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OPINION
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European Economic and Social Committee
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Assessment of the Letta and Draghi reports / EU single market
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Assessment of the Letta and Draghi reports on the functioning and the competitiveness of the EU’s single market
(own-initiative opinion)
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INT/1070
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Rapporteur: Matteo Carlo BORSANI
Rapporteur: Giuseppe GUERINI
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Rapporteur: Stefano PALMIERI
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Advisors
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Eleonora TRENTO (to rapporteur Matteo Carlo BORSANI)
Samuel CORNELLA (to rapporteur Giuseppe GUERINI)
Marco CILENTO (to rapporteur Stefano PALMIERI)
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Plenary Assembly decision
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11/7/2024
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Legal basis
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Rule 52(2) of the Rules of Procedure
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Section responsible
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Single Market, Production and Consumption
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Adopted in section
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12/2/2025
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Adopted at plenary session
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26/2/2025
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Plenary session No
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594
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Outcome of vote
(for/against/abstentions)
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222/2/6
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1.Conclusions and recommendations
1.1The European Economic and Social Committee (EESC) agrees with the Draghi and Letta reports on the need to act urgently to increase the competitiveness of the European economy, abandoning ‘the illusion that only procrastination can preserve the consensus’.
1.2It is therefore essential to continue to work to complete the single market, extending it to the finance, electronic communications and energy sectors and strengthening the services sector.
1.3The EU institutions and the Member States should have a serious discussion about the fundamental rules of the EU and on the relevance of the Treaties as they stand with respect to current challenges, which require action and quick thinking.
1.4The EESC calls on the EU institutions to make progress towards completing the single market with a high focus on environmental sustainability, economic prosperity, and social and territorial cohesion by recognising these as drivers for competitiveness.
1.5The EESC supports the assertions made by Draghi and Letta that the European economy, with its values and rules, must regain its competitiveness by increasing its international relevance.
1.6The EESC urges the EU institutions to adopt an industrial policy that can overcome the current approach that is fragmented due to the existence of multiple national industrial policies that are not always coordinated. The only possible way to ensure the right balance of tax, regulatory and trade/customs provisions and financial incentives that would genuinely benefit the single market is through a united effort.
1.7The EESC reiterates the importance of reducing bureaucratic burdens and compliance costs on businesses through better regulation and genuine administrative simplification. To this end, it would be useful to strengthen legislative impact assessments and competitiveness checks in order to support entrepreneurship and help to create quality jobs, improve working conditions and boost sustainable economic growth and social cohesion.
1.8The EESC calls for regulatory choices that aim to reduce energy prices and especially the price gap between Member States and between Europe and other economies. In this regard, calls for the increased use of contracts for difference and the decoupling of the price of renewable energy and of other forms of low-carbon energy from that of fossil energy, which is more volatile. We also need, and would like to see, more investments in the renewable energy sector as well as in other forms of low-carbon energy.
1.9The EESC agrees that a careful assessment of the carbon border adjustment mechanism (CBAM) is needed, and encourages EU legislators to explore effective ways of handling exports and imports in order to allow EU industry to remain competitive in international markets.
1.10The EESC notes that the measures proposed by the Draghi and Letta reports require massive investments, and therefore calls on the European institutions to reflect on the possibility of issuing common safe assets, as was done in response to the pandemic.
1.11While the EU should always remain a promoter of peace in accordance with a concept of security that is not exclusively military-focused, the EESC notes that changing geopolitical circumstances require the implementation of a European defence policy combined with a stronger common foreign policy. Defence investments will also need to be boosted, in part through new funding instruments designed to improve the level of technological development in the sector.
1.12The EESC would like to see renewed talks on European public goods that can define the key priorities for the EU’s future. As the provision of such goods is linked to economic, institutional and political factors, a European guarantee in this field could bring added value, replacing the multitude of national approaches.
2.Introduction and background
2.1The EESC welcomes the Draghi and Letta reports for the range of topics covered and for their courage to formulate ambitious proposals. Both reports start with a general analysis and then move to a detailed assessment of the proposals to be undertaken to strengthen the single market and the EU’s competitiveness. In this opinion the EESC aims to analyse the most pressing issues addressed in the two reports.
