The European Union’s Single Market remains one of the most ambitious economic integration projects in modern history. Encompassing approximately 450 million consumers and generating around €18 trillion in gross domestic product, it represents one of the largest integrated economic areas in the world.[1] Accounting for roughly 18 percent of global GDP, the Single Market is not merely a regional framework but a central pillar of the global economy.
For Germany, whose economic model is strongly export-driven, the EU internal market is its most important trading partner, absorbing more than half of German exports and serving as the foundation of its industrial strength.[2] The German Federal Government, has recently published a non-paper titled “Single Market Action Plan”, in which it calls on the European Commission to put forward concrete proposals to operationalize the Single Market Roadmap and accelerate the EU’s progress in energy, telecommunications, and capital market. This non-paper and its suggestions will be detailed below.
I. A Market of Scale – But Not of Full Potential
The non-paper points out that over the past two decades, productivity growth in the European Union has significantly lagged behind that of the United States. This has been highlighted in the European Commission’s follow-up to the Draghi report, which underscores that the widening transatlantic productivity gap reflects structural weaknesses in Europe’s economic architecture.[3] The International Monetary Fund similarly argues that fragmentation within the Single Market suppresses productivity and limits the ability of firms to scale across borders.[4]
Strikingly, the IMF estimates that intra-EU trade barriers correspond to tariff equivalents of around 44 percent for goods and more than 100 percent for services.[5] This suggests that while formal tariffs have long been abolished, regulatory and administrative fragmentation continues to function as a powerful economic constraint. The European Central Bank confirms that significant untapped growth potential lies in deeper services integration.[6] In a geopolitical environment marked by industrial competition and strategic rivalry, completing the Single Market thus becomes not only an economic priority but a strategic imperative.[7]
II. Unlocking Services and the Digital Economy
The most pronounced weaknesses of the Single Market – as highlighted by Germany’s non-paper as well – lie in services, which account for roughly 70 percent of EU GDP but remain significantly less integrated than goods markets.[8] National licensing regimes, administrative burdens, and diverging standards particularly affect small and medium-sized enterprises (SMEs), which constitute the backbone of the European economy.[9]
Germany’s proposal to introduce an EU-wide eDeclaration system for posted workers aims to reduce administrative complexity in cross-border service provision while maintaining labour protections.[10] Simplifying notification requirements through digital tools would reduce compliance costs and enhance legal clarity, addressing one of the most persistent obstacles identified in the Commission’s Single Market Strategy.[11]
Digital regulatory simplification extends further. The growing body of EU digital legislation – including the GDPR, the Digital Services Act, and the AI Act – has strengthened consumer protection and fundamental rights but also increased compliance obligations. The European Parliament’s Think Tank argues that simplification efforts, if carefully designed, could enhance competitiveness while preserving high standards of data protection.[12] Meanwhile, instruments such as the Digital Product Passport, embedded in the Circular Economy Action Plan, demonstrate how digitalization can simultaneously support sustainability and market transparency.[13]
In this sense, Germany’s call for a “fit-for-digital” review of EU legislation seeks not deregulation but smarter regulation – rules that are coherent, interoperable, and proportionate. Creating a common digital framework for automated and standardized data exchange is necessary to improve efficiency and cut costs and time for businesses and public authorities.[14]
III. Capital, Companies, and the 28th Regime
Beyond services liberalization, the German non-paper emphasizes structural reform of Europe’s corporate and financial framework.[15] The proposed “28th regime” – a voluntary EU-wide corporate legal form – would provide companies with a harmonized framework for cross-border activity. Legal fragmentation in company law, insolvency rules, and corporate governance continues to deter entrepreneurs from scaling across Member States.[16]
Efforts to deepen the Savings and Investments Union build upon the long-standing Capital Markets Union initiative.[17] However, progress in integrating European capital markets has been limited. The IMF stresses that deeper and more unified capital markets are essential for mobilizing private investment and financing innovation.[18]
Political leaders increasingly recognize that without integrated financial markets, European startups will struggle to compete globally.[19] The 28th regime could therefore become a cornerstone of a more entrepreneurial and investment-friendly Single Market, provided it balances harmonization with respect for national labour and social standards.
