On April 17, 2024, the former Italian Prime Minister, Enrico Letta, published a report outlining the future of the EU’s single market (the “Report”).[1]  Letta proposed significant reforms, including the addition of a fifth freedom to spur innovation, consolidation in key sectors to enhance global competitiveness, and a new framework for State aid governance.


The Presidencies of the Council and the Commission asked Letta, for the 30th anniversary of the Single Market, to prepare a report detailing recommendations to increase the competitiveness of the Single Market.  The Report, which has been published a few months before the next European elections, suggests revised competition priorities for the next Commission.  Letta suggests that the EU should introduce a new fundamental freedom focused on innovation, back consolidation in certain strategic sectors, and propose State aid funding through the EU budget.

A fifth freedom to foster innovation

The Single Market is focused on four pillars:  the free movement of goods, services, people and capital.  The Report claims that the Single Market framework has become outdated and suggests the addition of a fifth freedom to drive innovation.  To foster European innovation, Letta recommends to increase transparency and data access in  key areas such as AI, quantum computing, biotech, biorobotics, and space.[2]

The fifth freedom would complement the Digital Market Act, the Digital Services Act, the AI Act, the Data Act, and the Data Governance Act.[3]  The fifth freedom—complex enough an idea not to have been precisely defined in the report[4]—is likely a response to the discussion that the Digital Markets Act targets companies outside the EU but provides few concrete tools to promote the emergence of European digital competition.

More consolidation at the EU level to compete at the global level

According to the Report, European companies suffer from a significant “size deficit” compared to global competition from the USA and China and “[t]he lack of integration in the financial, energy, and electronic communications sectors is a primary reason for Europe’s decliningcompetitiveness.”  The Report warns that a balance must be struck between allowing companies to scale up and safeguarding a level playing field.[5]

The Report warns that keeping the focus only on “pro-entrant” regulation would be detrimental in the context of telecommunications infrastructure.[6]  The Report claims that more consolidation would create pro-competitive sharing of investments in key network elements, necessary in new technologies, like in 6G and AI, for example.[7]  This is at odds with the current Commission’s tough stance on consolidation in the telecommunications sector, particularly in mergers that reduce the number of players in the relevant national market from four to three.[8]

In the energy sector, the Report seeks to foster market integration and interconnectivity between Member States to “ensure the deployment of new clean energy generation in the fastest and most cost-efficient manner possible.”  According to Letta, this cooperation towards the achievement of a carbon-free competitive Single Market presupposes a strict implementation of the rules on foreign direct investments at the EU level, coupled with easier access to EU funds or State aid.[9]  The Commission’s Carbon Border Adjustment Mechanism is a step in that direction.[10]

A new state aid governance framework

The Report acknowledges that the relaxation of State aid rules has contributed to limiting the negative effects of recent crises, but has also produced distortions of competition.  The Report suggests balancing a strict enforcement of State aid at the national level and the progressive expansion of EU-level funding support to overcome market distortions.  This would require Member States to allocate a portion of their national funding to finance pan-European initiatives and investments.[11]  Letta emphasizes that a State aid governance framework with common conditionalities for disbursement encourages a level playing field,[12] protects against harmful foreign subsidies,[13] and also constitutes a response to alternative legislation from different economic blocs like the US Inflation Reduction Act.[14]


The Report is a response to the current geopolitical discourse—it details the state of play of the Single Market and formulates ambitious recommendations to increase its competitiveness in the current global landscape.  However, some of these proposals are at odds with the current objectives of the Commission’s Directorate-General for Competition as well as with the stances of some Member States on public funding.  With regard to the consolidation proposal to drive investments, Competition Commissioner Margrethe Vestager explained that, “We have nothing to suggest that a more consolidated market invests more. We have every suggestion that competition is the fundamental driver to investment.”[15]  Furthermore, some Member States such as the Netherlands—historically reluctant to increasing EU funds[16]—will require substantial persuasion to back the proposal for a New State Aid Governance Framework.  To further fuel the debate, former European Central Bank President, Mario Draghi, is preparing another competitiveness report that is expected to be published in June, 2024.[17]

[1]           Enrico Letta, “Much More than a Market,” April 2024, available here.

[2]           Ibid, pp. 7, 21–23.

[3]           Ibid.

[4]           Rather the Report outlines the objectives and fields that the fifth freedom seeks to cover.

[5]           Ibid., p. 8.

[6]           Ibid., p. 52.

[7]           Ibid., p. 55.

[8]           Samuel Stolton and Jillian Deutsch, “EU’s Vestager Warns of Telecoms Merger Risks to Competition,” Bloomberg, April 18, 2024, available here.

[9]           Report, supra, fn 1, pp. 62-66.

[10]          See Cleary Gottlieb’s Climate and Financial Sector Newsletter, May 2023, available here.

[11]          Ibid., p. 11.

[12]          Ibid., p. 39.

[13]          Ibid., p. 12.

[14]          Ibid., pp. 12 and 27.

[15]          Bethan John, Vestager stands firm as EU report pushes for greater consolidation in telecom markets,” Global Competition Review, April 18, 2024, available here.

[16]          E.g. See Sam Fleming, “Netherlands opposes new EU money to counter US green subsidies,”  Financial Times, January 24, 2023, available here.

[17]          “Draghi to speak to EU ministers ahead of competitiveness report, source says,”Reuters, February 12, 2024, available here.