2.2In the first part of this opinion, the EESC identifies the most urgently needed investments in various areas, while in the second part, it urges European decision-makers to adopt an approach to competitiveness that takes into account its social dimension and that includes economic, social and territorial cohesion. To this end, the EESC highlights the importance of supporting investments in social infrastructure, evoking the conclusions of the Val Duchesse Summit renewing European commitment to social dialogue and its importance for implementing the European Pillar of Social Rights and the La Hulpe Declaration.
2.3The EESC points out that the EU is facing a crucial strategic choice: actively shape global economic transformation by significantly boosting its own competitiveness, or preserve its past achievements, while ensuring that previous EU sustainability and climate commitments are respected.
2.4The EESC, in line with the Letta and Draghi reports, therefore stresses that it is extremely urgent to take swift action, and calls on the co-legislators to move forward.
3.The internal market and its future
3.1The EESC agrees with the Letta and Draghi reports that the single market is one of the main technical and political achievements of the European integration process. However, its original form must be reviewed to adapt it to the geopolitical context that has since developed and to demographic trends in the EU, which is set to see its workforce slashed by 2 million workers per year by 2040. Given the central role of duly enforcing the single market rules, the EESC would like to be directly involved in the single market enforcement taskforce.
3.2The EESC also considers it essential to continue work to further complete the single market, extending it to the finance, electronic communications and energy sectors, and strengthening the services sector, which currently still faces many barriers to integration.
3.3A stronger and more integrated single market will bring economic and social benefits. The EESC therefore believes that the proposals put forward in both reports to strengthen the single market and Europe’s single currency must be accompanied by fiscal, social and environmental policies that ensure that the benefits of the single market reach all EU citizens and workers.
3.4Both the Draghi and the Letta reports (the latter more implicitly) point to a renewed partnership between the EU Member States. This highlights the need for a debate on the fundamental rules of the EU and on the relevance of the current Treaties, in light of the ambitious actions proposed in both reports, from which information sent to the new Commissioners in the mandate letters was also taken.
3.5However, the EESC believes that the implementation of the Draghi and Letta reports could pose a challenge for the new EU economic governance framework (the reformed Stability and Growth Pact), in so far as this framework results in budgetary constraints that could have been to date too restrictive, as highlighted by the European Fiscal Board
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3.6The EESC supports the Letta report’s call for a single market that aims to boost environmental sustainability and economic prosperity, as well as the Draghi report’s call to make European ambitions in the field of sustainability an element of competitiveness. The EESC has for many years supported the transition from a linear to a circular economy, and civil society’s role in this.
4.EU global leadership
4.1The EESC agrees that in economic terms, the EU finds itself in competition not only with the United States, but also with emerging economies such as China and India, in an international environment that has become more complex than that in which the single market was first initiated. In this regard, the Draghi report outlines three key areas for action: i) the need to compete in the global ‘race’, closing the innovation gap; ii) the importance of reducing the strategic dependencies of non-EU supply chains; and iii) the EU’s ability to truly act in a united way.
4.2With this in mind, the EESC underlines the importance of an ambitious EU trade agenda and cooperation of the EU with global partners.
4.3The EESC supports Draghi’s and Letta’s assertions that the European economy, with its values and rules, must regain its competitiveness by increasing its international relevance, despite the rapid and continuous growth of major non-EU trading blocs and an alarming escalation of geopolitical tensions.
4.4The European Union must continue to play a leading role on issues related to climate change, pollution and biodiversity loss.
4.5In this context, the EESC believes that the EU must continue to be a vector of peace and democracy
, contributing to the search for new global balances and seeking a stronger role for the Euro in the global economy and increased opportunities to speak with one voice in foreign policy. The EESC calls for the possibility of adopting majority voting in this field to be explored.
