The former Italian Prime Minister and current President of the Jacques Delors Institute, Enrico Letta, is due to submit a report on the future of the internal market to European leaders on 17 April. In his view, industrial policy and the financial tools that go with it will be crucial to strengthening the single market. On Thursday 22 February, Mr Letta, who appeared before the European Parliament’s Internal Market Committee (IMCO) following 230 meetings with decision-makers and stakeholders over the last few months, agreed to answer EUROPE’s questions. (Interview by Léa Marchal)
Agence Europe - You went to Washington to study the Inflation Reduction Act (IRA), which subsidises the production of green technologies. What lessons have you learned about the action that needs to be taken at European level, beyond the Net-Zero Industry Act (NZIA)?
Enrico Letta - The essential question, from my point of view, remains the following: how can we finance the transition and the capacity of companies to be fully involved in the green and digital transition? The evolution of the system must lead us to find a European response on two levels: a public level and a private level. The key question is: how can we ensure that these two instruments can help companies to do what they most need, i.e. automation and speed?
This brings us to the IRA, which today is seen by European companies not as a threat, but as a model, according to the discussions I’ve had. It works, it’s automatic because they are tax credits.
How can we ensure that, at European level, we have a system of automatic tax incentives? In the knowledge that this model, this level of automation and speed, requires a major step forward on the part of the Member States.
If we don’t do this, there is a risk that the European level will always be stuck in procedures that are not automatic, that are not based on tax incentives, but on complex procedures.
And this is the big question of how to arrive at a unitary business code for companies, and avoid this fragmentation with 27 [Member States]. I am working on the idea of the 28th regime, which could be single and unitary in many areas, including the issue of business law.
Do you think that tax credits should be prioritised over other financing tools?
I don’t know. But I’m observing that, in the economic system, the tax credit is seen as the best instrument. I understand that and I’m thinking about it, because obviously this is an area that needs less bureaucracy.
And the strength of the tax credit is its automaticity, the responsibility of the entrepreneur and the ex-post control. I think that’s what we most need. I’m well aware that the European legal system is complicated. So we need to work on finding the right instruments and the right model.
In such a unitary system, we still need to define exactly what we are supporting in terms of technology and production, and to do so clearly. Are you not afraid that it will be difficult for the EU27 to agree on a unitary system that is as clear-cut as the IRA?
No, I don’t think so, because I think that at the end of the day, everyone agrees that the green and digital transition is an objective that we have decided on. There is a whole series of accompanying measures that are, I think, essential: accompanying measures for electrification, for the infrastructure system...
There are obviously obstacles. But as far as the method is concerned, I don’t think anyone would question the fact that it’s the Commission that should be leading the way.
So I’m quite convinced that a new Commission legitimised by a vote from electors in the European elections could have the strength to do this.
In their ‘Antwerp Declaration’, major industrialists call for simplified rules on State aid (see EUROPE 13354/9). What is your position on the current rules?
Obviously, it’s the elephant in the room. I think we need to put this issue together with all the others. So, I imagine a toolbox in which you have, all together, the national pillar of public money, in other words State aid; you have a European public pillar of European facilities or European incentives; and you have a European and national pillar of private money.
It’s all part and parcel of a financial union that is finally modern and complete.
In this context, I believe that a review of the State aid system is necessary. This revision must ensure that it is exceptional, not the rule, and increasingly European. Let’s say that national State aid must serve a European purpose, that State aid must not be used in one country against another, that it must not be a matter of competition between countries.