European Union

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by Manuela Moschella (Professor of Political Science, University of Bologna) and Lucia Quaglia (Professor of Political Science, University of Bologna)

The European Union (EU) stands at a critical juncture. Global competition, technological disruption, and geopolitical fragmentation challenge the economic framework that has defined the EU for over three decades. Two landmark reports — Much More Than a Market by Enrico Letta and The Future of European Competitiveness by Mario Draghi — outline a bold vision for Europe’s economic future. In our article “Much More Than a Report: The Search for Europe’s New Political Identity and the Politics of Competitiveness” in the Journal of Common Market Studies, we examine these reports and show that they signal a decisive shift from internal market efficiency to external competitiveness as the bloc’s strategic priority. These shifts imply a redefinition not only of the EU’s economic priorities, but also of its political identity.

A New Economic Playbook

A central theme uniting the two reports is the call for a more assertive and state-driven economic policy. The authors advocate a departure from the EU’s long-standing emphasis on non-interventionism and free-market orthodoxy. This includes supporting “European champions”, strengthening industrial policy, and ensuring economic security through investment and regulation.

Investment emerges as a key area for transformation. Letta proposes expanding and rebranding the Capital Markets Union as a “Savings and Investments Union” to unlock private capital for long-term growth. Draghi goes further, calling for joint EU borrowing and the creation of European financial instruments to fund strategic initiatives, particularly in defence, energy, and digital infrastructure. The message is clear: Europe must scale up its financial tools to cope with contemporary challenges and match its ambitions.

The Need for Institutional Reforms

Both reports also recognize the importance of institutional reforms. They criticize slow decision-making and regulatory fragmentation in the EU, arguing that streamlined governance is essential for swift and effective action. However, the challenge is not merely institutional: it is profoundly political. Implementing this new strategy requires broad-based legitimacy not only from EU institutions and national governments, but also from the public. Increased defence spending and targeted industrial subsidies may raise concerns about diverting resources from social welfare or education. Without transparent communication to the public and political ownership, these initiatives run the risk of being met with public resistance in the member states, which, ultimately, might be reluctant to go ahead.

At stake is not merely a set of economic policies but a redefinition of the EU’s identity. The push toward economic sovereignty, industrial protectionism, and strategic autonomy raises fundamental questions: Can the EU maintain its commitment to openness, legal predictability, and multilateralism while adopting more interventionist tools? How can it balance market freedom with national interests and supranational coordination?

Letta and Draghi do not deny these tensions. Strategic autonomy may require selective protectionism. Economic security may necessitate more public spending. But ultimately, these are not technocratic but political choices that require public debate and shared vision.

The Road Ahead

The EU has often moved forward in times of crisis — from the creation of the Euro to the NGEU funding package adopted in response to the Covid-19 pandemic. The current situation calls for a similar resolve. However, technocratic reports alone are not enough. Political leadership, especially at the national level, will be essential to translate vision into action and to mobilize public support.

As the EU seeks to turn a corner in its economic development, the choice is not simply about adopting new tools. It is about affirming a coherent vision of what Europe stands for both economically and politically. Whether the Union can successfully recalibrate its economic model while maintaining cohesion and legitimacy will shape not only its competitiveness but the future of European integration itself.

Manuela Moschella is Professor of Political Science at the University of Bologna and Adjunct Professor at Johns Hopkins SAIS Europe. Her research focuses on European and global economic governance, central banking, and the politics of economic policymaking. She is one of the editors of the Review of International Political Economy.

 

 

Lucia Quaglia  is Professor of Political Science at the University of Bologna. She has published 9 books, 7 of which with Oxford University Press and has guest co-edited 7 special issues of academic journals. Together with Manuela Moschella and Aneta Spendzharova, she has published a textbook on European Political Economy (Oxford University Press, 2024).

The post Rethinking Europe’s Economic Model: A New Vision for Competitiveness and Political Identity appeared first on Ideas on Europe.

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