4.6The EESC warns of the risks of fragmentation in global governance and the risk of the increase of trade tariffs. Problems in building beneficial international relations risk fuelling a race to gaining the competitive advantage, which could exacerbate tensions and conflicts, threatening peace, democratic values and the achievement of social and environmental objectives. The EESC also believes that achieving stable and lasting peace in the world also hinges on improving living and working conditions – in line with the sustainability goals provided for in the UN 2030 Agenda.
5.EU industrial policy
5.1The EESC appreciates the fact that the Draghi report identifies a strong correlation between industrial competitiveness and the sustainability of the European social model – founding value of the EU and the glue which holds the integration process together.
5.2The EESC shares Draghi’s views on the need to adopt an industrial policy that can overcome the current fragmented approach resulting from multiple national industrial policies that are not always coordinated. In fact, a structured European effort is the only possible way to ensure the right balance of tax, regulatory and trade/customs provisions and financial incentives that characterise the most recent industrial policies of the United States and China in a way that would genuinely benefit the single market. This effort should be made by streamlining legislative initiatives so that they are more targeted in qualitative terms to assess the impact on European companies and on the creation of quality jobs.
5.3The EESC believes that current (reduced) European investments in research, development and innovation, as well as shortcomings in the adoption of advanced technologies, could, at least in part, be remedied by greater and more focused public investment (according to Draghi, Horizon Europe’s objectives are too scattered). The EESC therefore agrees with the report’s call to concentrate investments in sectors with high-growth potential and to: i) focus and coordinate actions; ii) define an effective industrial strategy based on research and development and technological innovation; and iii) support industrial partnerships by strengthening central tools such as important projects of common European interest (IPCEI).
5.4As regards mergers, the EESC supports the overall approach set out in the Draghi report that suggests finding balance between competition policy and industrial policy, including by giving adequate prominence to strategic factors such as innovation and future or potential competition, including at international level. To facilitate this approach, the EESC, like the Draghi report, considers that there is no need to amend the EU Merger Regulation, but rather to update Commission’s guidelines. In this regard, the EESC urges particular caution when considering potential mergers in sectors that are strategic for the security of EU citizens (information and communication technology, dual use technologies).
5.5With regard to Article 101 TFEU, the EESC recognises the importance of providing clear guidance and templates for horizontal cooperation agreements between EU businesses, as proposed by the Draghi report, in order to facilitate investments in R&D, the transition towards sustainability and other policy initiatives.
6.EU regulatory framework
6.1In line with various positions that have already been taken, the EESC reiterates the importance of reducing the bureaucratic burdens and compliance costs on all businesses due to European and national rules, in order to boost the productivity and competitiveness of these businesses through better regulation and administrative simplification.
6.2The EESC would like to see the implementation of the European Commission’s proposal to reduce the reporting burden on undertakings by 25% by extending the scope of this measure to encompass bureaucratic constraints in the broadest sense, and setting a target of reducing the burden by at least 50% for small and medium-sized enterprises (SMEs), without undermining the private sector’s commitment to aligning its economic activities with common environmental, social and competitiveness objectives.
6.3The EESC therefore welcomes the call made to this effect in the Draghi report, which highlights how bureaucracy penalises SMEs in particular. In this regard, it is necessary to strengthen the impact assessments to be carried out on future measures, including by carrying out preliminary simulations supported by econometric and quantitative feedback. In this regard, the EESC also supports the suggestion that competitiveness checks be carried out before EU legislation is passed, and that these checks also be carried out for substantial changes or amendments that are made during the legislative procedure, in order to support entrepreneurship and the creation of quality jobs, improve working conditions and boost sustainable economic growth and social cohesion.
6.4The EESC suggests developing good legislation techniques that are in line with the principle of subsidiarity and that value the role of social dialogue and the involvement of social partners and civil society. Moreover, EU legislation must not open the door for national governments to reduce worker protections, but should promote decent work through rights and protection measures, fostering the convergence and improvement of the living and working conditions of European citizens, also considering the rapid evolution in the use of new technologies.
