EU urged to take swift action to close gap with US, report warns

Enrico Letta, a former Italian prime minister, has issued a stark warning to the European Union, cautioning that unless significant changes are made to the single market, the EU risks falling further behind the United States. Letta, who has extensively toured Europe and meticulously prepared a report for EU leaders, emphasizes the urgent need for the bloc to keep pace with global economies, including China.

European businesses have faced substantial challenges, exacerbated by the repercussions of Russia’s 2022 invasion of Ukraine, which led to soaring energy prices. Additionally, they contend with intensified competition from state subsidies and relaxed regulations in China and the US. Letta stressed the urgency of the situation, citing the widening gap between the EU and the US, underscoring the imperative for swift action.

Economic growth figures highlight the disparity between the EU and the US. While the EU experienced modest growth of 0.5 percent in 2023, the United States surged ahead with a growth rate of 2.5 percent. Of particular concern to Brussels is the risk of lagging in crucial future technologies, such as solar panels, batteries, semiconductors, and artificial intelligence.

According to Letta, addressing this gap requires significant financial investment, with an estimated additional 620 billion euros ($660 billion) annually needed to fuel the clean energy and digital transitions. However, accessing these funds poses a challenge for European startups, often compelling them to seek investment opportunities across the Atlantic.

To address these issues, Letta advocates for the creation of a robust single market for financial services, emphasizing the need for a savings and investment union. He points out that over 300 billion euros in European savings flow annually to the American market, underscoring the urgency of mobilizing private funds within the EU.

Letta’s report stresses the imperative of expanding the single market beyond its current scope to include energy, telecoms, finance, and defense. Fragmented markets with disparate national regulations hinder scalability and impede competitiveness. Letta asserts that a unified market with effective enforcement mechanisms is essential for the EU’s future prosperity and global standing.

Letta will present his comprehensive report to EU leaders at the upcoming summit. The document underscores the urgent need for the EU to bolster its competitiveness vis-à-vis global rivals, particularly China and the US. It advocates for an EU-wide mechanism to address disparities in state aid contributions, highlighting the need for cohesive action to safeguard the EU’s economic interests and manufacturing prowess.