IV. Goods, Enforcement, and Economic Security
Although goods markets are more advanced in terms of integration, regulatory divergence and enforcement gaps persist. The New Legislative Framework provides the foundation for EU product safety and conformity assessment,[20] yet differences in labelling and implementation continue to create operational complexity. The European Product Act (EPA) announced by the Commission is aimed at increasing coherence in product regulation and reducing complexity.[21]
Globalization has introduced additional challenges. The rapid expansion of eCommerce imports from third countries has strained market surveillance mechanisms. The Digital Services Act strengthens obligations for online platforms to remove illegal or non-compliant.[22] Complementing this framework, the Foreign Subsidies Regulation seeks to prevent distortions arising from state-supported non-EU firms.[23]
These developments illustrate that Single Market policy increasingly intersects with economic security. Ensuring fair competition within the internal market now requires vigilance not only toward internal fragmentation but also toward external distortions.
V. Energy, Governance, and a New Regulatory Mindset
Energy integration represents both an economic and strategic priority. Although the EU internal energy market is among the most interconnected globally, infrastructure bottlenecks and price volatility reveal structural weaknesses.[24] Cross-border grid expansion and improved interconnections are crucial to enhance security of supply and price convergence.[25] The REPowerEU strategy emphasizes accelerating infrastructure investment and reducing dependence on external suppliers.[26] As highlighted in the Draghi report, affordable and secure energy is indispensable for industrial competitiveness and climate neutrality.[27]
At the institutional level, the German non-paper advocates a new culture of regulatory restraint.[28] The European Commission’s Better Regulation agenda already aims to ensure that EU law is proportionate and avoids unnecessary administrative burdens.[29] However, national “gold-plating” during transposition continues to create fragmentation and compliance costs.[30] Strengthening administrative cooperation through instruments such as the Internal Market Information System (IMI) can enhance uniform enforcement across Member States.[31] The Commission’s position as the “Guardian of the Treaties” must be strengthened to enable it to safeguard the consistent application of Single Market rules.[32]
Conclusion: From Integration to Strategic Sovereignty
The German Single Market Action Plan reflects a comprehensive effort to revitalize Europe’s central economic project. Rather than proposing isolated reforms, it advances a coherent vision that connects services liberalization, digital simplification, capital market integration, goods market modernization, energy infrastructure, and governance reform. The underlying premise is clear: Europe’s competitiveness and economic sovereignty depend less on new industrial subsidies and more on unlocking the full potential of its own internal market.[33]
The political challenge will lie in balancing deeper harmonization with Member State autonomy and social standards.[34] Yet in a world characterized by technological acceleration and geopolitical rivalry, completing the Single Market may represent Europe’s most powerful and sustainable strategy for safeguarding prosperity, innovation, and global influence.
[1] European Commission. “Single Market Strategy.” European Commission, https://single-market-economy.ec.europa.eu/single-market/strategy_en, (hereinafter: EC Single Market Strategy).
[2] German Federal Government. Single Market Action Plan: Non-paper by the German Federal Government. 6 Feb. 2026, https://table.media/assets/europa/260206-non-paper-binnenmarkt-deutschland.pdf, (hereinafter: German Non-Paper (2026)); KPMG. “Economic Key Facts Germany.” KPMG, https://kpmg.com/de/en/insights/geopolitics/economic-key-facts-germany.html; Euronews. “Germany’s Export Model Hit from Both Sides as US and China Demand Slumps.” Euronews, 23 Dec. 2025, https://www.euronews.com/business/2025/12/23/germanys-export-model-hit-from-both-sides-as-us-and-china-demand-slumps; Reuters. “Can Germany’s Merz Be the Saviour of Europe?” Reuters, 11 Feb. 2026, https://www.reuters.com/markets/europe/can-germanys-merz-be-saviour-of-europe-2026-02-11/.
