High-profile report urges EU to create a ‘fifth freedom’ of research and innovation

The European Union needs a revamped single market that includes a “fifth freedom” dedicated to the free movement of research, innovation, knowledge and education, according to a high-profile policy report by former Italian Prime Minister Enrico Letta.

Letta’s report has been presented to the European Council, which will discuss it during a two-day summit in Brussels this week in the context of the bloc’s economy and competitiveness. It could have far-reaching consequences on the future structuring of not just the EU’s single market, but also its R&I landscape and funding programmes.

The report argues that the single market, which is based on the free movement of goods, services, people, and capital, is “outdated” and not fit for the 21st century. Those four freedoms “fall short in addressing the shift from an economy based on ownership to a new one, based on access and sharing,” Letta writes. 

The report is the result of over 400 meetings that Letta held with various experts across Europe between September last year and April this year. It is part of a broader exercise by the Council to rethink what’s working and what’s not working in current single-market policy; and the appointment of Letta to organise it was intended to give it impact. But the prominence the report gives to R&I policy came as a surprise to university and science lobbyists now battling for bigger budgets in Brussels – but was also criticised by some leading R&D policy makers. 

In many ways, the document reflects what the EU’s R&D community has been saying for years. That is, research funding streams need to be better aligned, public-private partnerships boosted, data sharing made easier and more accessible, open science be pursued while maintaining research security measures, EU R&I laws be harmonised, the use of regulatory sandboxes expanded, and more.

However, while the R&I community in general welcomed the report, Christian Ehler MEP warned that the vision it presents could be a “misunderstanding of the value and functioning of R&I”.

“R&I needs freedom and flexibility to develop new ideas, technologies and knowledge on which we can build our future competitiveness. It should not be a predetermination of what our economy will look like, which technologies we will use,” Ehler told Science|Business.

He is concerned that this top-down framing of science and technology could spill over into plans for the EU’s next multiannual R&I funding programme, FP10, due to begin in 2028. “FP10 cannot simply become an implementation instrument of a European planned market economy,” he said.

A new vision of an old idea

Letta’s vision for an improved single market goes beyond just facilitating the flow of research and innovation; it “critically entails embedding research and innovation drivers at the core of the single market”.

If Europe does not address gaps in its single market, it will continue to fall behind global competitors such as the US and China when it comes to economic output and competitiveness, Letta warns.

“The EU is not just losing ground to the US because of the fragmentation of our market but also because of innovation, we are lagging behind and part of the problem is that the single market is based on four freedoms from the 20th century,” he said during a press conference presenting his report today. “The idea is to try to launch and underline the importance of this fifth freedom,” he added.

While Letta’s report is new, it is not novel. Former EU research commissioner Janez Potočnik published a paper back in 2007 arguing in favour of making knowledge a fifth freedom. His vision is similar to Letta’s and generally calls for the same reforms.

At the time of Potočnik’s paper, the idea of creating a European Research Area (ERA), a single market for research and innovation first suggested in the year 2000, was struggling to get off the ground. Potočnik wanted to make the ERA dream real and said, “I want to see how far we can go”.

The ERA is now explicitly an EU treaty objective and was revamped in 2018 with a first ERA policy agenda for 2022 to 2024. The EU has also created a European Education Area, a higher education equivalent to the ERA, and has passed several measures to better coordinate cross-border research, education, data sharing and collaboration.

So while Letta’s vision is not revolutionary, commentators said, his suggestion that research, innovation and education become a fifth freedom of the single market could give greater impetus to creating a fully functioning ERA.

Mattias Björnmalm, secretary general of university association CESAER, said Letta’s suggestion is welcome. “The objectives of ERA are mandatory in the EU, but the implementation appears to be voluntary,” he said. “There is nothing voluntary about the free movement of goods or people, and this should be the same when it comes to the ‘fifth freedom’,” he added.

Björnmalm has previously argued that the ERA needs a reboot and that the ERA Forum, which brings together the European Commission, member states and stakeholders from the EU’s R&I community, could become a vehicle to amp up the ambition, and to focus on the high-level status of ERA as the fifth freedom.

Kurt Deketelaere, secretary general of the League of European Research Universities, called the report an “interesting document” that is fully in line with what LERU has been defending for years. “We need a legal underpinning of the fifth freedom, which must lead to an elimination of EU and member state legal obstacles to the free circulation of knowledge,” he told Science|Business.

