Enrico Letta back in the EP to overcome fragmentation of financial markets

Years have passed by, but former MEP and prime minister Enrico Letta returned to the EP in Strasbourg after eight years from the end of his mandate. This time, his speech focussed on the fragmentation of financial markets and the effect on the green transition.

Six months after the release of his report “Much More Than a Market“, Letta visits Strasbourg to advocate for the significance of the single market. He emphasizes that the European Union must address the fragmentation in its financial markets and establish a Union for Savings and Investment to enhance economic competitiveness.

According to Letta, the lack of a unified financial system is one of the reasons why Europe has lagged behind the United States over the past 15 years. Letta explained that 300 billion of European savings go to the United States each year because Europe, with its fragmented markets, is unable to absorb these resources. This weakens European companies, while American ones benefit.

Some background

Often regarded as the foundation of European integration, the single market now serves 449 million consumers and supports 31 million active companies, primarily small and medium-sized enterprises (SMEs). It has generated significant economic benefits, contributing between 8% and 9% to the European Union’s gross domestic product (GDP). Trade among Member States has consistently increased, currently accounting for approximately 56 million jobs in Europe. The EU stands as one of the largest trading blocs globally, representing 15% of world GDP, compared to 16% for the United States and 19% for China. The single market’s appeal to foreign businesses also acts as a crucial geopolitical asset, enhancing the EU’s influence during shifting geopolitical landscapes.

As Letta reports, recent challenges, such as the COVID-19 pandemic and the war in Ukraine, have exposed vulnerabilities within the single market while highlighting how the EU’s competitiveness heavily depends on its effective operation, ensuring seamless access to necessary goods, services, and strategic inputs in its supply chains.

The effect of single market in the green transition

Financial market integration is essential to finance the Green Deal, the EU’s green and digital transition. Without a clear financing plan, the risk is to create social and economic tensions. Letta stressed that the EU must act urgently to mobilize private and public resources and ensure sustainable growth.

“The Green Deal will remain the top priority of the following years and we cannot allow the it to become luxury, that only the wealthy societies can allow a green and just transition”, remarks Enrico Letta during the speech. “We need an innovative leverage of tools”.

“If not now, when?” asks Letta at the end of the speech; “We win through cooperation, not fragmentation”.