Letta: Europe is a ‘financial colony’ of the US

The United States’ ownership of European citizens’ banking data and domination of global payment systems mean that the European Union is increasingly becoming a “financial colony” of the US, former Italian Prime Minister Enrico Letta said on Wednesday (2 October).

Letta, whose recent report on the single market is expected to heavily shape the EU policy debate in the next mandate, also warned that member states’ refusal to relinquish control of their domestic banking sectors to empower a cross-border European market risks exacerbating Europe’s financial subservience vis-à-vis the US.

“I think we are becoming more and more a colony in financial terms,” Letta said at an event hosted by Bruegel, a Brussels-based EU policy think-tank.

“What for me is strange is that all the different [EU] countries, there’s a race to raise our national flag. [But this is akin to] raising our own flag as colonies,” he said.

“So we have to work on our side and to leave the status of a colony, for instance, of the financial system and to integrate,” he added.

US platforms dominating payments market and financial data

The Italian politician, who currently chairs the Jacques Delors Institute in Paris, argued that digital financial transactions currently take place almost exclusively through US platforms – whether they are between European or US counterparties.

That also means that US firms’ control of digital payment systems not only allows them to extract hefty fees for processing EU-based transactions, but also facilitates their ownership of European citizens’ personal data, Letta argued.

“Data-based US platforms are owners of all our data, and we are a colony of them,” he said.

Letta’s report, published in April, called on EU policymakers to bolster a European market for the financial sector – one of the key industries that had been left unaddressed at the time of the creation of the EU single market in the 1990s, alongside telecoms and energy. He suggested centralising financial supervision and harmonising tax and insolvency regimes, among other ideas.

Letta’s comments on Wednesday come amid deepening concerns about Europe’s declining competitiveness relative to the US – as extensively laid out in another recent report by Mario Draghi, who also previously served as Italy’s prime minister.

French President Emmanuel Macron has also repeatedly stressed over the past year that Europe is at risk of becoming a US  “vassal” due to its failure to diverge from Washington’s policy over Taiwan, a self-governing island that China views a part of its territory.

Some security analysts recently argued that the potential re-election of Donald Trump as the next US president would also strengthen the case for EU countries to end their over-reliance on the US for geopolitical security.

European integration preliminary to transatlantic integration

Letta, however, emphasised that there was “nothing anti-American” about his use of the term “colony”.

His own report called for a “transatlantic single market” – the development of which, he wrote, “is not without challenges” but has a number of “potential benefits in terms of economic growth, job creation, and global influence”.

However, on Wednesday he warned that the pursuit of a joint EU-US single market can only be achieved if member states work to integrate their banking sectors and, more generally, relinquish their financial sovereignty.

Letta also said that development of such a transatlantic single market will become significantly more difficult if Trump, rather than current Vice-President Kamala Harris, is elected in November.

“I don’t think that with Trump it would be possible to have any kind of single [transatlantic] market. I think with Harris that we can open the discussion… But of course, [we can only] open the discussion if we are not a colony.”

Letta also mentioend Germany’s recent reluctance to allow Commerzbank, the country’s second-largest lender, to be purchased by Italian bank UniCredit as a notable example of EU countries’ banking nationalism.

In particular, Letta argued that policymakers’ and media descriptions of the proposed merger as “cross-border” is a serious misnomer, and reveals latent nationalist sympathies.

“Stop naming it as cross-border merger because we don’t have borders within the European Union,” he said. “It is not a cross-border merger, [because] it is a European border.”

“It’s an inter-European deal,” Letta said.

[Edited by Anna Brunetti/Owen Morgan]