"European savings go to the US because it is more profitable"

The creator of the single European market has a name and surname, Jacques Delors.

Oliver Thansan
Oliver Thansan
11 May 2024 Saturday 23:36
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"European savings go to the US because it is more profitable"

The creator of the single European market has a name and surname, Jacques Delors. Now, the person who chairs the Jacques Delors Institute, the former Italian Prime Minister Enrico Letta (Pisa, 1966), is in charge of revitalizing a successful but exhausted invention. He presented his report for the transformation of the single market to the European Council, and now explains its main lines to La Vanguardia. He warns that without transformation, decline is guaranteed and proposes a capital market at EU level to prevent the flight of European savings to the United States.

The single market is a success story. It has been so in the past, but it is not so clear that it continues to be so in the present. What is not working anymore?

The single market is a success story, but it is also the single market that was built for a world that no longer exists, and inertia leads to decay. If the single market continues as it is, it is decadence, because the world around us has changed. I was lucky enough to meet Jacques Delors before his death to discuss this exercise with him. What he told me is that the geopolitical situation has changed. When the single market was made, the world was a small place. China and India together represented 4% of the world economy. Now they are 25%. Germany was not reunified. The Soviet Union was still there. There were 10 of us, then 12, and we called ourselves the European Community, not yet the Union. So the world has totally changed and the single market was created for that world. What Delors told me was that the report had to change the single market and adapt it to today's big world. The single market was good for a small world. Now we need a single market for a big world.

Is it the reason we lag behind the United States?

Yes, the reason is fragmentation because it prevents considerable levels of investment in innovation, for example. We are losing ground in innovation. Fragmentation is the root of all problems. One of the successes of Europe is the manufacture of airplanes. If we had a Spanish Airbus, an Italian Airbus, a French Airbus and a German Airbus, Boeing would keep everything. But we have a European Airbus and it is winning. There are areas where scale and integration are critical.

You talk about a European paradox, how European money goes to the United States and comes back to buy companies in Europe.

The real paradox is the fact that the US capital market is integrated, unique, and therefore very large and profitable. Our capital market does not exist at European level. We have 27 markets. The Bank of France and the European Central Bank have put the amount of European savings that go to the United States every year at 300,000 million euros. And in the United States, savings are converted into actions that strengthen American companies that, strengthened, return to Europe to buy our companies with our money. This paradox is linked to the consequences of the fragmentation of our market. Do you know why we don't have integrated financial markets? Because everyone wants to fly their national flag in their country's market and, at the same time, because political leaders don't want to put their faces next to the word finance.

How can this change be articulated?

I propose a mixed solution, private money with tax incentives to make the savings of Europeans profitable if this drives the transition. At the same time, if we put in private money we can break the blockade of the Nordic countries, Germany and Holland, who do not want to give public money as they did with Next Generation. But if we get a mix of public and private money I think they will accept it.

How do you get to this single capital market?

What currently prevents the single capital market is a false idea of ​​national sovereignty. Because if, to cling to your national market and the national flag in your national market, you create the situation I mentioned, with the money going to the United States, the end is suicidal. It is not a plea for everything to become big, for everything to be like the United States. I like Europe as it is, a fantastic mix of the small and the big. The small must be maintained but the large must grow to be more competitive in today's world. When Delors created the single market, the leaders of his time told him: capital markets, energy and telecommunications do not touch. At that time, the large European countries were large enough for the national dimension to be sufficient for telecommunications. Today, this national dimension has become the ceiling that prevents growth.

You talk about the union of capitals and we have not even managed to complete the banking union.

Yes, and do you know why? Because the banking union was not created out of conviction, but out of necessity. And when things are done out of necessity, when the need ends, they stop being done. We created the banking union because of the economic crisis. If the leaders have asked me for a report, it is because they are asking for a vision, they are asking for action, not reactions. The real difference is between reaction and action. The Europe of Delors was the Europe of action. The Europe of recent years has been the Europe of reactions. And when you just react, it doesn't work in the end.

You propose to create European champions in telecommunications and energy. Doesn't this mean dismantling the competition?

I don't want Europe to become the United States. I want Europe to remain Europe, but more integrated. In Europe we have more than 100 telecommunications operators. There are three in the United States. Consumers are happier here than in the United States, but the telecommunications industry is a mess. The proposal is to move from 27 markets to one and apply competition rules to that single telecommunications market to ensure consumer protection, but with competition rules at European level. Between the 100 European operators and the three North American ones there is a middle ground.

In what period should your approach be applied?

Everything in the report can be applied in the five years of the next legislature.