European summit to focus on 'last chance' to modernise single market

Italy's former prime minister Enrico Letta presented his report on the modernisation of the European single market on Wednesday. He believes big steps forward need to be taken in integrating energy, telecoms and financial markets to close the distance with competing countries.

"The gap we have with the United States, but also with other countries, is so big that we are quietly facing our last chance," Letta said on Wednesday .

Letta's report was commissioned by the Belgian and Spanish presidencies of the Council of the EU, with European Commission president Ursula von der Leyen. Now that the 147-page document is ready, it will be discussed at the European summit in Brussels on Thursday.

Fragmented single market

In his report, Letta argues that the single market is too fragmented in the current geopolitical and geoeconomic context. In terms of innovative capacity, productivity, job creation and internal security, the EU has to acknowledge the superiority of both the US and China. "It is therefore crucial to support large European companies to become bigger and compete on the global stage," he says.

The energy, telecom and financial markets sectors are essential, Letta argues. Due to the current fragmentation, around 300 billion euros of savings leaves Europeans every year, mainly to the US economy. "Keeping that money in Europe as well as mobilising it for the home economy should help finance the digital and green transition."

"The gap we have with the United States, but also with other countries, is so big that we are quietly facing our last chance"

The debate on the capital markets union, which Letta calls a "savings and investment union", is likely to receive the most attention at the summit. On Wednesday morning, Belgian prime minister Alexander De Croo highlighted its importance. "Implementing the Green Deal requires around 1,000 billion euros in investments, 25 years in a row. This will only succeed with a smart mix of public and private money."

Big issues

European Council president Charles Michel indicated that discussions on tax harmonisation between member states and reform of financial market supervision were two major obstacles to capital markets union. He also sees a major role for the European Investment Bank in financing European policy challenges.

The issuance of common bonds at European level and state aid rules will be two other highly debated topics. Smaller countries are already unhappy that big countries such as France and Germany are luring investors away from smaller member states. De Croo and Flemish minister-president Jan Jambon have been raising the issue for months.

Ahead of the summit, King Philippe received the 27 heads of state and government of the EU at the Royal Palace in Brussels on Wednesday evening.

^{© BELGA PHOTO JAMES ARTHUR GEKIERE}