The European Union (EU) faces a series of unprecedented challenges, which severely impact on its ability to pursue an economy that works for people. As confirmed by the publication of the new United States (US) national security strategy, the return of Donald Trump to the US presidency has undermined transatlantic relations at a time when Russia brought back war to the continent. This forces the EU and its Member States to logistically and financially support Ukraine, but at the same time to increase defence spending to ensure security in Europe and the effectiveness of NATO, with possible negative effects on funding for education, health care and welfare. Geopolitical tensions emanating from the weakening of international commercial rules, and unfair trade practices from China and other competitors, have exposed EU strategic dependencies in key materials and energy sources, requiring the EU to enhance its economic security. At the same time, next to the climate crisis, revolutionary transformations in the digital sector, including AI, pose new challenges to the EU competitiveness and its social model.
In this context, one of the long-standing promises of European integration – economic prosperity – has come under pressure as never before in history.
It was to deal with this concerning state of affairs that the EU commissioned two high-level reports from former Italian Prime Ministers Enrico Letta and Mario Draghi. The two complementary reports, published respectively in April and September 2024, together identified a roadmap for the EU to get out of its economic quagmire, by deepening its internal market and enhancing its economic competitiveness. In particular, the Letta report laid out a path to complete the EU internal market in six sectors – telecoms, energy, space, health, transport and the defence industry – while also building a savings and investments union to channel private funding towards EU growth.
The Draghi report, moreover, proposed a comprehensive plan for enhancing EU competitiveness built on the simplification of the regulatory framework, especially for disruptive technologies, the creation of an energy union, a new industrial policy, and the development of common funding instruments to support EU public goods, including defence. Draghi took a holistic approach to the concept of competitiveness, stressing that it is not only industrial but also demographic, educational, and social. The reallocation of budgets toward defence without creating new common funding tools could erode the very foundations of Europe’s socio-economic model.
The Letta and Draghi report were well received by EU decision makers, but more than a year and a half after their publications, while references to these reports can be found in policy documents, such as the November 2024 Council Conclusions on the future of European competitiveness and the European Commission’s 2025 Clean Industrial Deal, only marginal aspects of these plans have actually been implemented. In fact, the only major EU legislative consequence of the reports thus far has been the adoption of a series of simplification bills oriented towards deregulation, notably in the fields of environmental law, corporate social responsibility, and AI. Yet as Letta and Draghi explicitly warn, deregulation should not be confused with strategy. Moreover, in the funding domain, none of the proposals of the two reports have as of now been taken on board: instead of building new supranational funding mechanisms, the EU has merely relaxed the framework for national state aid and suspended EU fiscal rules, which has opened the door to greater government intervention in support of domestic firms, and of rearmament. This risks amplifying the disparities between Member States and could in turn undermine the level playing field that the Letta–Draghi agenda seeks to restore through common instruments and integrated markets.
The EU is at a disadvantage compared to global competitors like the US and China which can rely on massive central fiscal capacity and coordinated industrial strategies. Without common EU-level resources, Member States currently cannot match this scale, and national responses will remain fragmented and inefficient. Implementing Letta’s “savings and investment union” and Draghi’s proposals for EU-level funding has the potential to unlock private capital and reduce dependence on third countries.
In our informed opinion, this half-hearted and one-sided implementation of the Letta and Draghi reports is problematic. Letta and Draghi have set out a credible strategy to deal with global competition, technological change, and security concerns, in order to maximize the potential of a common market of 450mn people. Yet a sluggish cherry-picking approach to the two reports will do nothing to structurally solve the EU’s weaknesses, as it falls further behind its main competitors.
Moreover, the problem is urgent, because the EU’s window of opportunity for strategic reform is closing. The Letta and Draghi reports were drafted at a moment of acute awareness of Europe’s vulnerabilities. But political momentum is already fading, and with it the ability to push through reforms that require institutional courage. If the EU delays further, the proposals risk becoming obsolete or insufficient in the face of accelerating geopolitical and technological competition. It is essential therefore the EU institutions accelerate work towards the implementation of the Letta and Draghi reports to relaunch EU economic policy and its promise of prosperity for its citizens. This calls for a comprehensive and coherent implementation strategy, which does not yet exist.
