Could a Multi-Speed Europe be the Solution?
EU companies’ competitiveness challenges to be solved by the 28th regime.
The Return of Competitiveness
An informal meeting of EU heads of state and government will be held on February 12th, convened by President António Costa. The aim of the meeting is to strengthen the single market and enhance competitiveness in a challenging geo-economic and geopolitical context. The European Council website states: “The EU needs to do more to effectively reduce national barriers, and to make the regulatory framework at all levels more conducive to investment, innovation and company growth. Creating a new ’28th regime’ to help companies scale up and accelerating the work on a savings and investment union will also be crucial in this regard.”
The proposed regulatory changes are intended to simplify administrative procedures for businesses, support growth, and accelerate the Savings and Investment Union agenda. The meeting will include exchanges of views with the Presidents of the European Parliament, Mario Draghi and Enrico Letta. The two former Italian Prime Ministers each prepared a 2024 report on improving EU competitiveness at the Commission’s request.
The need to enhance competitiveness has long been recognized in the EU and was a central theme of the 2024 Hungarian EU Presidency. A central element of the Budapest Declaration (November 2024) was the expectation that the Commission would take measures to reduce the administrative burden on small and medium-sized enterprises. Another important point was that the Commission would include impact assessments on bureaucracy and competitiveness in its legislative proposals. The Commission was also expected to present a strategy to deepen the single market.
Progress in enhancing competitiveness
The Commission began work under its mandate in January 2025. In March, it launched the Simplification Advisory Group and adopted two notable measures. First, it submitted two Omnibus draft laws to simplify and harmonize reporting obligations under the previously adopted Corporate Sustainability Reporting Directive (CSRD), the Sustainability Due Diligence Directive (CSDDD), and the EU Taxonomy Regulation. Second, within the framework of the Competitiveness Compass, it put forward a proposal for the creation of a “28th regime”, the details of which it promised to provide later. Momentum on competitiveness later declined: the issue received less attention from subsequent EU presidencies, while the Commission prioritized defense and military industry development and major trade agreements over internal‑market initiatives.
At the end of January 2026, during a German-Italian summit, the two major EU economies reaffirmed their mutual commitment and emphasized closer cooperation on competitiveness. In early February, Mario Draghi addressed the Catholic University of Leuven, where he reiterated the need to increase EU competitiveness. He argued that the current world order was undergoing transformation – partly due to China’s pursuit of multipolarity and partly due to the USA’s changing role – which presents new challenges for the EU. Draghi sees a way out: moving from what he calls the current confederal structure to a federation. noting that the EU can act with a single voice in areas of de facto federal cooperation (for example, trade and the common market) but struggles where unanimity is lacking (for example, defense, industrial policy, and foreign and security policy).
He proposed the so-called “pragmatic federalism”: member states willing to pursue closer cooperation would voluntarily deepen supranational integration in specific policy areas. In this model, deeper integration would be optional and would not be blocked by the national interests of less willing Member States.
Other points on the agenda of the upcoming informal summit are based on a letter from the President of the Commission to the members of the European Council. President Von der Leyen stresses that the EU is currently facing geopolitical and geoeconomic challenges, to which she proposes, among others, the following measures:
- Trade diversification and increasing strategic autonomy: accelerating trade negotiations (in particular with India, but Australia, Thailand, Malaysia, the Philippines, and the United Arab Emirates were also mentioned), protecting companies against unfair practices, implementing “European preference”, and economic risk reduction to reduce strategic dependencies.
- Deepening the single market: eliminating internal barriers (for goods and services), tackling fragmentation, in areas such as telecommunications, energy, capital markets, and company law.
- In the area of energy and infrastructure, an Energy Union and a Grids Package will remove bottlenecks, accelerate grid deployment and cross-border interconnections, and produce a White Paper on deeper electricity market integration.
- Mobilising innovation and investment instruments such as the European Innovation Act, InvestEU, the EIB, Horizon Europe, promote access to risk capital, and create funds such as the European Competitiveness Fund and the Scale-up Europe Fund.
- Macro-financial policy actions: supporting the digital euro and strengthening the international role of the Euro as part of broader economic sovereignty and financing strategies.
- Creating an EU-wide company form, within the “28th regime” or “EU Inc.”, to reduce legal fragmentation and facilitate cross-border business. The system would provide a single EU-wide company form with online registration within 48 hours, simplified winding-up procedures, harmonized rules in areas such as company law, insolvency, employment, and taxation, to reduce administrative burdens and allow companies to operate smoothly across Member States.
The proposals appear to be part of a wider strategy to bring more policy areas into EU-level decision-making, in accordance with the “pragmatic federalism” approach.
Could the 28th regime solve all challenges?
The thought of a 28th regime is not new: a similar draft regulation was already presented in 2011. The proposal was heavily debated and raised concerns that it would eventually become mandatory, slowly replace national laws, increase market uncertainty, and ultimately reduce consumer confidence. The European Parliament finally froze its discussion in 2014, and the Commission withdrew the proposal in 2020.
The Commission appears poised to revisit the idea, refine it, and rely on political pressure from the economic slowdown to advance it. Details are expected within a month; current information raises several questions. It is likely that the proposal will take the form of a regulation requiring Member States to implement certain rules, alongside a distinct set of provisions for “EU Inc.” companies. These measures would aim to facilitate the registration of innovative firms, ease cross-border capital raising and expansion, and enable rapid winding up in cases of bankruptcy.
A central question is the extent to which companies established under the 28th regime would be subject to national tax and labor laws. Would they be exempt from national fiscal rules on subscribed capital, payment conditions, or corporate tax rates? Would a uniform local tax and harmonized reporting deadlines apply across the EU? Would EU-level employment law govern contract types, notice periods, and severance? If answers are largely affirmative, the regime could create a quasi-sovereign corporate framework, raising concerns about regulatory divergence, fiscal losses for some states, and increased administrative costs. Member States might also need to provide specialized administrative expertise, further increasing public costs.
An alternative closer to Draghi’s vision is the 28th regime, which could be optional and applied through enhanced cooperation under the Lisbon Treaty. Edited: Corrected legal citations and phrasing. Enhanced cooperation (Articles 20 TEU and 326–334 TFEU) may be initiated by at least nine Member States, must not adversely affect the internal market or cohesion, and must remain open to other Member States. Under enhanced cooperation, reluctant Member States would not block deeper integration among willing partners, though concerns about competitive distortions would persist. Still, Draghi’s pragmatic federalism may present a more politically feasible alternative to both “militant” federalism and wholesale centralization of powers.
