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BRUSSELS ― It&#8217;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 &#8220;less naïve&#8221; 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,&#8221; he said. &#8220;This is the key point: a single market with teeth.&#8221;

The network of the EU&#8217;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&#8217;s greatest achievements, politicians still lament the ways it doesn&#8217;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&#8217;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 &#8220;state aid&#8221; ― 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,&nbsp;<a rel="noreferrer noopener" href="https://api.politico.eu/editorial_documents/e7ba3ed0-4401-499b-ae5e-6051ebe45903" target="_blank">obtained by POLITICO</a>, Letta says that “Europe cannot, and should not, cede its role as a manufacturing leader to others.&#8221;

<h3 class="wp-block-heading">Risky investments</h3>

In typical EU style, Letta&#8217;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&#8217;s &#8220;competitiveness&#8221; by the European Commission.

In his report, Letta suggests there should be wider use of EU laws that governments must apply to the letter — rather than being able to make changes to them, which can lead to a confusing patchwork of requirements. He also proposes a European Code of Business Law to streamline administration for companies.

The former prime minister said he also wants to build on the Important Projects of Common European Interest model which combines national subsidies to boost key technologies, and an Enlargement Solidarity Facility to facilitate a smooth EU entry for new members.

To help fund all its new goals, the EU needs a common financial market — a Saving and Investment Union — his report says, which can channel EU citizens’ savings to support businesses.

“In Europe, there is not an interest in investing in the private equity, and there is not a big interest in having risky investments,” Letta said, recommending incentives to attract investment firstly for the green and the digital transition.

<h3 class="wp-block-heading">Defense bonds</h3>

The report has a strong focus on integrating the energy, telecommunications, and finance industries with a roadmap to achieve progress in each sector by 2029. That could mean&nbsp;<a href="https://y3r710.r.eu-west-1.awstrack.me/L0/https:%2F%2Fdmp.politico.eu%2F%3Femail=jroberts@politico.eu%26destination=https:%2F%2Fpro.politico.eu%2Fnews%2F178527/1/0102018ee547520c-88d0e234-aece-4c03-a15d-732f53da9fde-000000/19y72OilAiQHh39PZIgyCucqWYw=369" target="_blank">allowing more dealmaking</a>, he said, a frequent demand by telecoms providers.

The money the EU will spend to improve its security should support “jobs and industries in Europe,” the report said. One of Letta’s advisers said he is supportive of defense bonds, already touted by internal market chief Thierry Breton and Estonian Prime Minister Kaja Kallas.

Once leaders have discussed the report this week, they will give directions on how much of it they want to see the Commission and European Parliament take on after the European elections in June and the formation of the new executive at the end of the year.

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title: Time for a European single market ‘with teeth’ to take on China, India, leaders
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summary: Former Italian Prime Minister Enrico Letta tells POLITICO that government
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