[Interview] Europe needs to finish single market or lose more scale-ups to China and the US, warns Enrico Letta

European companies are being gobbled up by US and Chinese competitors because they aren’t big enough. That is former Italian prime minister and EU heavyweight Enrico Letta’s reading of Europe’s besieged economy. Letta is president of the influential Jacques Delors Institute and dean of the IE School of Politics, Economics, and Global Affairs at IE University in Madrid, where he also heads the Competitiveness Hub, a research centre the university opened in Brussels in May. His 2024 report on the single market, which steered much of what the EU Commission has done in the past few years, revolved around a simple message: European companies need a unified market, not one fragmented along 27 national lines, if they are to grow to a size befitting the 21st century. China already featured as a global competitor in that report. But the staggering technological rise since then has turned it into a threat of the first order, now widely referred to in Brussels as the ‘China Shock 2.0’. The sectors this is most associated with are electric vehicles and complex machinery, the sort of things German industrialists believed they were best at. But a new paper by researchers at Letta's Brussels think-tank argues China is also increasingly displacing Europeans in health and biotech. "China is ravaging the sector, [and] changing it completely," he told EUobserver in an exclusive interview. We spoke about how European companies can survive the scale-up phase, which is the point when many go bankrupt or are sold off to Chinese and US competitors. Your hub's paper warns that European companies in the health sector and elsewhere are being gobbled up by US and Chinese competitors. What's needed to change that? In the writing of our report, we found that Chinese leadership in the health-sector is growing, and that as Europeans we do have to find a way to scale up and boost innovation at the European level. Size is one of the main issues that gives Chinese and American companies the advantage. So the key point I want to raise is to meet that challenge — to be able to scale up — we need integrated markets. This autumn will be decisive for implementing [the EU’s single market plan], which in my view is also the best way to respond to the pressures Europe is under, from Trump, to the Chinese, and on security from Russia. Ursula von der Leyen’s State of the Union speech on 16 September will show whether she's able to design a trajectory for Europe where it can be assertive and compete economically. Given the disagreements between member states — over where supervisory bodies should be placed for example — are you confident they can forge agreement before the end of the year deadlines? I am confident. I see member states pushing in the same direction on competitiveness. For instance, the 28th regime [the idea of having a single EU-wide set of business rules], is widely agreed on. There are many differences between member states, on the multi-annual budget, but those are not related to competitiveness and single market integration. That is not to say I am not worried about the divisions, on migration, on the budget. But it is natural to have disagreements, especially when it comes to these political, very emotional topics. You said scale-ups are leaving Europe, not only for the US, but increasingly for China. What does China offer that we don't?