Much More Than a Report: The Search for Europe's New Political Identity and the Politics of Competitiveness
Introduction
Thirty years ago, the European single market was built on a simple but powerful idea: economic integration among EU countries would drive internal prosperity and political unity while also supporting global openness. Today, that idea is being tested. Faced with intensifying global competition, geopolitical fragmentation and technological shifts, the EU is rethinking its economic approach. In 2024, two landmark reports – Enrico Letta's Much More Than a Market and Mario Draghi's The Future of European Competitiveness – laid out distinct yet complementary visions for the future of European economic governance. These reports not only diagnose the structural weaknesses of the EU economy but also propose a roadmap for ensuring Europe's long-term competitiveness in an increasingly uncertain global order.
Despite their different emphases, both reports converge on a crucial point: the EU has reached a turning point and requires a fundamental recalibration of its economic model. Over the past three decades, EU policy has primarily focused on internal competitiveness – removing barriers within the bloc and ensuring a level playing field among member states. Now, both reports signal a decisive shift toward external competitiveness. In other words, the priority is no longer just deepening the internal market but positioning the EU more effectively in global economic competition. This shift entails a more strategic approach to economic governance, including targeted industrial policies, strengthened financial instruments and, in some cases, a reconsideration of trade openness.
This transformation is not merely about adjusting policy tools; it requires rethinking the very principles that have long guided European integration (also McNamara, 2023). Historically, the EU has upheld economic openness (Siles-Brügge, 2014), regulatory harmonization and governance (Majone, 1998) and rules-based competition (Bulfone, 2023) as defining features of its model. However, moving towards a more interventionist and strategically autonomous economy challenges this framework. If Europe is to foster ‘European champions’, introduce more selective industrial support and enhance its economic security, it must reconcile these goals with its long-standing political economy model (Moschella et al., 2024) staked on the commitments to competition policy, multilateralism and legal predictability. At stake is not only a new economic strategy but a redefinition of the EU's identity as an economic and, more importantly, political project.
Beyond the economic and institutional challenges, the success of this new strategy depends on securing political legitimacy. The realigning of the EU's economic approach will indeed require political support not only from European institutions but also from national governments and the wider public. Some of the proposed measures – such as increased defence spending and more direct state intervention in industrial policy – may be seen as coming at the expense of traditional welfare and social investment policies. Without broad political buy-in, this economic shift risks facing resistance from both national governments and EU citizens. The challenge, therefore, is not only designing effective policies but also building the political consensus necessary to implement them.
The essay is structured as follows. First, we analyse the Letta and Draghi reports, identifying their main similarities, differences and overarching policy messages. Second, we reflect on the broader implications of the shift they propose, examining how it challenges established visions of the EU and the political obstacles that could hinder its implementation.
I Changing the Playbook: What the Two Reports Tell Us
Amid growing concerns over Europe's economic stagnation and geopolitical vulnerabilities, the European Council and the European Commission commissioned two major reports to assess the future of the EU's economic model.
The first report, authored by Enrico Letta (2024), a former Italian Prime Minister, argues for reinvigorating the single market as both a political project and a strategic asset for the EU. Commissioned by the European Council, the report emphasizes that the single market must be expanded, deepened and adapted to contemporary economic and geopolitical challenges. Letta introduces the concept of a ‘fifth freedom’ – the freedom of research, innovation and education – to complement the traditional four freedoms of movement. He stresses that the single market cannot be seen as a purely economic mechanism but must also function as a driver of European solidarity, sustainability and geopolitical resilience.
The second report, authored by Mario Draghi (2024), an economist and former President of the European Central Bank, focuses on European competitiveness, in line with the mandate given by the von der Leyen Commission. Draghi's report assesses the structural weaknesses of the EU economy and highlights the urgent need to boost innovation and strengthen Europe's industrial base to ensure long-term growth. It identifies key areas where Europe lags behind its global competitors, particularly in technology, finance and energy, and calls for policies that improve investment conditions, accelerate digital and green transitions and enhance economic security.
Despite being commissioned by different EU institutions and written by authors with distinct professional backgrounds, the two reports offer largely complementary diagnoses and recommendations. Both recognize that the EU's vulnerabilities stem not only from domestic structural weaknesses but also from its deep economic openness in an era increasingly shaped by geoeconomic competition. As other major economies adopt more interventionist policies, the EU's traditional reliance on multilateralism and open markets is under growing pressure. In response, both reports argue that Europe must adapt by embracing a more strategic economic vision. From this perspective, they call for a deepening of the single market, particularly in strategic sectors where European firms lack scale and competitiveness. They emphasize the need for greater integration in financial services, energy markets, defence and digital infrastructure to fully leverage the EU's economic strength.
