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A critical analysis of the European Single Market: cornerstone of innovation or obsolete institution?


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At the beginning of January 2025, the Financial Times reported the difficulties faced by the Belgian-based multinational Umicore due to European bureaucracy. This firm operates in the recycling sector where it deals with critical raw materials, such as components of old electronics.  The FT reported that a growing number of suppliers are exporting their waste outside Europe and are no longer working with Umicore. The reason behind  this decision is their desire to avoid navigating European internal proceedings. Indeed, as reported by the article, European practices imply dealing with documents in many different languages, while at the same time facing several different license regimes. 


At this point a fundamental question arises: has the Single Market truly achieved its goal of making cross-border economic activity seamless? 

The answer is far from obvious. The EU is characterized by the presence of a mechanism that should favor the integration of the single national markets, overcoming barriers such as those created by different languages or different national structures. Yet, Umicore’s struggles highlight a paradox at the heart of the European project: three decades after the Single Market’s creation, firms still face the same kind of bureaucratic barriers Although the Single Market remains Europe’s greatest achievement, it now struggles to fit a digital, green and multipolar world.

 

Origins and achievements of the Single Market

In January 1993, the then–European Community (EC) member states created the Single Market in order to ensure free movement of goods, services, people, and capital among member states. This was a significant step which was implemented thanks to the continuous work done since 1986, when the Single European Act was introduced. In the span of these seven years, several laws were passed in all the participating nations, with the aim of removing technical, bureaucratic and legal barriers which prevented free trade and movement across member countries. This introduction is generally considered a milestone in the history of the European Union, because it has the potential to significantly boost its competitive position on a global scale l. As stated by Arthur Cockfield, “A single market is not just about tariffs; it is about barriers of every kind — seen and unseen — that still keep Europeans apart”. As a matter of fact, when it was introduced it did provide a stimulus to the European economy which grew substantially and to the European market which became more attractive to investors. 


During the last thirty years the development of the Single Market led to several important results. Looking at numbers,: more than 17 million people nowadays live or work in an EU country  other than their own; intra-EU internal trade rose from €671 billion in 1993 to €4135 billion in  2023; more than 16 million people had the possibility  to develop their knowledge in a country different from their own, thanks to European mobility plans. 


These results and many others have been reached by the  introduction of several policies aimed at strengthening and improving the EU Single Market. Such policies aimed  to ensure higher levels of enforcement, information, coordination and monitoring. For instance, in 2009 the Points of Single Contact were introduced, making it easier for firms to access and meet their administrative requirements online. Another example is the EU Pilot, which is an informal pre-infringement mechanism meant to solve potential breaches of EU law  through dialogue with national authorities before formal proceedings.  



Challenges in compliance and legislation

Today, the Single Market  lies at the heart of “Europe’s competitiveness resilience, and capacity to lead in the digital age”.  Thirty years later, the game has changed. Others built world-class giants; Europe mostly built SMEs. About 99% of EU firms are small or mid-sized, and too few break out to global scale. Furthermore,  the EU has struggled to build EU-wide digital infrastructure that keeps pace with rapid technological change. Telecoms is a case in point: the market remains fragmented along national lines. These internal weaknesses are amplified by rising external competition. Let us think about the emergence of many Eastern economies, such as China and India, whose influence both on economics and politics has been rising significantly. Not to mention the surge of AI and demand for greener sources of energy. The Single Market, as noted by Enrico Letta in his report, was born in a simpler and less integrated world, which still did not know many players which are nowadays critical on a global scale. 


In a recently published report, the think-tank Bruegel analyses the main critical aspects characterizing the current situation of the Single Market and divides them into two main categories: compliance and legislation. 


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They find that, despite the introduction of many policies, countries are very slow in implementing them. They analyze transposition deficit, which is a measure of delayed EU rule implementation, and they show that in the span of the last 15 years there  have been no improvements. At the same time, the conformity deficit, measuring incorrect implementation of EU rules, has deteriorated in the last few years. 


Furthermore, regarding compliance analysis they report a high  number of infringement cases of the single market.  Regarding this issue, both Letta and a recent European Court of Auditors (ECA) report propose remedies: strengthen monitoring—by setting binding minimum criteria for investigations—and introduce tougher penalties to better deter infringements.


With respect to the legislation criticisms, they point out that although a reasonable degree of harmonization is indeed present, the existence of some gaps leave space for national differences to arise. For instance, in the field of consumer protection, there are several legislative gaps, implying that providers have to deal with 27 different sets of rules, which can discourage interaction with EU legislation completely. Moreover, there are areas that are politically sensitive —such as labour law— or that touch on sovereignty —such as taxation— which are not fully harmonized. 



The way forward: reforms and integration

 Rather than watching from the sidelines, the EU acted.  It has issued several reports and proposals such as the Single Market Report and the Single Market Strategy of 2025. These documents, diagnose the problems and propose a roadmap to make the Single Market fit for today’s challenges. First, the commission aims to focus on “removing the most harmful barriers” which hinder the process of moving both goods and services across European borders. Moreover, they plan to design legislation to reduce bureaucratic burdens on Small and Medium Enterprises (SMEs) . In addition, they propose the introduction of a Construction Service Act in order to make this sector, which now faces substantial barriers, more dynamic and to complement already existing initiatives regarding telecommunication sector. 


 Amid geopolitical and economic pressures, strengthening the Single Market must be a priority. Global instability — from Washington’s shifts to wars in Ukraine and Gaza — leave Europe exposed.  Big problems require big solutions. At this moment in history, Europe needs to step up and present creative solutions to strengthen its struggling Single Market, overcoming the illusion that an institution introduced in 1993 can still drive the continent’s economy after more than 30 years. This is the only way to ensure that the Single Market is considered a cornerstone of innovation, rather than an obsolete institution. 


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