Why the EU single market still isn’t getting enough love from Brussels

Good morning. Today, the man who proposed a plan to fix the EU’s single market tells our colleagues that Brussels is not being ambitious enough in its remedies. And Laura reveals a cross-party European parliament proposal to cut off all EU funding to Hungary.

To the Letta

Policymakers in the EU should focus on fixing the bloc’s internal market rather than spending their energy on tariffs and defence projects, Enrico Letta tells Alice Hancock and Barbara Moens.

Context: The former Italian premier last year penned a report on the state of the bloc’s 30-year-old internal market, which diagnosed the gaps and highlighted the areas the EU should focus on to deepen integration.

The European Commission will today announce a new strategy for the single market guided by Letta’s ideas. It will list actions such as simplifying compliance for small companies, harmonising waste disposal, and possible joint rules for sending people to work in other EU countries, according to a draft seen by the FT.

But Letta said that while this was “positive”, the “top priority” should be for the commission to present more binding rules to member states. This means tabling regulations, which member states have to copy and paste into their rule books, rather than directives, which they can implement as they choose.

“We are entering a moment in our history when directives are like the cavalry horses against the tanks,” Letta said.

Letta warned that policymakers should focus on strengthening the EU’s internal market rather than putting all their energy into tariff retaliation lists in the trade war with the US, or new defence initiatives. Progress “will not come by inertia”, he said.

The “crazy Trump nightmare” of tariffs was a “lose-lose” situation for the EU, not only because of the economic impact, but also because it sucked up all the attention in Brussels, Letta said.

Brussels needed the courage for “strong negotiations with the member states”, particularly larger ones, Letta said. He feared big countries “were not ready to accept a big movement of consolidation” and were too preoccupied with protecting their own companies and interests.

Chart du jour: Fat trap

Danish drugmaker Novo Nordisk has seen its share price fall 60 per cent from its peak, and last week ousted its chief executive. The market stance towards its star drug Ozempic highlights the pitfalls of being a one-trick pony. 

Turning off the tap

European lawmakers across party groups are calling on the European Commission to freeze all funding to Hungary as Budapest continues to chip away at the rule of law, writes Laura Dubois.

Context: The EU currently withholds some €18bn in funds dedicated to Budapest over concerns about corruption, discrimination against LGBT+ people and breaches of the rule of law. The European parliament last year sued the commission over the unfreezing of about €10bn in a deal to get Budapest to back aid for Ukraine.

Parliamentarians are now stepping up the pressure.

“We urge the European Commission to increase pressure on Viktor Orbán’s government to cease violating EU values and EU laws by immediately suspending all EU funding for Hungary,” a group of 26 lawmakers wrote in a letter to the commission, seen by the FT.

The letter, initiated by Green MEP Daniel Freund, lists a number of measures which it says constitute an “alarming regression” on the rule of law, including some undermining the independence of the judiciary.

They highlight a draft law “enabling the state to blacklist NGOs deemed a threat to sovereignty”. The law, which was discussed in parliament yesterday, would allow a “Sovereignty Office” to investigate NGOs or media organisations receiving foreign funds, and impose potentially heavy fines. Critics view it as a measure by Prime Minister Viktor Orbán to quell dissent.

The lawmakers also criticise Hungarian legislation allowing the suspension of citizenship for dual nationals perceived as threats, and a ban on the Budapest Pride march.

“Given these troubling developments, we firmly believe the EU must adjust its response,” write the MEPs. “We therefore consider a freezing of all funds proportionate to the risk posed to the union’s financial interests.”

The lawmakers also warned against allowing Hungary to claw back some funds using loopholes.

In the past three years, Hungary has spent about €6bn from the EU budget per year, according to commission figures.

What to watch today

1. Annual EU budget conference

2. EU and African Union foreign ministers meet in Brussels.

3. European parliament president Roberta Metsola meets the president of Italy, Sergio Mattarella, and opens the chamber’s plenary session in Brussels.

Now read these