The European Union is the world's largest single market, fusing 27 national markets into a pool of 450m consumers. In practice, services firms often find it harder to export within the EU than goods manufacturers, because national laws on labour, tax, professional qualifications and insolvency remain tangled. A pan-European company format, the Societas Europaea, was created in 2004 but has attracted few takers. Reports by former Italian prime ministers Enrico Letta and Mario Draghi proposed a "28th regime"—an EU-wide corporate form that would float above the 27 national systems, letting firms incorporate as an "EU Inc" subject to one set of common regulations. On March 18th 2026 the European Commission unveiled its version, called EU Inc. The proposal creates a European register for firms, but each company is still incorporated in a member state and governed by that country's law; preventive administrative, judicial or notarial control is required for every formation and amendment of articles of association, preserving the gatekeepers the regime was meant to bypass. It does offer two glimmers of ambition: an EU-wide stock-option regime with common standards, and a simplified insolvency procedure for startups—though the latter applies only to firms with fewer than 100 employees, excluding the fast-growing companies most likely to need cross-border insolvency protections. The key obstacle is that scaling companies requires harmonising tax, employment law and insolvency, areas that still require unanimity among member states, meaning a single country can block the rest: Germany blocks changes to labour law, France any effort to boost competition in services, Ireland and Luxembourg any move on harmonised tax bases.
The commanding heights of Europe's modern economy have been quietly captured by American firms: Apple and Google power mobile phones, Silicon Valley titans run the cloud, and Visa and MasterCard are often required for Europeans to pay other Europeans. In the 1990s the EU imported just half the natural gas it used, thanks in part to domestic production in places like the Netherlands; today 85% of all gas used is imported, over a quarter of it from America. Several thousand European banks once jointly owned a pan-continental payments system known as "Visa Europe"; well-intended EU regulations that capped the sector's profits made the business unattractive, and in 2016 the banks sold it to America's Visa, creating a new dependency. Getting environmental and other permits to extract critical raw minerals can take up to 20 years, according to the EU's auditors. The European Commission was due to unveil a "tech sovereignty package" in mid-2026.
The combined value of stockmarkets in the EU is 85% of GDP, compared with 220% of GDP in America. The European Commission has long sought to stitch together capital markets across the bloc, but each national market remains small. Market-based funding is more suitable for risky research and development than the bank lending that dominates European finance; venture-capital investors also need a deep capital market into which they can sell their holdings.
For decades European leaders dismissed a two-speed or "variable geometry" Europe as a second-best option, fearing it would undermine the single market. But by 2026 concerns about internal fragmentation had been trumped by the fear of inertia. "Coalitions of the willing" abound: a new "E6" of heavy hitters—France, Germany, Italy, the Netherlands, Poland and Spain—brands itself as a pioneering kernel of economic integration. An informal "E3" of France, Germany and Britain discusses security matters. When a €90bn package of assistance to Ukraine was blocked by Hungary, the Czech Republic and Slovakia, 24 of 27 governments pushed ahead regardless. Viktor Orban's defeat in Hungary's April 2026 election removed the EU's most persistent spoiler; his successor Peter Magyar promised to lift the veto on the Ukraine loan and restore a constructive approach in Brussels. The problem of managing democratic backsliding in a member state that has already joined the club, rather than one aspiring to, remains unsolved.
EU governments approved a €90bn ($105bn) loan for Ukraine in April 2026, after it had been blocked by Hungary's populist-right, Putin-friendly government. At a summit in Cyprus on April 23rd-24th, EU officials were given the task of exploring how Article 42.7, the bloc's mutual-defence clause, might work in a conflict—with a view to extending it to Ukraine as part of a provisional membership arrangement. France and Germany are pushing associate forms of membership for Ukraine, possibly involving observers' seats in EU institutions without voting rights.
Bart De Wever, Belgium's prime minister, coined the metaphor of a "European Onion"—multi-layered integration with a federalising core and looser outer tiers. Mario Draghi speaks of "pragmatic federalism". Such a model could also help countries outside the EU—such as Ukraine, which is being promised membership as part of a peace deal, or Britain—work more closely with the bloc through "outer-tier" arrangements. An existing treaty provision for "enhanced co-operation" among some member states has been little used.
Between 2014 and 2024 the European Commission considered over 1,000 proposals; some 660 were adopted. The EU's official beancounters at Eurostat estimate that reporting requirements and other paperwork cumulatively cost European businesses €150bn ($176bn) a year, equivalent to nearly 1% of the EU's GDP. The IMF reckons that selling goods and services across national borders in the EU costs firms the equivalent of a 44% and 110% tariff, respectively. A 2025 survey found German firms had to hire an additional 325,000 employees over three years to tick more bureaucratic boxes.
In March 2026 the 27 national governments jointly acknowledged that deepening the single market was "an urgent, shared responsibility". The commission is pursuing ten "omnibus" bills to streamline rules. One exempts firms importing less than 50 tonnes a year of dirty products like steel from the EU's carbon-border tax. Another lets firms with fewer than 1,000 employees and annual sales of less than €450m dispense with reporting some environmental risks. Companies with under 5,000 staff and €1.5bn in revenue no longer need to track their global environmental and human-rights footprint. Eurocrats estimate simplification could reduce businesses' annual administrative costs by €37.5bn by 2029. The Ifo institute found that 27 episodes of bureaucratic decluttering around the world between 2006 and 2020 raised GDP per person by an average of 4.6%.