7.A banking union and capital markets union
7.1The EESC points out the strategic importance of the capital markets union (launched in 2015), reiterating at the same time the need to complete the banking union while ensuring that small-scale savers are protected and that the objectives of pension savings are respected.
7.2There is also a need to work towards a more complete European venture capital market. At its current size, representing a 5% share of the global total, the EU venture capital market does not even compare to those of the United States and China (representing 50% and 40% shares respectively), which results in objective difficulties for European innovators in the start-up and the scale-up phases, pushing them to take their projects outside the EU.
8.An energy union
8.1The EESC calls for regulatory choices that aim to reduce energy prices that are currently much higher in Europe compared to economies elsewhere, putting it at a competitive disadvantage. The reasons for this unfavourable situation are not just related to the lack of natural resources in the EU, but also to i) the slow pace of certain strategic investments in clean energy; ii) sub-optimal tax rules; and iii) the functioning of the derivatives market which can drive volatility (Draghi). Furthermore, as Letta points out, an additional penalising factor is the fact that energy markets are not fully integrated, which would give the possibility to reduce access costs and promote investments.
8.2Both reports therefore propose placing greater emphasis on the benefits of renewable energy and other forms of fossil-free energy, in particular through contracts for difference and the decoupling of the price of renewable energy from that of fossil energy, which is known to be more volatile.
8.3The EESC calls on the European Commission to support investments in renewable energy and evaluate the opportunity to support investment in other forms of fossil-free energy, to implement concrete measures to ensure that the share of the emission trading scheme (ETS) income allocated to Member States (currently around 75%) is invested in decarbonisation projects, such as those to develop solutions for carbon capture, use and storage (CCUS) and to produce and deploy hydrogen quickly.
8.4Both reports mention the importance of the CBAM in safeguarding European industry from carbon leakage and environmental dumping, but highlight some issues with this mechanism. The Letta report underlines the need to carefully consider the risks of competitiveness losses for European industry, including by reviewing its scope. On the other hand, the Draghi report questions the success of the CBAM, highlighting the fact that it is excessively complex, which in turn creates huge administrative burdens for businesses and runs the risk of fragmented implementation by Member States.
8.5The EESC agrees with the Letta report’s proposal that the Commission and the European Investment Bank (ΕΙΒ) set up a European Green Guarantee (EGG) scheme for investments to mobilise public and private funds for sustainability objectives. The current strong position that European businesses hold in clean tech sectors should be protected from the aggressive growth of Chinese businesses in this sector.
9.A knowledge union
9.1The EESC welcomes the Letta report’s suggestion to add a fifth freedom to the existing four freedoms of movement which would focus on knowledge, research and innovation.
9.2The EESC supports the actions identified in the Draghi report in the area of skills development to address the EU’s future challenges. Such actions are designed to close the innovation gap and improve the transition from invention to commercialisation for products and services. These valuable proposals include: i) support for upskilling and reskilling, especially in technology and digital sectors; ii) improving skills mobility; iii) simplifying access to funding; iv) creating public-private partnerships to establish relevant skills standards and training programmes.
9.3The EESC notes, however, that the Draghi report does not adequately emphasise the role that social dialogue can play to unlock such investments and trigger collective bargaining to support the transitions, or the importance of continuous training for employees.
10.The role of artificial intelligence
10.1The EESC would like to highlight the role and importance of artificial intelligence (AI) for developing a fifth freedom of movement based on knowledge, innovation and research, and for the more general need to boost the future productivity of the European economy by ‘vertically integrating’ AI in industrial processes.
10.2AI must be developed in accordance with the European Declaration on Digital Rights and Principles for the Digital Decade, and based on a development model that respects the plurality of information, the development of SMEs and the creation of new jobs.
10.3Given the pervasive potential of AI and new emerging technologies, an approach aimed at avoiding negative outcomes for workers as a result of using these technologies is needed. Legislative initiatives should address gaps in the protection of workers’ rights in the workplace and ensure that humans remain in control in all human-machine interactions.
