By Clara Piazza, Cameron Kelly & Charles Feld | Brussels, European Union 

Responding to a request from the European Council back in June 2023, former Italian Prime Minister and President of the Jacques Delors Institute, Enrico Letta, presented his report on the future of the EU Single Market to heads of state and government on the 18th of April. His 146-page long study, entitled “Much more than a market”, is the result of over 400 meetings held in 65 European cities. In it, he assesses the EU’s strengths and weaknesses and presents a comprehensive plan to strengthen the block’s economic resilience in the face of global challenges. Recognising the EU’s past achievements, particularly the 4 freedoms (the free movement of goods, persons, services and capital), Letta calls for a better funded, more competitive, sustainable and integrated Single Market, which can be leveraged to promote the EU’s geopolitical interests. He also warns against excessive bureaucracy and highlights the need for reforms benefitting all EU citizens and businesses. His recommendations have been mostly welcomed by Member States, some mainstream political groups in the European Parliament and industry, although some civil society organizations appear to be more sceptical. So how disruptive is the Letta report? And could it influence debates ahead of the European elections and ultimately translate into policy?  

Rethinking the purpose of the Single Market: Letta’s vision for the future  

The body of the Letta report is divided into five sections. 

The first addresses the issue of financing the EU’s strategic goals, focusing on fair, green, and digital transitions, EU enlargement, and enhanced defence capabilities. Letta details the need to mobilise both private and public resources effectively. To do so, he advocates for a Savings and Investments Union to integrate financial services within the Single Market, attracting private savings and additional resources. He also suggests balancing stricter enforcement of State aid at national levels with progressive EU-level funding support. In addition, he notably calls for the EU to enhance its industrial strategy to compete globally and to consider the creation of an EU Long-Term Savings Products, while enhancing frameworks for institutional investors like pension funds and insurance companies.  

The second underlines the importance of scaling up the Single Market to tackle demographic changes and shifting economic patterns that are diminishing the EU’s global influence. To address the lagging performance of European companies compared to global counterparts, Letta suggests establishing a new EU executive agency to manage EU clean energy funding programs and incentive schemes. More generally, the report calls on the EU to address fragmentation, by further integrating, harmonising and consolidating (through strategic alliances) key sectors such as finance, energy, electronic communications, and defence. This uniform application is essential for safeguarding consumer rights and promoting innovation across all Member States.  

The third part of the report is focused on sustainable growth. Letta notes that the Single Market is perceived to favour sectors, regions and groups with the means and skills to capitalize on cross-border opportunities. This perception, if unaddressed, poses a risk to public and political support critical to the Single Market’s success. To ensure greater cohesion, Letta recommends empowering citizens by for example promoting a “freedom to stay” alongside the freedom of movement. He also urges the EU to strengthen the social dimension of the Single Market by ensuring fair opportunities, workers’ rights, and social protection for all. To this end he notably calls on the EU to establish a new task force on housing affordability. When it comes to supporting SMEs, Letta requests simplified procedures, access to information, and streamlined bureaucracy, by for example creating a new European code of business law. He also pinpoints the need to harmonize EU tax frameworks and combat aggressive tax practices to support shared growth and investment. Finally, he emphasizes the need for greater consumer protection. 

The fourth section claims the Single Market can go faster and further. Letta considers that the Single Market’s efficiency is hindered by excessive regulation and red tape, particularly impacting SMEs. This raises costs for businesses but also favours non-European competitors. A risk-averse regulatory approach has led to overlapping regulations, creating legal uncertainty and imposing compliance costs. To enhance the Market’s functionality, the report calls on policymakers to streamline the regulatory framework and ensure effective, efficient, and coherent policies. Prioritizing the use of regulations and ensuring consistency across Member States are essential to prevent fragmentation and maintain competitiveness. This approach would be embodied by a new Commission Executive Vice-President, responsible for Single Market and acting as a Chief Enforcement Officer. 

The final part of the report deals with the role of the Single Market beyond its borders. In response to the evolving global landscape, the EU must expand its focus beyond internal matters and prioritize the external dimension of the Single Market. Letta finds that to maintain competitiveness, the EU must shape global standards and adapt its trade policy accordingly. This entails balancing integration into the global market with ensuring economic security and resilience. In addition, strategic partnerships and well-founded policies can help navigating geopolitical tensions and addressing enlargement challenges. According to the report, the EU must continue to streamline trade agreement ratification procedures, strengthen trade defence mechanisms, and enhance cooperation with candidate countries to ensure smooth accession processes. Upholding the rule of law to foster common values and build mutual trust is considered essential to maintain the integrity of the Single Market. 

Letta’s report ends with a call to action. To prevent the window of opportunity for revitalising the European economy from closing, the report outlines actionable policy recommendations. Letta calls on the European Council to take decisive leadership in advancing necessary reforms for Single Market completion. This entails prioritising the development of a comprehensive Single Market Strategy, outlining clear steps to dismantling existing barriers, fostering consolidation, and elevating competitiveness. He also recommends involving of all EU institutions (including the European Economic and Social Committee and the European Committee of Regions), Member States, and the European public (by establishing a Permanent Citizens’ Conference).  

What next? 

Letta’s report is comprehensive to say the least. It contains credible and, in some cases, truly innovative ideas. His assessments and recommendations, based on extensive consultations, appear to be pragmatic rather than ideologically driven. Less than a week after it was published, his research has received broad support. European heads of state and government including Emmanuel Macron, Pedro Sánchez and Giorgia Meloni have welcomed his views. Several political groups in the European Parliament such the Socialists and Democrats (centre-left), Renew Europe (liberal) and Greens have also praised his work, while others such as the European Peoples Party (centre-right), European Conservatives and Reformists the European (conservative), The Left (far left) and Identity and Democracy (far-right) have remained silent. Large industry groups such as BusinessEurope, the European Round Table for Industry (ERT), EuroCommerce, Digital Europe or CEFIC, have called the report a “pertinent and timely” “wake-up call”, underscoring “the need for decisive action” and “a reboot of the Single Market”, but some NGOs such as Greenpeace have pushed back on its excessive focus on competitiveness and the potential impact of some measures on “nature and living standards”. 

As a moderate personality, with extensive experience at the highest levels of government and in a prominent European think tank, Letta can speak on the same level as European Council members. The main question now is whether the report will come to life or end up on a shelf or in a drawer. To be fully implemented, it would require strong and, in some cases, unanimous backing from Member States and broad support from the new European Parliament. More realistically, the European Council will likely prioritise and eventually pick and choose some of the options he outlined.  

The latest Council conclusions provide a first indication of how it could materialise and feed into the EU’s new strategic agenda. EU leaders emphasise the need for “a fully integrated Single Market” supported by investments in key strategic sectors and request “a horizontal strategy for a modernised Single Market by June 2025”. However, the Single Market is only considered as one of the drivers for the “new European competitiveness deal” that EU leaders are calling for, alongside a Capitals Markets Union, industry, research and innovation, energy, circular economy, digital, social policy and trade. This reaction confirms that competitiveness is poised to become the EU’s compass over the next term, but whether political groups in the next Parliament can agree on a common definition and clear objectives remains to be seen. By the time they meet for the first plenary session in July, another report from another former Italian Prime Minister, Mario Draghi, this time focusing explicitly on the EU’s competitiveness, will be out and will no doubt be debated in Brussels and Strasbourg corridors.

Photo by: eunews