Kadri Veermäe
Journalist
July 13, 2026
Kristen Michal: Europe’s Dullness, Predictability, and Stability Have Become an Advantage
The single market is one of Europe’s strengths only if it actually works.
Instead of a rulebook that tries to cover every question and exception, the focus should be on simplification and competitiveness, so we can invest in defence and technology, says Estonia’s Prime Minister Kristen Michal.
This Lennart Meri Conference focuses on Europe. In recent years, one of the most influential analysts, Mario Draghi, offered some solutions to the EU’s economic struggles. A key message of his widely discussed 2024 report is that Europe has become bogged down in its own constraints and regulations and has thus fallen behind the United States and China. Is the volume of regulation the main reason for the EU’s slow economic growth?
In February, Enrico Letta and Mario Draghi, both former Italian prime ministers, attended the European Council’s informal summit. Both have written reports that follow a similar line of thinking: how Europe could function as a genuine market.
I would start by distinguishing between different levels of regulation. It is very easy to say that European rules prevent us from doing things. Sometimes that is true, but let me give an example I also raised at the summit in February. If you look at ridesharing, there are many market-protection rules at the local level.
In Estonia, it is a simple, widely used service for both young and old. The odd thing is that there is one large European country—I will not name it, to avoid putting it under pressure—where a ridesharing provider is not allowed to show the final price of the service. So, if you travel from point A to point B, you do not see the cost. What’s the point? That is precisely why you use the service: you know where you are going and how much you will pay. There is also another country where a ridesharing provider must have a garage. Or a third country where a 20-minute break is required between rides. What exactly is supposed to rest—the car or the app?
The problem arises when we take this too far and try to impose a uniform legal regime.
This shows that the problem is often not just European rules. In some markets, protectionist measures exist at the national level. This is particularly true in larger markets and more traditional sectors. Addressing this depends on the willingness of the member states themselves, and it also calls for certain standards across Europe.
In economic competition with actors such as the US and China, common European standards are entirely reasonable. The problem arises when we take this too far and try to impose a uniform legal regime that accounts for and protects every possible interest in every country and every sector. That is often too much.
In their reports, Letta and Draghi argue that things should be simple, with as few rules as possible, and that the economy and markets should be allowed to function. Letta even spoke of “one market” rather than a single market, stressing that it consists of distinct markets—capital, services, and others.
Omnibus packages currently in progress must be pushed through.
Our contribution to this debate is a description of how to make things simpler, namely through the ‘once-only’ principle, which means you should only have to submit your data to the state once. This idea has been taken up by European Commission President Ursula von der Leyen and European Council President António Costa in their speeches. At the most recent European Council, I sincerely wished von der Leyen strength in implementing it, because ‘once-only’ is not easy to apply even in Estonia.
At the same time, if the data already exists, then all unnecessary rules should be removed. When entrepreneurs are asked why they do not enter certain markets, there are naturally many factors, such as market size or access. But often, it is because they would have to learn an entirely new legal regime.
That said, I expect the world to change for the better. Perhaps even within a year, artificial intelligence—and I am not an apologist for any particular technology—will offer ways to navigate the maze of different markets and rules with the help of machines.
To sum up: simplify European rules, reduce administrative and reporting burdens as much as possible, and conduct systematic reviews. All those omnibus packages currently in progress, which include further simplifications, must be pushed through. The simpler the coordinated services market is, the better.
The single market is one of the pillars of Europe’s strength—its “superpower”.
If we look specifically at the services market, it remains problematic. Of the barriers to the single market identified in 2002, 60% still remain—20 years later. In Europe, we are something of an outlier—like a blue, black, and white lantern—with relatively few restrictions and systems that function.
The single market is one of the pillars of Europe’s strength—a “superpower,” as von der Leyen calls it. But it is only a strength if it actually works. Otherwise, anyone who wants to grow and innovate will simply move on to the next market.
At the Munich Security Conference, you said in a panel on European competitiveness that at summits, everyone readily agrees to simplify single-market rules, but then each country thinks things should be done in its own way. How can we overcome this obstacle?
Jokes aside, that is exactly how it always is. In discussions about the European market, we need to reach a point where, in certain areas, we agree on a minimum baseline and set common rules.
The idea of a 28th company law regime is once again on the table: I was Estonia’s minister of justice in 2011–12, and I have reminded Ursula von der Leyen of this more than once that already back then, we were discussing the need for a single, unified company law regime in Europe. The idea is straightforward: large companies would also enter smaller markets because they would no longer have to worry about taxation, legal disputes, or differences in consumer protection. The system across the EU would be broadly similar, although taxation would remain a national competence. Right now, there are discussions about a common EU Inc. It is difficult to say how the negotiations will unfold, but it will likely happen.
There is no definitive answer to this question—the search continues—but my recommendation would be to aim for the simplest possible regime, one that allows new services and new sectors to grow in Europe without having to relocate elsewhere. So far, Europe has tended to look for the most complex regime that tries to answer every question. I would take a different approach: perhaps we should look for a regime that makes things as simple as possible, while remaining competitive.