11.The role of investment
11.1The EESC notes that the various measures proposed by the Draghi and Letta reports cannot be undertaken without massive investments, as pointed out by the parallel drawn in the Draghi report between the investments currently needed in Europe and the post-war Marshall Plan.
11.2The EESC therefore invites the European institutions to reflect on the possibility of issuing common safe assets (as was done during the pandemic) according to a new approach that is no longer linked to a specific emergency, but is geared towards long-term objectives and producing European public goods. In this context, the EESC believes that consideration should be given to the possibility of setting up a common EU investment fund financed through various instruments, including joint EU debt issuance, that targets projects of common European interest and with a governance that guarantees social dialogue.
11.3The EESC underlines the fact that investment spending has declined over the last two decades, which has led to a reduction in public capital stock in many EU countries. This decline in public capital, in addition to generating safety concerns, puts the quality and supply of public services at risk, to the detriment of economic growth, and therefore also of potential private investments.
11.4State aid rules could be adapted in the manner suggested by the Letta report, namely to achieve strategic objectives such as the green and digital transitions or even to help disadvantaged individuals break back into the labour market or make it easier for businesses to obtain financing. At the same time, an EU fund should be quickly set up for strategic investments of European interest that could help to shape the EU’s competitiveness and drive the green and digital transitions.
11.5The EESC also notes that while the competitiveness gap with the United States and China needs to be closed, it is equally important to point out that the European model stands out as a model of excellence in terms of welfare, solidarity, social inclusion, sustainability and addressing inequalities. In becoming more competitive and productive, the EU should preserve and renew this legacy of solidarity and equality by highlighting the role of the social economy.
11.6At the same time, it should also be stressed that if Europe fails to become more productive, it will be forced to choose between technological leadership, climate leadership and independence on the global stage, leading to difficulties in financing our advanced social model. The cost of transition must be shared collectively, therefore the EESC proposed the need for a just transition policy framework .
12.A defence union
12.1The EESC, evoking Article 3 TEU, according to which ‘the Union’s aim is to promote peace, its values and the well-being of its peoples’, believes that the EU must, at all times, promote its own diplomatic efforts to find a peaceful solution to any ongoing conflict.
12.2The EESC notes that the invasion of Ukraine requires the implementation of a European defence policy that cannot be separated from a common foreign policy. In this context, the EESC believes that investments will need to be boosted, including through new funding instruments that can improve technological development in the military sector, to protect the EU’s eastern borders particularly.
12.3The EESC therefore welcomes the requests in both reports for i) greater aggregation and coordination of demand at European level to increase economies of scale, including through joint procurement; and ii) an immediate implementation of the European defence industrial strategy (EDIS); and, in the Draghi report, for the swift adoption of the European defence industry programme (EDIP). The Letta report also mentions the need for a comprehensive approach to spending in the defence sector that takes into account market-oriented incentives at European as well as national level.
13.A union capable of delivering European public goods
13.1In light of both reports, the EESC believes that there should be reflection on European public goods in order to define the key priorities for the EU’s future. As the provision of such goods is linked to economic, institutional and political factors, an active role for the European institutions in this field could bring added value in the form of economies of scale and positive externalities, complementing the plurality of national approaches.
13.2The EESC therefore considers that it is important to ensure adequate investments in defence, as well as to promote, among others, investments in: i) the provision of cross-border digital and energy infrastructure; ii) the development of platforms for acquiring and exchanging skills; iii) the launch of joint procurement programmes for critical raw materials; iv) the joint supply of vaccines and health equipment; v) the creation of permanent vocational education and training programmes; vi) the implementation of healthcare services; vii) the reinforcement of social housing.
13.3In light of these considerations, the next multiannual financial framework (MFF) 2028-2034 should be geared towards the strategic priorities highlighted in both reports and towards the relevant investments in European public goods mentioned above. For this reason, the EESC hopes that the quantitative allocations of the next MFF will enable the EU to fulfil its strategic priorities in the areas of the environment, technological innovation, open strategic autonomy and social progress, and to adequately address global challenges.