[3] European Commission. “Draghi Report: One Year After.” European Commission, https://commission.europa.eu/topics/competitiveness/draghi-report/one-year-after_en?prefLang=hu.
[4] International Monetary Fund. “Scaling Up the Single Market to Boost Productivity.” IMF, 18 Nov. 2024, https://www.imf.org/en/news/articles/2024/11/18/sp111424-scaling-up-the-single-market-to-boost-productivity.
[5] German Non-Paper (2026).
[6] European Central Bank. “What Is the Untapped Potential of the EU Single Market?” ECB Economic Bulletin, 2026, https://www.ecb.europa.eu/press/economic-bulletin/articles/2026/html/ecb.ebart202508_01~2e71d52829.en.html.
[7] Reuters. “EU to Meet in Belgian Castle to Tackle Economic Rivalry with US, China.” Reuters, 11 Feb. 2026, https://www.reuters.com/world/china/eu-meet-belgian-castle-tackle-economic-rivalry-with-us-china-2026-02-11.
[8] EC Single Market Strategy.
[9] German Non-Paper (2026).
[10] Ibid.
[11] Ibid.
[12] European Parliament Think Tank. “Simplifying EU Digital Laws for Competitiveness.” European Parliament Think Tank, 20 Nov. 2025, https://epthinktank.eu/2025/11/20/simplifying-eu-digital-laws-for-competitiveness/.
[13] European Circular Economy Stakeholder Platform. “Digital Product Passport as an Enabler for the Circular Economy.” European Circular Economy Stakeholder Platform, Sept. 2023, https://circulareconomy.europa.eu/platform/en/knowledge/digital-product-passport-enabler-circular-economy.
[14] German Non-Paper (2026).
[15] Ibid.
[16] Ibid.
[17] European Commission. “Savings and Investments Union.” European Commission, https://finance.ec.europa.eu/regulation-and-supervision/savings-and-investments-union_en.
[18] International Monetary Fund. “Scaling Up the Single Market to Boost Productivity.” IMF, 18 Nov. 2024, https://www.imf.org/en/news/articles/2024/11/18/sp111424-scaling-up-the-single-market-to-boost-productivity.
[19] Reuters. “EU to Meet in Belgian Castle to Tackle Economic Rivalry with US, China.” Reuters, 11 Feb. 2026, https://www.reuters.com/world/china/eu-meet-belgian-castle-tackle-economic-rivalry-with-us-china-2026-02-11/.
[20] EC Single Market Strategy.
[21] German Non-Paper (2026).
[22] Regulation (EU) 2022/2065 of the European Parliament and of the Council of 19 October 2022 on a Single Market For Digital Services and amending Directive 2000/31/EC (Digital Services Act), OJ L 277, 27.10.2022, pp. 1–102.
[23] European Commission. “Foreign Subsidies Regulation.” European Commission, https://competition-policy.ec.europa.eu/foreign-subsidies-regulation_en.
[24] German Non-Paper (2026).
[25] Bruegel. “Upgrading Europe’s Electricity Grid Is about More Than Just Money.” Bruegel,12 Feb. 2025, https://www.bruegel.org/policy-brief/upgrading-europes-electricity-grid-about-more-just-money.
[26] European Commission. “REPowerEU.” European Commission, https://commission.europa.eu/topics/energy/repowereu_en.
[27] European Commission. “Draghi Report: One Year After.” European Commission, https://commission.europa.eu/topics/competitiveness/draghi-report/one-year-after_en.
[28] German Non-Paper (2026).
[29] European Commission. “Better Regulation.” European Commission,https://commission.europa.eu/law/law-making-process/better-regulation_en.
[30] EC Single Market Strategy.
[31] European Commission. “Internal Market Information System (IMI).” European Commission, https://ec.europa.eu/internal_market/imi-net/about/index_en.htm.
[32] German Non-Paper (2026).
[33] Ibid.
[34] Ibid.