In Estonia, the prevailing view is that if you simplify a given area, people will start to act on their own. Any problems that arise in the economy can be addressed later. There is no need to assume from the outset that everything will go wrong. When it comes to startups, we have proposed several solutions in Europe: a digital business register, the e-residency programme, digital signatures, a startup visa system, and model contracts developed by the sector itself. Another issue is what we do with data. Estonia has a strong ICT sector: a company scales up and starts operating in multiple locations, creating twin hubs such as Tallinn–Amsterdam or Tallinn–London. But when it comes to using data, businesses move to markets where the framework is more flexible. Europe has markets, and it has capital, but this is often where the problem lies.
If we turn to European industry, one factor holding it back is high energy prices, partly due to a fragmented market and the geopolitical situation. Some EU countries will continue to buy natural gas from Russia until 2027. [During the war in Ukraine, the EU has purchased an estimated €200 bn worth of oil and gas from Russia – K.V.] Why has it been so difficult to reach an agreement on something so fundamental?
[Sighs] From Estonia’s side, we have been extremely frustrated. Our message has been clear: stop it. Why are we giving Putin money through energy trade—money that can be used against us in intelligence and security operations or to kill women and children in Ukraine?
We should call out those who are still hooked on Russian energy.
As to why some countries are still on that pipeline—or ‘on the gas needle’—it ultimately comes down to political leadership. I do not want to stigmatise any country, but this has been discussed publicly on many occasions. In the cases of Prime Minister Robert Fico and former Prime Minister Viktor Orbán—and Prime Minister Andrej Plenković in Croatia has said it, too—the reality is that Hungary and Slovakia could source their fuel elsewhere. So, the issue is not a lack of alternatives; it is simply the price.
Estonia and the other Baltic states, however, are paying a very high price, because we have cut our ties with Russia and invest in defence every day. Our defence spending is at 5.4%—that is not easy. We are building physical infrastructure and networks to protect critical assets against potential threats. Every day. I would say that whenever possible: we should call out those who are still hooked on Russian energy. This is not acceptable, and it is not even rational. If others have already paid the price to push a dictator into a corner, then the European Union should act together.
President Donald Trump could even be considered for an environmental award this year.
How do we break free from this? In my view, the answer is quite simple. First, we must agree that we will not continue to import Russian energy, as the EU has done with gas, and most have also moved away from oil. Second, we must simultaneously start working out what the energy mix should be. That mix will likely differ from country to country, ranging from nuclear to renewables. The latter in particular has come back into focus because of the Strait of Hormuz. What is happening now will almost certainly give a strong boost to both renewable and nuclear energy projects over the next five years. It has suddenly reminded everyone why we do not want to depend on fossil fuels to such an extent—because cruel autocrats, whose nuclear button is being pushed further away, can close the Strait of Hormuz. So, in a way, I suppose President Donald Trump could even be considered for an environmental award this year.
Returning to the question of unity, could the EU move from unanimity to qualified majority voting to avoid situations where, for example, €90 bn in aid to Ukraine is held up?
Many countries have so far been cautious about giving up the right to veto, both in foreign policy and in taxation. I support a more unified Europe because for a small country, this provides stronger security cooperation and, from a market perspective, greater strength externally. Unfortunately, this is not something we are likely to see anytime soon.
To be frank, regions competing with Europe would much prefer a weak, fragmented, and indecisive Europe. It is in our interest to have a strong Europe, and the general direction is towards that, but there are still many discussions ahead, and no one is about to change decision-making mechanisms overnight.
Let us return briefly to competitiveness. French President Emmanuel Macron has proposed that the EU jointly borrow €1.2 tn to increase defence spending and invest in technology and green energy. Do you support this?
I can say that Friedrich Merz has already responded that Germany does not support it. There are historical reasons for this, and each country has its own view on public finances.
We have generally supported borrowing in areas such as defence, so in that sense, it is broadly acceptable to us. But borrowing simply to expand the budget is more problematic. If the goal is to boost competitiveness by increasing debt and claiming that this will make us more competitive, those two directions may at some point begin to work against each other. We have supported defence-related Eurobonds and joint European borrowing, but there is a limit to that as well. The EU has always had its more frugal member states and those who argue for borrowing, investing, and then assessing the outcome later.
How can we make better use of the fact that the US and China are the EU’s two largest trading partners? Can we leverage this in our own interests?
We certainly can, and I believe we are already doing so. Many people feel that in recent crises, Europe has been in a weaker position. But from the perspective of the European Council table—and this may surprise some—the opposite is true: Europe’s dullness, predictability, and stability have become a significant asset in the economy, in trade, and in diplomacy.
Free trade agreements with different states and the ability to decide on economic, market, and investment matters, as well as to determine who gains access to which markets, are powerful currencies. Through the impact of our market—access, decisions, and policies such as visas—we are able to influence a large part of the world, as far as our reach extends.
