How could the European Union continue to compete with the world’s economic giants, such as the United States and China? This is what the leaders of the EU member states discussed at the Brussels summit on Thursday.
As a prelude to the big competitiveness debate, the EU ordered a review of the future of the Union’s internal market from the former Italian prime minister From Enrico Letta.
The central message of the report published on Wednesday is that the world has changed and the internal market must be able to respond to the changed situation. There is an innovation and investment gap in Europe, and measures are needed, the leading EU expert of the Confederation of Finnish Business Päivi Wood says.
– The report recognizes that the competition for investments has reached massive proportions in different continents and also within the European Union, says Wood.
In this article, we go through the most important points of the report.
The EU’s internal market was born in a smaller world
The success of the EU’s economy is largely due to the Union’s internal market, but it was born in a very different world than the one we live in now, Letta states in the report.
The EU’s economic power in the world has shrunk, Letta warns. The EU’s share of the world’s gross national product was more than 20 percent in the year the internal market was established in 1993. Now it is only 13.3 percent. The United States and China have overtaken the EU, and India is not far behind.
Last year, the EU economy grew by half a percent. In the United States, the economy grew by 2.5 percent.
It is currently difficult for the EU to compete with the US and China’s state subsidies and looser regulation. On top of everything, Russia’s attack on Ukraine has disciplined the EU’s economy. According to Letta, change is necessary, and it is urgent.
– The problem is that we are too small in the big world. If we don’t integrate, we will shrink, says Letta to the economic newspaper for the Financial Times.
– We need an internal market equipped with teeth.
A “toothless” internal market to be competitive
So what would improve the EU’s competitiveness against the world’s economic giants?
First of all, Letta would have the leaders of the EU countries examine how national business subsidies could be raised to the EU level. Letta shapes To Politicothat business support could become “more of a European than a national tool”. According to him, Europe should avoid internal competition.
– The United States utilizes its own internal market. We don’t, Letta tells FT.
Letta would also expand the inclusion of EU laws in national legislation as such. He justifies this by the fact that the current EU regulations and requirements for international companies are a confusing patchwork.
According to the report, the EU also needs a more unified internal market – a savings and investment union.
In addition, there should be a common market for the energy, telecommunications, financial and defense industries. Letta says that currently the sectors are fragmented according to different national rules, and EU competition legislation limits their growth.
– If a single market is not integrated for energy, the financial sector and telecommunications, then there will be no financial security whatsoever, Letta tells FT.
Expert: Important proposals for Finland
EK’s Päivi Wood agrees with Letta that a functioning internal market is a key building block for the EU’s competitiveness. According to Wood, the EU’s economic growth and success in big issues such as the green and digital transition, EU enlargement and guaranteeing European security depend on them.
With the help of the report, it will be possible to promote issues important to Finland, says Wood. In the report, strengthening competitiveness is based on market-based solutions. In addition, it proposes to tighten state aid rules.
– We have large member states that have granted very massive subsidies, says Wood.
– State aid rule policy should be tightened so that there is no state aid competition between member states that erodes the internal market. It is harmful to the competitiveness of the Union as a whole.
However, Wood points out that the report does not, for example, take a position on how a common European business support system would be financed. Finland opposes the EU’s joint debt assumption.
– The report does not directly present a new financial instrument based on joint debt, says Wood.
‘s Europe correspondent evaluates Letta’s report in this video: