forward to 2010 and to (optimistically) projected EU growth of 1.8% this year. Is there any way for Europe to change course?

Former European Competition Commissioner Mario Monti took a stab at answering that question in his recent report titled "A New Strategy for the Single Market; At the Service of Europe's Economy and Society," which in part formed the basis for Internal Market and Services Commissioner Michel Barnier's more recent "Single Market Act."

These plans combine technical advice with a strict adherence to the politically feasible. Mr. Monti says the European project can survive only if its members strike a grand bargain with Brussels and pay for further economic integration with tax harmonization. The EU's high-tax countries could thus keep pursuing their "social policies," leaving taxpayers to foot the bill without fear of capital flight to lower-tax regimes such as Ireland or Poland. Mr. Monti's assumption is that European voters will somehow be assuaged by their governments' retaining their licenses to tax, even as the creative destruction of increased productivity sweeps the single market.

But will this be good for growth? Hardly. Ending tax competition in Europe risks a sharp increase in taxes: Monopolists seek monopoly prices, and most taxpayers throughout Europe would have to accept the rates they're given, no matter how high. But large businesses and the wealthier set—that is, Europe's job creators—will have an alternative: leaving Europe. This is not a recipe for a flourishing Continental economy.

In contrast, better integrating Europe's economies, and making it easier for goods, services, and people to cross its internal borders, can help to create wealth in the EU. The services sector is the most glaring example of a market in need of liberalization: Services account for nearly 70% of employment in the EU's 15 oldest member countries, but internal barriers—mostly of a regulatory nature—continue to break up the sector along national lines. Over 30% of intra-European trade in services is in the travel industry, followed by transport (around 20%) and insurance and finance (10%). Meanwhile, health care—the center of the service market in countries with aging populations—stays strictly within national borders. Through the tireless work of labor unions, many professions also still throw up high barriers to entry for immigrants from other EU countries looking for employment across borders.

With increased liberalization, Europe's economies could achieve better division of labor, resulting in lower prices for producers and consumers. The easier capital—including human capital—is able to move, the more likely it is to be allocated efficiently.

The EU has tried this in the past, most recently with the Bolkestein Directive, which was drafted in 2004 but was then neutered and rewritten by 2006. At the time, the EU tried to write regulatory competition into Europe's economic system, by mandating that when a service is performed in one country but received in another, the former country's law applies. Thousands of red flags marched the streets of Brussels in protest, and this "country of origin" principle died.

Messrs. Monti and Barnier seem to have learned these lessons too well, judging by their recommendations. But growth in Europe is no longer optional: The EU's economies must liberalize and expand, or sink under the weight of their own debts. Red flags will show up again in Brussels anyhow. The question is how long they will stay there.

**Mr. Mingardi is director general of the Milan-based Istituto Bruno Leoni, Italy's free-market think-tank. IBL has recently published a detailed analysis of the Monti Report.