It's older than the euro and as integral to the EU as being able to cross borders without a passport ― but the single market is failing to deliver while ever-stronger world economies gain the upper hand.

Enrico Letta, a former Italian prime minister who will hand his report on the issue to EU leaders at their summit in Brussels on Thursday, told POLITICO the bloc needed to be "less naïve" if Europe was going to be robust enough in the years ahead.

“I strongly think that we need to create a single market with teeth," he said. "This is the key point: a single market with teeth."

The network of the EU's 27 countries, and a few neighboring nations beside, is supposed to allow the free movement of goods, services, people and capital, and came into being in 1993. While seen as one of the EU's greatest achievements, politicians still lament the ways it doesn't work. With the EU confronted by pressure to remain competitive in the face of emerging powers such as India and China, that needs to change.

Letta's report is wide-ranging and, in some places, radical. One of his more controversial suggestions is about the rules for when governments subsidize companies ― known in the EU as "state aid" ― and which the European Commission is in charge of.

The Italian will tell leaders they should explore how these subsidies “can become a more European tool and less a national tool,” he told POLITICO, arguing that Europe needs to avoid internal competition. State aid “can be added to the rest of the European tools,” he added.

The report calls for a state aid contribution mechanism where governments would put some of their national funding into pan-European initiatives.

In the report, obtained by POLITICO, Letta says that “Europe cannot, and should not, cede its role as a manufacturing leader to others."

Risky investments

In typical EU style, Letta's report is one of two significant studies written by former Italian prime ministers on similar subjects at the same time. Mario Draghi ― who led his homeland seven years after Letta before resigning in 2022 ― has been asked to explore Europe's "competitiveness" by the European Commission...

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