Both reports also advocate a shift toward a more proactive industrial policy. Letta highlights the role of the single market in attracting investment and enabling European firms to scale up, ensuring that Europe fosters globally competitive businesses. He views a stronger single market as essential to maintaining Europe's economic security in an increasingly uncertain global environment. Draghi takes this argument further, explicitly calling for a break from past economic orthodoxy. He argues that the EU should be willing to use state support, targeted subsidies and, when necessary, protective trade measures to strengthen key industries.
Investment is another central theme. Both reports acknowledge that the scale of investment required for Europe's transformation cannot be met by private capital alone. Letta focuses on expanding the Capital Markets Union – renamed the Savings and Investments Union – to mobilize private investment. Draghi calls for a more ambitious financial framework, including joint EU borrowing and the issuance of European safe assets to fund critical investments in defence, energy and technology. This aspect of Draghi's report has sparked controversy as it touches on the politically sensitive issue of fiscal integration.
Institutional reform is another shared priority. Letta argues that governance of the single market must be streamlined to reduce regulatory fragmentation and improve enforcement. Draghi, in a more direct manner, suggests that the EU must rethink how economic policymaking is structured, warning that slow decision-making and excessive regulatory complexity are undermining Europe's ability to respond effectively to economic and technological shifts.
Taken together, the reports signal a significant shift in the EU's economic approach. They move away from the long-standing assumption that internal market efficiency is the primary goal of European economic policy. Instead, they propose a new paradigm in which external competitiveness becomes a central priority. The reports stress that Europe's economic challenges are not merely the result of internal inefficiencies but are increasingly shaped by external pressures. As other major economies become more interventionist, the EU must respond by rethinking its own economic governance.
This shift carries profound implications. It points to a more strategic economic governance model, where EU institutions take on a greater role in shaping industrial policy, financing strategic investments and managing external economic risks. It also suggests a more interventionist approach to global economic competition, with the EU adopting a more assertive stance in trade, technology and financial markets in line with recent initiatives in this direction (Bauerle Danzman and Meunier, 2024; Herranz-Surrallés et al., 2024).
At its core, the message of both reports is clear: more Europe is needed, not just to deepen integration but to compete effectively in the global economy. This new competitiveness agenda reflects a growing recognition that Europe can no longer rely solely on the rules and institutions that have guided its economic policy since the 1990s. Instead, it must develop a new strategy that combines market integration with strategic state intervention, openness with economic security and economic growth with political legitimacy. While past phases of European integration focused on market liberalization, fair competition and the elimination of internal barriers, the emerging strategy calls for a more deliberate and state-driven economic approach. This includes a stronger role for public intervention, selective trade restrictions, direct support for key industries and the cultivation of large European firms capable of competing globally.
Yet, this new playbook presents serious challenges for the EU – not only in terms of policy trade-offs but, more fundamentally, in terms of competing visions of what the EU represents as a political project. The move towards a more strategic and interventionist economic model raises difficult questions about the balance between market openness and economic security, national sovereignty and supranational governance and the EU's evolving role as an economic and political actor. In the next section, we explore these tensions in greater detail, examining the obstacles that stand in the way of implementing this new vision and the broader implications for European integration.
II A New Page in the Process of EU Integration – And Its Limits
The path charted by the Letta and Draghi reports is important, timely and necessary – but it is also daunting. The challenge is twofold: first, it requires navigating competing visions of what the EU represents as a political project. Second, it demands the construction of broad-based political support, not just among European elites but also across national governments and the public. These two challenges are deeply interconnected.
First, both reports acknowledge that the shift toward external competitiveness requires a complex rebalancing of economic priorities. Achieving this balance will require Europe to reconcile objectives that are not always easily aligned – strengthening its own economic security while preserving its commitment to openness, fostering European champions without distorting internal market competition and reducing regulatory burdens without compromising its decarbonization and sustainability goals.
