On Thursday 18 April, former Italian Prime Minister Enrico Letta will present his high-level report on the internal market to the Heads of State or Government of the countries of the European Union. In this document of some 150 pages, which Agence Europe has obtained, he stresses the importance of own resources in the EU budget to strengthen the internal market.
“The forthcoming Multiannual Financial Framework represents a critical juncture for the ambitious proposals detailed in this report, challenging all actors to reaffirm their dedication to developing a new Single Market”, says Mr Letta in his introduction.
The budget issue will be “the really difficult discussion for European leaders” on Thursday 18 April, a senior European official said on Tuesday 16 April. They are in complete agreement on the idea of launching a “new European competitiveness deal”, an initiative they are expected to call for in the conclusions of the European Council to be adopted (see EUROPE 13387/1).
On the other hand, the leaders are divided over the amount of public funding required. Several countries are refusing to open the debate on the next Multiannual Financial Framework, and even less so on a joint loan. Conversely, other Member States are calling for massive investment if they hope to compete with China and the United States.
“Enrico Letta is right to relaunch the debate on own resources”, said one European diplomat, who also admitted that the discussion would be difficult.
On Thursday morning, the former Italian Prime Minister is expected to propose a parallel system of state aid with a European dimension. “We could envision a State aid contribution mechanism, requiring Member States to allocate a portion of their national funding to financing pan-European initiatives and investments”, he writes in his introduction.
In an interview with Agence Europe in February, Mr Letta was already calling for more European-style state aid (see EUROPE 13356/1).
The ‘Important Project Of Common European Interest’ (IPCEI) model also warrants development, he believes.
Consensus to attract private capital
Whatever the final outcome of the discussions on public investment, “there will never be enough”, said one European diplomat. So the EU27 are fully aligned on the need to attract more private capital. “This is also where you have the largest amounts”, added a European official.
“European businesses must have access to more diversified financing at lower cost, by channelling ‘domestic’ savings and mobilising the large volume of private investment required”, write the authors of draft conclusions of the European Council dated 12 April.
This sentence did not appear in the previous version of the conclusions that we detailed (see EUROPE 13387/1).
CMU: convergence on the principle of moving forward, less on the how
With this in mind, the Capital Markets Union (CMU) is likely to feature prominently in the discussions on Thursday. According to some, the fact that this issue is now on the table for the Heads of State or Government demonstrates the urgent need to mobilise the massive savings of Europeans. A stock estimated at up to €30,000 billion could be used to finance the digital and green transitions, in addition to the European budget.
According to the draft conclusions, the European Council will call for “work [on the CMU] to be taken forward without delay”. It could even recommend measures that are more decisive than the 13 proposed by the Finance Ministers in the 11 March declaration from the enlarged Eurogroup (see EUROPE 13368/3).
In particular, leaders will call for harmonisation of national frameworks for corporate insolvency and corporate tax law to encourage equity investment. Above all, the European Council could call for greater supervision of capital markets at European level, or even the design of a “cross-border investment/savings product”. This last measure was proposed by the French Minister for the Economy, Bruno Le Maire, during his “Ghent Appeal” in February (see EUROPE 13357/8).
It remains to be seen whether the draft conclusions will be adopted as they stand, overcoming certain reservations on the part of countries such as Luxembourg and Ireland, and whether they will send a political signal in favour of pursuing further financial integration within the EU, including in the area of supervision, which remains the most controversial issue. The role of the “European supervisory authorities” attests to this: they were explicitly mentioned in a previous draft of the conclusions, dated 8 April, but the reference has since been removed.
To go even further on this issue, Enrico Letta is proposing the creation of a Savings and Investments Union. Its aim is to prevent European private savings from leaving the continent, at a time when €300 billion in capital is being transferred annually from the EU to the United States; and to attract additional resources from abroad.
Enrico Letta’s report will be followed in June by Mario Draghi’s report on competitiveness, commissioned by the European Commission. The Belgian Presidency of the Council of the EU and the Hungarian Presidency, which takes over in July, have promised to follow up the ‘Letta’ report as far as possible, according to a senior European official.
See the Letta report: https://aeur.eu/f/bst
See the draft conclusions of the European Council: https://aeur.eu/f/bs2 (Original version in French by Léa Marchal, Bernard Denuit, with editorial staff)