13.4The EESC regrets that the Strategic Technologies for Europe Platform (STEP) introduced in the mid-term review of the 2021‑2027 MFF is far too small compared to similar initiatives in other countries.
13.5The EESC also believes, given the positive results produced during the COVID‑19 crisis, that consideration should be given to the possibility of re-launching another SURE instrument to provide support for upskilling, reskilling and sustainable and just twin transitions, and to cope with any contingent shocks,.
13.6The EESC hopes that the next financial framework will include a strategic investment instrument for European competitiveness to complement social cohesion, combining the perspective and logic of redistribution with the logic of investment, particularly in the areas of technological competitiveness and industrial transformation.
13.7The new ‘competitiveness coordination framework’ put forward in the Draghi report that suggests linking all relevant economic policies to the strategic priorities agreed by the European Council should be coordinated with budgetary matters and the new Social Convergence Framework through European Semester procedures.
13.8The European Semester could play a key role in fostering competitiveness, productivity, sustainability and social fairness, provided that these factors have equal status in the new reference framework. The development of the new competitiveness coordination tool, together with the implementation of the European Competitiveness Fund, aims to support economic growth by coordinating both EU and national objectives and priorities.
13.9The EESC would also like to point out the correlation between the European Semester and the new Social Convergence Framework (SCF), which is a useful tool for monitoring, assessing and implementing investments made by Member States to achieve the objectives of the European Social Pillar.
14.The importance of social and territorial cohesion
14.1It is crucial for economic, social and territorial cohesion to maintain a central role. The EESC points out that while the Letta and Draghi reports highlight a close link between the single market and economic, social and territorial cohesion (Letta), and between EU competitiveness and the European social model (Draghi), they tend to have substantial analytical differences and, consequently, different concrete proposals with respect to the major issue of economic, social and territorial cohesion.
14.2Cohesion policy plays a central role in the Letta report; it ensures that the benefits of the single market are fully distributed among all EU citizens and territories (‘the freedom to stay in the community of one’s choice’). It is in this context in particular that the importance of services of general interest (Article 14 TFEU and Protocol No 26 TEU) is highlighted, as they directly guarantee the freedom to remain in the community of one’s choice. Letta in particular identifies the European Semester as the most suitable policy framework to ensure that appropriate cohesion rules are applied, thus providing a counterweight to the multilateral fiscal and macroeconomic surveillance provided by the Stability and Growth Pact.
14.3The EESC therefore believes that it is the responsibility of the European Semester to identify minimum common standards and to remove any barriers to inclusion that persist to this day, in population groups at risk of poverty or exclusion, and in the geographical areas most vulnerable to economic transitions, in order to provide them with a sufficient level of cohesion.
14.4The EESC notes that while the Draghi report highlights the existing link between competitiveness and the European social model, it seems to doubt the strategic role of cohesion policy within the current MFF (2021-2027). It may also underestimate the effects on EU competitiveness brought on by investments in tangible and intangible social infrastructure, in support of social, redistributive and labour policies.
14.5The EESC calls for consideration to be given to the regional dimension of competitiveness, which was regrettably not a focal point in either of the two reports, but which was well captured in the EU Regional Competitiveness Index 2.0. The EESC believes that the EU’s competitiveness should also be analysed at regional level in order to implement many of the proposals put forward in the Draghi and Letta reports.
14.6The EESC wishes to highlight the risks of a competitiveness strategy that fails to take inequalities into account. Such an approach would widen the gap between rural areas, islands and inland areas, which are all at risk of depopulation, and urban areas, and also between different areas of the single market.
14.7Lastly, the EESC hopes that the Commission’s legislative agenda can balance the different visions put forward in both reports on the topic of cohesion, in order to fine tune competitiveness policies on the one hand, and economic, social and territorial cohesion and environmental sustainability policies on the other. Competitiveness must in no way undermine social cohesion and solidarity, since the harmonious development of the regions is key to ensuring the proper functioning of the single market, as well as its future growth.
Brussels, 26 February 2025
The President of the European Economic and Social Committee
Oliver RÖPKE
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