Maria Leptin, president of the European Research Council, the EU’s primary basic research funding body, also welcomed Letta’s report. “We agree that there needs to be a radical step change in our support for research, innovation and education,” she told Science|Business. “The ERC Scientific Council has indeed long argued, as Letta does, that this is an era where technology increasingly dominates and where Europe grapples with the challenge of keeping pace with swift global advancements.”

What is lacking from the report is a specific budget goal for R&I investment in the EU. “The report states that addressing the investment gap in research and innovation is paramount, but it doesn’t refer to the EU’s own responsibility to lead the way and reduce the investment gap,” said Thomas Estermann, director of governance, funding and public policy development at the European University Association (EUA).

He said the EU has a chance to address this in the planning of FP10. The EUA, like many other research and university associations, is calling for it to have a budget of €200 billion, over twice that of the current Horizon Europe programme.

Education

In his report, Letta addresses the European Education Area as a “crucial dimension of the fifth freedom,” including recommendations to boost education mobility and the recently debated European degree announced by the Commission.

The role of the European Universities alliances supported by the Erasmus+ programme would be pivotal in introducing this new type of degree, the document says. Because of this, Letta recommends, “A leap to €10 million annually for each alliance, culminating in 600 million euros per year across the current spectrum of 60 alliances.”

While it’s nice to see increased support for the Higher Education Package, LERU’s Deketelaere told Science|Business that some questions remain unanswered. For example, Erasmus+ would manage two-thirds of the €600M supporting funds, but Deketelaere argues the document does not clearly state who or what will contribute the rest of the capital.

Moreover, Letta calls on member states to enshrine the European degree into law to remove the administrative and legal barriers that hinder joint degree programmes. However, harmonisation in education is hard with member states holding sole legislative responsibility in the field, and the report does not mention making education a European Parliament shared competence, a measure MEPs have long pushed for.

‘Knowledge Commons’ and more

Overall, Letta’s report touches on a vast swathe of areas in the EU’s R&I ecosystem.

For example, to improve the EU’s cross-border data sharing capabilities he wants to see the establishment of a European Knowledge Commons, “a digital platform pooling publicly funded research, data sets and educational resources”. It is not immediately clear how this would differ from the already established European Open Science Cloud, which has similar goals.

Elsewhere, Letta calls for an expansion of Marie Skłodowska-Curie Actions, grants that support the mobility of postdoctoral researchers. There is no mention in the report of the ERC, to the disappointment of LERU’s Deketelaere. “Why does he write such a nice chapter on research, innovation and education but does not mention the biggest R&I realisation of the EU, the ERC?” Deketelaere said.

Letta wants the EU to move towards a Common Market for the Security and Defence Industry, which would go beyond the EU’s European Defence Industrial Strategy presented in March this year.

A more offbeat suggestion is the creation of an EU Deep Tech Stock Exchange financed through pension funds or large asset management firms. The point is that investing in deep-tech start-ups is high risk due to their nature of trying to commercialise cutting-edge technologies, and so small investors cannot afford to gamble on them, and often don’t have sufficient capital to back them.

On space policy, the report takes aim at the currently disjointed set-up in Europe. For example, it praises the European Space Agency’s geo-return policy, which means that ESA’s member countries benefit proportionally from their financial contributions to the agency. But it goes on to say that the model is “no longer adequate for today’s global, competitive space economy”. Letta suggests this model is applied only to “R&D, science, and other programs that do not yet have a commercial and competitive market”.

It also questions how ESA, which is not an EU institution and has the UK as a member, can work alongside the EU Space Programme Agency (EUSPA), saying “clarity and complementarity” are essential.

Finally, the report extensively focuses on the role of SMEs, which according to Letta is one of the most important challenges for the future of the single market, which is currently exploited mostly by big enterprises and companies.

“To accelerate innovation, tackle societal challenges, and bolster European competitiveness, the EU must actively encourage public-private partnerships in strategic areas focused on knowledge exchange and innovation uptake, with targeted support for SMEs and startups,” reads the document.

The current fragmentation of the Single Market, as Letta explained during the press conference, hinders SMEs because of many reasons, including administrative burdens like business law and the taxation system. Reducing these obstacles and harmonising state aid rules would boost SMEs’ access to support and, thus, improve European R&I.

Letta’s report on the single market precedes that of another former Italian Prime Minister, Mario Draghi, who is working on a paper on EU competitiveness that he promises will propose “radical change” and is due to land later this summer.