The EU risks lagging further behind the United States unless Brussels makes significant changes to the single market to give it "teeth", warned the author of a report that will be submitted to leaders Thursday.
Enrico Letta, a former Italian prime minister, has criss-crossed Europe and spent months preparing a report for EU leaders on what the 27-nation bloc needs to do to keep pace with other global economies including China.
European businesses have been hit hard by the fallout from Russia's 2022 invasion of Ukraine which sent energy prices soaring, while facing a double threat from bonanzas of state subsidies and reduced regulation in China and the United States.
"There is a sense of urgency because the gap with the US is growing. We need to intervene fast, there is no time to waste," Letta told reporters.
Growth figures for the EU and US economy illustrate the difference. The bloc grew by a mere 0.5 percent in 2023, compared with 2.5 percent in the United States.
Brussels is especially fearful of being left behind in the technologies needed for the future, including solar panels, batteries, semiconductors and artificial intelligence.
The EU's executive arm says an extra 620 billion euros ($660 billion) each year will be needed to finance the clean energy and digital transitions.
According to Letta, Europe will need to mobilise private funds but European start-ups find it difficult to access larger sums -- often forcing them across the Atlantic.
Creating a true single market for financial services "is the core of the solution of how to finance the transition," he said.
Letta wants a savings and investment union, pointing to how more than 300 billion euros in European savings leave every year to be invested in the American market.
For Letta, the single market that allows the free movement of goods, services, capital and people within the EU is too small.
It should be bigger and include energy, telecoms and finance as well as defence, he argues. Currently these markets are fragmented with different national rules that make it difficult to scale up.
"We need a single market with teeth," he said.
Letta will present his report at an EU leaders' summit on Thursday.
In the document seen by AFP, Letta also warns about the risks to the EU's competitiveness against China.
"EU companies currently lag behind their global counterparts, particularly those in the US and China," the report warns.
"Europe cannot, and should not, cede its role as a manufacturing leader to others," it says.
Among the report's recommendations is an EU-wide contribution mechanism to address deepening anger in the bloc over varying levels of state aid.
The EU's two biggest economies, Germany and France, spend significantly higher amounts on national subsidies compared with the other 25 member states.
Brussels relaxed state aid rules in 2020 in response to the Covid pandemic, and did so again in 2023.
