Enrico Letta Advocates European Capital Markets Union

Enrico Letta has outlined his proposals for European competitiveness, which he is due to present on Thursday at a European summit. The former Italian Prime Minister warned on Wednesday that the European Union must act quickly to catch up with the United States by creating a real internal market for financial services.

“There is a sense of urgency because the gap with the United States is growing. We must intervene quickly, there is no time to lose,” Enrico Letta, president of the Jacques Delors Institute, told journalists ahead of a meeting of EU heads of state and government on Wednesday evening. and Thursday in Brussels.

European industry has been hit by rising energy prices in Europe since the Russian invasion of Ukraine, at a time when it must face American and Chinese competition benefiting from massive subsidies and reduced regulations. The EU is particularly concerned about being left behind in the technologies of the future: solar panels, batteries, electronic chips, artificial intelligence, etc.

Just to carry out its ecological and digital transformation, Europe will have to invest more than 620 billion additional euros per year in the coming years, according to the European Commission, and public money is lacking, particularly in the most indebted states of the South. from Europe. Hence the need to mobilize vast private funds. “The completion of a single market for financial services is at the heart of the solution,” assures Enrico Letta.

A single market in telecommunications, energy and defense

In addition to capital markets, his report also discusses at length the deepening of the single market in telecoms, energy and defense. These four sectors have in common that they are largely fragmented by divergent national regulations which prevent or slow down scale effects. As a result, the EU does not reap all the benefits of a market of 450 million inhabitants.

The impossibility of raising giant funds penalizes, for example, digital startups and pushes them towards the United States, whose powerful financial markets also attract the savings of Europeans.

“The main proposal is to work on building a Savings and Investment Union,” explained Enrico Letta. “More than 300 billion euros of savings leave Europe each year for the American market because the European market is fragmented and not attractive enough,” he stressed. “This is one of our main problems today.”

The former head of government also mentions the distortion of competition from American and Chinese state aid. “Europe cannot, and must not, cede its role as manufacturing leader to others,” he adds.

The European response has so far been one of disunity. The largest economies like Germany and France have considerably increased aid for industrial establishments after Covid and the war in Ukraine, at the risk of fragmenting the internal market and angering their smaller neighbors. Enrico Letta proposes a form of pooling with aid at EU level. “It is not only the United States that is capable of carrying out the IRA,” he declared on Wednesday, referring to the massive subsidies of the American climate plan (“Inflation Reduction Act”).

In the field of defense too “we are paying the price of fragmentation”, he warned, at a time when Europe is struggling to mobilize the billions needed to increase its arms and ammunition capacities. “About 80% of what we spent to support Ukraine militarily went to non-European suppliers. It’s crazy,” he continued. “We must be less naive,” he said, explaining that he was “a big supporter” of the ideas of Internal Market Commissioner Thierry Breton to promote the European sector.

Thierry Breton defends a European fund of 100 billion for defense

In January, Thierry Breton defended the creation of a fund of 100 billion euros to increase arms production capacities in the European Union in order to support Ukraine against Russia. These 100 billion are “my personal assessment, what I consider to be necessary” to “very significantly increase our defense industrial base”, explained the Commissioner for the Internal Market and Industry.

He has already launched several measures to increase European capacities, but believes that we must go much further. The French official believes that this is a “vital subject” for the EU which will have to be addressed by the Commission, “during the next mandate”, after the European elections in June. The idea of a European fund, however, raises reluctance in so-called “frugal” countries, notably Germany, which are resistant to the increase in public spending and to pooled financing which places greater demands on them. Asked about the financing of the 100 billion, Thierry Breton remained evasive, without however excluding the possibility of resorting to a new joint loan like that of the 800 billion recovery plan for the green and digital transitions.

This article is originally published on latribune.fr

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