Enrico Letta, the former Italian prime minister and author of a landmark report on the future of the European single market, is sounding a stark warning. “I start from a very red, strong red alarm, a big red alarm. The gap is growing with the US,” he told Euronews. His six-month study, commissioned by the Belgian presidency of the EU, argues that the single market—created in 1993—must undergo a radical transformation to keep pace with global rivals like the United States and China.
A Market Designed for a Different Era
Letta points out that the single market was conceived in a world that no longer exists. “When Jacques Delors launched the SM, the Soviet Union was still there, Germany wasn’t united, China and India together were 4% of world GDP,” he explains. Today, those two countries alone account for a far larger share, and the rise of the BRICs has fundamentally altered the global economic landscape. The single market, he argues, must expand its scope to remain relevant.
Three critical sectors—energy, financial services, and telecoms—remain largely outside the single market’s framework. Letta sees this fragmentation as a major drag on Europe’s competitiveness. “We are having 100 telecom operators in Europe, fragmented in each country 3, 4, 5 operators,” he notes. “In the US there are 3, in China each operator has more than 467 million clients.” The lack of integration in financial services is even more troubling: “Our 27 financial markets are not enough integrated, not enough attractive, they are too small and the American market is having this pull effect.”
Financing the Green Transition
Letta proposes a savings and investment union, a pillar of private capital that, combined with public funds, could finance Europe’s ambitious net-zero goals. But he warns that the question of how to pay for the transition remains unanswered. “Farmers will be the first in a long sequence of people protesting, next one will be the workers in the automotive industry, next you will have other workers, other business people, other citizens.” This echoes broader concerns about social cohesion as the continent pushes toward decarbonisation.
A ‘Master Key’ for SMEs
Small and medium-sized enterprises (SMEs) often struggle to navigate the single market’s patchwork of national legal regimes. Letta’s solution is a “28th legal system”—a virtual European country with its own legal framework that companies could opt into. Sebastiano Toffaletti, Secretary General of the European Digital SME Alliance, calls it “a brilliant idea.” He explains: “If I have to set up a company I will have to set it up in my country, I’m Italian, I will set it up in Italy, but if I want to do business let’s France, Poland or elsewhere, I have to set another company in those countries so this is a complete mess.”
The Fifth Freedom
The single market’s four foundational freedoms—goods, services, capital, and people—are, in Letta’s view, a 20th-century construct. He advocates for a fifth freedom: the free movement of research, education, and innovation. “Having meetings around Europe, many young people, start-uppers [were] telling me ‘we want to go and do the US, Europe is not the place where we can develop our ideas’,” he says. This brain drain is a symptom of a market that has not kept up with the needs of a knowledge-based economy.
One concrete example of the potential lies in medical research. The French public research body INSERM (Institut national de la santé et de la recherche médicale) already benefits from open access to data and articles across borders. Research director Isabelle Chemin notes: “We now regularly see publications of articles based on the use of a dataset generated by another laboratory, possibly in another country. And I think that's fantastic. It avoids maybe ten labs all doing the same thing again, which costs a lot of money.”
Letta’s vision is ambitious, but it faces political hurdles. EU leaders must decide whether to embrace a deeper integration that could reshape everything from telecoms regulation to research funding. As the continent grapples with geopolitical shifts and internal pressures, the question is whether the single market can evolve fast enough to secure Europe’s place in a rapidly changing world.