In a nutshell, Europe will need to pursue multiple, sometimes competing, economic priorities. In some instances, trade-offs will be possible, allowing different goals to be pursued simultaneously. However, there will also be cases where trade-offs are insufficient, and the EU will have to make difficult choices, prioritizing one objective over another. Industrial policy is a clear example. As Draghi notes in his report (p. 37), there will be moments when security and economic interests demand that Europe prioritize domestic production, impose local content requirements and even resort to trade-distorting measures – such as tariffs – to protect key industries, even if this means challenging the multilateral trade system and the same principles that have guided the process of political and economic integration in Europe (Moschella et al., 2024).
At its core, the question is not just about economic policy choices but about values and identity. Economic policy priorities ultimately reflect deeper political choices about the kind of economic model a society wishes to sustain (Frieden, 2020). This is especially relevant for the EU, which has historically justified its economic policies through a broader normative framework, emphasizing openness, legal predictability and the rule of law. European integration has been shaped by deeply embedded ideas – among them, the belief that economic interdependence fosters stability and that rules, rather than power politics, should govern economic relations (De Vries, 2022). As Europe moves toward a more interventionist and strategic economic approach, the fundamental question is not just whether such policies are effective but whether they mark a shift in the EU's long-standing self-conception as a political project (McNamara, 2023).
Ultimately, this is not simply about adjusting technical policy instruments. It is about redefining who the EU is and how it positions itself in the global economy vis-à-vis other actors in a more competitive and fragmented world. Is the EU still primarily a regulatory and market-driven actor, or is it evolving into an economic power with a more interventionist role? If so, how does it reconcile this shift with its long-standing commitments to multilateralism and open markets? The challenge ahead is not just about finding the right policy mix but about determining the very principles that should guide European economic governance in the coming decades.
Second, rebalancing Europe's economic strategy will require not only technical adjustments but also political legitimacy. The shift outlined in these reports cannot be implemented solely through Brussels-led initiatives. It will require securing political support across national governments and among European citizens. Historically, European integration has often progressed through elite-driven processes (Hooghe and Marks, 2009), but the scope of the transformation envisioned in these reports demands a much broader political coalition. Some of the proposed policies – such as increased defence spending or interventionist industrial policies – may be perceived as diverting resources away from social welfare, creating tensions within and across member states.
There are already signs of diverging national attitudes. While some governments view strategic autonomy and industrial policy as essential, others remain wary of state intervention and concerned about fiscal implications (on the recent political re-alignments on these issues, see Schmitz and Seidl, 2022; Seidl and Schmitz, 2024). Similarly, public opinion on deeper economic integration remains fragmented, albeit there are encouraging signs of support for solidarity measures among EU citizens (Bremer et al., 2023). The experience of past crises – from the Eurozone crisis to the Covid-19 recovery – has shown that EU countries can overcome national differences and adopt major policy shifts when the political will and strategic management are in place (Nicoli and Zeitlin, 2024). However, success depends on effective political leadership and the ability to build public support. Avoiding the mistakes of the past requires ensuring that citizens understand what is at stake and why difficult choices may be necessary for Europe's long-term prosperity.
This goal cannot be achieved solely through technocratic reports and bureaucratic processes in Brussels. While the reports offer a roadmap, they cannot, on their own, mobilize political will or persuade European citizens of the necessity of these changes. That task falls to political leaders, particularly in national capitals, who must articulate the rationale for these reforms in ways that resonate with voters. More Europe has never been more necessary – but it cannot simply be imposed from above. It must be built through democratic legitimacy and broad political consensus.
Conclusions
The Letta and Draghi reports mark a critical juncture in the evolution of European economic governance. They signal a shared recognition that the EU can no longer unproblematically rely on the economic tools and principles that have traditionally guided its integration project. Instead, they call for a strategic shift toward external competitiveness: an agenda grounded in greater public investment, more assertive industrial policy, and stronger economic security instruments.
In this essay we argued that this proposed shift is not simply a technocratic recalibration of policy instruments. It challenges the foundational ideas and normative commitments that have underpinned the EU’s political economy for decades - namely, openness, legal predictability, and rule-based integration. Moving toward a more interventionist economic model raises complex questions about what kind of actor the EU wants to be in a changing global order.
Crucially, this transformation also hinges on political legitimacy. Without broad-based support across national governments and European citizens, the reforms envisioned in the reports are unlikely to materialize or endure. The challenge ahead is twofold: reconciling competing policy objectives and forging a shared vision of the EU’s future as both an economic and political project.
Whether this new agenda can gain traction will depend on the EU’s capacity to manage these tensions and articulate a coherent and legitimate path forward. Much more than a market, and indeed much more than a report, is at stake.
