It has been billed as a bold plan for reviving the single market and make it more consequential for Europe’s economic performance. While there are some truths to that, I would say that the Letta report is more significant for its political realism than its economic ambitions.
Yes, it’s the report season again!
No, I don’t mean the season of full-year or Q1 reports from Corporate-land but that we have a few months ahead of us with new reports about the EU’s economic future (there’s a link between the two that I’ll come to). First out is Enrico Letta, who was tasked by a few EU countries to come up with a review of the single market, and he is releasing his paper today (April 17). Thanks to some advanced leaks of the report, we already have a fuller idea of what the former Italian premier has in mind for economic reforms.
It has been billed as a bold plan for reviving the single market and make it more consequential for Europe’s economic performance. While there are some truths to that, I would say that the Letta report is more significant for its political realism than its economic ambitions. Generally, the report works mostly with ideas and concepts, and few of them are detailed and come with a deeper view of their market and growth dynamics. It’s not a blueprint for reform. Nor is it similar to past reports attempting to measure “the cost of non-Europe” or putting figures on the cost of inaction. It’s main conclusion? Letta urges the Council to “delegate to the European Commission the task of drafting a comprehensive Single Market Strategy”. More reports to come then!
Still, the Letta report could prove a useful contribution to the political debate. It offers some points of economic realism, and quite rightly suggests that flaws and inadequacies of single market polices, and the general incompleteness of the project, hamstring Europe’s economic performance. The report stands in stark contrast to the current political leadership of the EU, which for the last five years have downplayed single market reforms and rather believed in the pursuit of more regulation of businesses and markets, and entertained notions about regulating Europe to economic success.
True, the pandemic and Russia’s war on Ukraine have forced other policies on the agenda. Then again, deepening the single market and improving Europe’s competitiveness were never part of the von der Leyen Commission’s priorities when it took office in 2019. Remarkably, it was the first Commission ever that didn’t have Europe’s economic performance as placeholder for its own policy programme.
Enrico Letta also points to necessary areas of reform. Creeping economic nationalism has undermined existing EU freedoms and made the single market less useful for companies. Repeated “relaxations” of state aid rules have unleashed massive subsidisation and a total bill of industrial subsidies that simply doesn’t square with a single market based on free and fair competition. The single market for services remains work in progress. Europe’s financial markets are fractured along national lines and, even if there are ample savings, don’t fund corporate growth as for instance in the United States. Letta points to necessary reforms in financial services, energy, and telecoms.
He also suggests we need a “fifth freedom” to complement the other four freedoms. Even if it is a bit unclear what exactly should form part of the fifth freedom, Letta points to forms of economic integration that are based on economic activities with high intensity of R&D, human capital, data, and technology, and that are more sensitive to national variations in regulation and that cannot be effortlessly squeezed into an existing categories of EU freedoms. Whatever the headline of reforms in these areas, it is exactly in this type of a new economy where Europe is falling behind in international competitiveness. Changing the conditions for new growth requires many policy reforms but single market freedoms are definitely important parts of a package....
more at ECIPE
Key
Hover over the blue highlighted
text to view the acronym meaning
Hover
over these icons for more information
Comments:
No Comments for this Article