Yes, the EU may not have the same military capabilities, and yes, our decision-making is not like that of a state with a single leader. But we can decide what we do in our market and how we conduct our affairs, and we can certainly influence the world in a good way.
If you look at public opinion surveys, people often say that new technologies are unnecessary and that things already work well. But investment, including in clean energy solutions, has helped bring prices down. For example, in Estonia in spring, when the sun starts shining and the wind is blowing, prices fall immediately. This is an area where Europe has taken a global leadership role, and it has done it well. The direction—towards a cleaner planet for our children—is the right one.
Yes, we are able to exert influence—through our economic weight, trade, and investment.
Could the growth of the European defence industry and the idea of prioritising Europe have a negative impact on alliances?
It might create some underlying tensions, but at the moment, the defence market is a seller’s market. In practice, everyone is standing in the same queues and will continue to do so for a long time. Countries have to make choices: if you want capabilities quickly, you have to go to the United States, South Korea, or Israel.
Europe urgently needs its own production capacity. Russia’s economy is roughly the size of Italy’s, yet it still produces more armaments than Europe. This is not a good situation and should not be considered acceptable.
At the moment, the defence market is a seller’s market.
If we want to take on more responsibility for regional security—something the United States has also signalled—then the defence industry is key. Five or ten years ago, the defence industry was not seen as part of defence capability, but that paradigm has shifted in light of Ukraine’s experience. There are several reasons for this. First, you have to have the necessary equipment; second, you need weapons that you can use without permission from others; and third, if something goes seriously wrong, you can rely on this capacity.
Industrial and economic interests will always compete, but right now, everyone is in the same queues, and waiting times for weapons and systems stretch into years. It is understandable that countries are thinking about how not to remain stuck, waiting indefinitely to buy weapons from the previous era’s conflicts to use in the next one, even if they have proven to work.
Europe, therefore, needs to strengthen its capabilities—there is no doubt about that. For Estonia, this presents a real opportunity: our defence industry and the new generation of companies working in this field—DefSecIntel, Frankenburg, Milrem, GoCraft, the entire Estonian Defence and Aerospace Industry Association—should be given every chance to grow.
Is it possible for Europe to build a defence industry based on raw materials from trusted partners?
It should be able to do it, but this is part of a broader discussion about Europe’s industrial and competitiveness policy. We have addressed this at recent European Council meetings. The person responsible is Stéphane Séjourné, European Commissioner for Internal Market and Services, and the issue relates to the RESource programme, through which the EU organises joint procurement to ensure the security of supply of critical raw materials.
Let me give an example. With EU support, a Canadian company, Neo Performance Materials, has built a magnet factory in Narva in 500 days, using raw materials sourced globally. This is part of a critical industry—permanent magnets for cars, wind turbines, and other applications. Relying solely on European raw materials for everything is not realistic; nor is closing ourselves off and trying to manage entirely on our own. But we could follow a more balanced approach, which we have discussed in various forums: use what is available within Europe, and source what is not from trusted partners. That helps ensure secure supply chains. This is crucial because if something critical stalls or fails to move at the wrong moment, all good intentions to produce can come to nothing.
The same applies to the defence industry. Over the next five, ten, or fifteen years, this sector will grow in Europe because the threat from Russia is well understood and has only been intensifying. Alongside this come components related to artificial intelligence, an area where we, as countries, remain heavily dependent on external services and partners.
The EU also needs to act more like the US or China: be more deliberate in financing, agreements, and planning.
The United States is investing $600 bn in data centres [projected combined capital expenditure by major US technology companies by 2026 – K.V.], while Europe is far from that level. Last year, I met Mistral AI CEO Arthur Mensch, who attended the Tallinn Digital Summit organised by the ICDS in 2025. He said that in the next phases of both economic development and military confrontation, the decisive factor will be who has greater capacity. That is likely true, at least in part.
In that sense, strategic autonomy is necessary, as we must be able to secure and diversify our supply chains ourselves. It may sound blunt, but the EU also needs to act more like the US or China in this respect: be more deliberate in financing, agreements, and planning, so that we have functioning supply chains and, where needed, the capacity to develop new technologies that allow us to produce what different systems require. At the same time, we cannot assume that we will be able to build a defence capability that can produce everything we need independently in every crisis.
How much do you use AI in your daily life, and what do you use it for?
I use a wide range of applications: I compare things, run analyses, process texts and materials, and verify information. For me, it is a very practical tool. I use Claude for certain types of analysis and ChatGPT as a language model. Each has its own role. I also subscribe to various briefings and alerts. The machine does not sleep, and if something happens, it notifies me. Copilot is also used at the Government Office to analyse materials. And just to be clear, so that no one has any doubts: we do not process anything classified with it. There is no need for concern.
This article was written for the Lennart Meri Conference special issue of ICDS Diplomaatia magazine. Views expressed in ICDS publications are those of the author(s).