The "28th regime" lets firms register digitally for less than €100 with no minimum capital. The commission also proposed services passports for telecoms. Negotiations on an "omnibus" relating to AI broke down on April 28th 2026.
Some 33,000 officials trudge into the European Commission's offices every day, alongside even more in other EU bodies. Overwhelmingly they embrace liberal values such as multilateralism, open markets and the rule of law. Power has steadily centralised under presidents Jean-Claude Juncker and Ursula von der Leyen, working through powerful chefs de cabinet, turning the commission from a technocratic apparatus into a "political commission". On April 28th 2026 Sabine Weyand, the EU's senior trade official who had been publicly critical of the Turnberry trade deal with Trump's America, was announced as being out. Some 170,000 applicants applied to join the EU institutions as entry-level administrators in a recent recruitment drive, shattering past records; fewer than 1% will be granted entry.
The anti-coercion instrument is the EU's most powerful economic weapon, a mechanism that has never been used. It would allow the EU not simply to adopt matching tariffs in response to foreign levies but to resort to entirely different forms of retaliation—from cancelling banking licences to restricting exports. Emmanuel Macron suggested invoking the ACI in January 2026 during the Greenland crisis, when Donald Trump imposed tariffs on eight NATO members. The crisis was defused before the instrument was tested.
On January 27th 2026 the EU and India announced a free-trade pact, alongside a security and defence partnership, a deal on skilled migration and an agreement to explore expanding India's participation in Horizon, the EU's flagship research-funding programme. Ursula von der Leyen, president of the European Commission, and Antonio Costa, president of the European Council, were guests of honour at Indian Republic Day on January 26th. The deal is shallower than others the EU has recently signed, reflecting India's protectionism; tariffs on European cars will gradually fall from 110% to 10%, subject to a quota. The EU also signed a pact with Latin America's Mercosur trade zone on January 17th 2026.
On December 3rd 2025 the EU unveiled its ResourceEU strategy to co-ordinate member states' efforts on rare earths, pushing for joint procurement and stockpiling. A European critical raw materials centre, modelled on Japan's equivalent, is to be set up as a strategic headquarters. The EU is scraping together €3bn ($3.6bn) to invest in supply chains and in recycling the 34 types of mined commodities it deems critical.
The EU is home to only three of the world's top 50 tech firms by market capitalisation; its largest bank ranks 16th globally. More than 270 regulators oversee digital networks across the bloc. Mario Draghi, in his influential 2024 report, argued that competition policy needs to change to support innovation and secure supply chains. Ursula von der Leyen went further, calling for "European champions" and "merger guidelines that reflect the realities of the global market, not just the European one". In early 2026 the European Commission was expected to publish draft merger guidelines that would be more lenient. Critics counter that the barrier to scale is not competition policy but the incomplete single market: banking remains national, telecoms spectrum auctions are largely national, and defence procurement is fragmented. Where the single market is fully integrated, European firms have achieved world-beating results—ASML, Spotify and SAP among them.
At an informal meeting of EU leaders in Alden Biesen, a castle in Belgium, on February 12th 2026, Ursula von der Leyen promised to present a plan called "One Europe, One Market" by March 20th. The plan combines the EU's traditional liberal approach with more muscular protective measures: lightening regulation, pursuing more trade agreements (including with Mercosur and India), deepening capital-market integration with common supervision, creating a "28th" regime of corporate law, and using competition law to promote larger "European champions". The most controversial element is "Buy European" clauses in public procurement, which smaller and more liberal member states fear will increase costs and alienate allies. Requirements that weapons be mainly bought from EU firms were included in a €90bn support package for Ukraine and the EU's €150bn internal defence funding scheme.
The EU's emissions trading system (ETS) puts a price on carbon, currently about €66 per tonne, adding approximately €25 to the price of a gas-powered MWh. The system has come under fire from countries desperate to lower energy costs during the Iran war; Giorgia Meloni, Italy's prime minister, called for suspending it. Eight countries, including Spain, sent a strongly worded letter defending the ETS; it will probably survive, but its schedule for phasing out free emission permits to energy-intensive industries by 2034 could be extended.
The EU must invest €1.4trn in its electricity grid by 2040, according to its own estimates. System costs, including grid upgrades, already make up around 20% of household electricity bills. A study shows that connecting different parts of Europe's grid to balance peaks and gaps could save about 500GW of costly backup capacity. A commission grid package from December 2025, proposing more centralised planning, faces opposition from France (nuclear power) and Sweden (hydropower), which are reluctant to share their cheaper electricity.
Some 37% of EU businesses report using generative AI, on par with America. In manufacturing, European firms are ahead. In January 2026 the European Commission launched an effort to identify and remove barriers holding back open AI models. Although the EU is not about to become a model-building superpower, it can be a world leader in putting AI to work. Using open models, including from China, could increase its lead in applied AI.
The Turnberry Agreement is a trade deal the EU signed with the United States under which Europe accepted a 15% tariff rate without reciprocating. In January 2026 the European Parliament put the agreement on hold after Trump's Greenland tariffs, meaning European tariffs were set to take effect on about €93bn ($108bn) of American goods. They were deferred again after the crisis was defused.
Love thy neighbor as thyself, but choose your neighborhood.