The Letta report: Proposes extensive changes to the EU’s internal market

An internal market for all. That is the mantra in the long-awaited report from Italy’s former Prime Minister Enrico Letta on the EU’s economic future.

There he advocates a number of far-reaching reforms of the internal market.

– Too fragmented

– The internal market is too fragmented when it comes to company legislation, tax systems and financing, Letta stated at a press conference together with EU President Charles Michel ahead of the EU summit on Wednesday.

It hinders growth and competitiveness, he believes.

According to Financial Times the EU today accounts for 13.3 per cent of the world’s gross domestic product (GDP), down from just over 20 per cent in 1994.

At the same time, the EU’s economy grew by just 0.5 per cent last year, compared to 2.5 per cent in the US.

– We cannot afford to wait. The distance to the US is increasing, says Letta.

On Thursday, he will present the report to the leaders of the EU countries.

– We have clearly identified a problem in Europe, says Michel.

Compares with fast trains

Letta himself compares the shortcomings of the internal market to the possibilities of traveling by high-speed train in Europe:

Within national borders, the system works perfectly. But there are no high-speed trains between most of the capitals.

In the report, he advocates that the internal market should also include energy, telecoms and the financial markets.

This means harmonizing the regulations so that companies within these sectors can work across national borders to a far greater extent.

– Must clean up

Briefly explained, a simpler and more common set of regulations will reduce the administrative burden for the companies and make it easier to operate within the entire union.

If the bureaucracy is not cleaned up, companies will move to, for example, the United States, warns managing director Lars Sandahl Sørensen of Dansk Industri.

– It takes up to seven years to get a new product approved in the EU. In the US it takes two years. No self-respecting company can afford to stay in Europe on that basis, he says to the Ritzau news agency.

A fifth freedom

Among the more controversial proposals is to change the state aid rules by having the EU countries pay into a common fund instead of subsidizing national businesses.

According to the report, this will prevent distortion of the internal market as a result of rich countries having a greater opportunity to provide state aid than poor ones, and at the same time ensure investments where global competition is greatest.

In addition, Letta introduces a fifth freedom in addition to the EU’s four freedoms on the free flow of people, goods, services and capital, namely the sharing of knowledge and innovation across national borders.

Wants a capital market union

Another controversial proposal on the table is the EU president’s wish for a capital market union.

– There is a lack of integration in the capital markets, Michel stated at the press conference.

Letta also believes that this is at the core of what is needed to finance the green and digital shift.

However, many EU countries are skeptical.

– This is controversial, but we have to talk about this, said an EU diplomat ahead of the summit.

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2024-04-18 13:03:35

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