The European Union (EU) is now grappling with profound threats to its unity and competitiveness, including Russia’s illegal invasion of Ukraine, the weaponization of tariffs, finance, and technology by global powers like the United States and China, and the increasing dependence on critical raw materials and technologies. In addition, ground-breaking advancements in digital technologies, such as artificial intelligence (AI), are reshaping industries and economies, presenting both opportunities and risks for Europe’s economic future.
To address these challenges the EU must leverage its Single Market, historically the engine of its prosperity. To this end, the EU must not only bolster the market’s internal cohesion but also enhance its capacity to withstand external shocks and reduce its dependence on external powers, thereby increasing its strategic autonomy. This is in line with recent high-level EU reports, including those by former leaders Letta, Draghi, and Niinistö, which underscore the need to secure a robust economic foundation for the EU amid a rapidly evolving global landscape.
Integration is the foundation of the Single Market, but gaps and barriers still persist in key sectors like telecommunications, energy, transport, health, and defence. To effectively address these shortcomings, the EU should follow the Letta Report in promoting a “fifth freedom” – meaning the free flow of knowledge, data, research, innovation, and skills across Europe – which would complement the existing four freedoms of the movement of goods, services, capital, and people. Moreover, the EU needs a more comprehensive European industrial policy, new frameworks to remove regulatory barriers and support start-ups and scale-ups across the EU. Achieving deeper integration in areas like energy and defence will require coordinated efforts at both the national and EU levels.
Competitiveness remains a fundamental challenge as the EU faces global competition from economic superpowers. The EU should therefore create a more favourable environment for innovation and entrepreneurship, particularly in the digital and green sectors, reducing red tape, streamlining regulations, and fostering greater access to private investment, particularly for small and medium-sized enterprises (SMEs). As noted in the Draghi report, the competitiveness of the EU hinges on a Union of skills, digital infrastructure, and the completion of a Savings and Investment Union to attract and unlock private capital for innovation.
Resilience is another key concern, especially in light of external threats such as trade coercion, energy insecurity, supply chain disruptions and military insecurity. To achieve this goal the EU should reduce strategic dependencies on non-EU countries, particularly in critical areas such as rare earth elements, semiconductor manufacturing, pharmaceuticals, and military hardware. By strengthening the EU’s economic preparedness and developing its own defence capabilities, the EU must increase its strategic autonomy in the face of geopolitical challenges.
Finally, solidarity is critical to ensuring that the benefits of a resilient and competitive Single Market are distributed equitably across all EU Member States and social groups. The EU should continue to promote social inclusion, territorial cohesion, and the protection of workers’ rights. In defence of the European model, policies can mitigate the social impacts of technological transformation, such as the rise of AI and the green transition, and ensure that no region or demographic is left behind. To preserve political consensus and democratic legitimacy the EU should promote an inclusive vision, in which the economic benefits of the Single Market are shared equitably across society.
By deepening the Single Market – its greatest asset – and boosting its competitiveness and resilience, the EU can secure economic prosperity in an ever more challenging geo-political context.
