The EU internal market: Open construction sites, need for reform and options for action – in focus: industry, mechanical engineering and logistics

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Published on: September 11, 2025 / Updated on: September 11, 2025 – Author: Konrad Wolfenstein

The EU Single Market: Open issues, need for reform and possible courses of action – focus on industry, mechanical engineering and logistics – Image: Xpert.Digital

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It is the foundation of European prosperity and the heart of the EU economy: the single market. But this heart is sputtering. Instead of a seamless economic area for 450 million people, companies are increasingly experiencing a labyrinth of national special regulations, paralyzing bureaucracy, and a lack of digitalization. In a time of geopolitical tensions, global subsidy races, and aggressive competition from the US and China, this internal weakness is becoming an existential threat.

The result is a gradual loss of competitiveness that directly threatens Europe's industrial base – particularly German mechanical engineering and systemically important logistics. Renowned reports from figures ranging from Enrico Letta to Mario Draghi sound the alarm, warning of deindustrialization if the EU does not radically change course. This article analyzes the most serious shortcomings of the single market, illustrates the concrete consequences for industry and logistics, and outlines the urgently needed reforms for a future-proof and sovereign European economic area.

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Why is the single market now the central project?

What is the significance of the European Single Market in a volatile global economy? The Single Market is the heart of the European economic architecture. With 450 million people and more than 23 million companies, it offers enormous potential – in theory. In practice, however, this potential is often blocked: Fragmented regulations, excessive bureaucracy, unilateral national actions, and a lack of digitalization hinder economic development in the EU. Especially in times of geopolitical tensions, global subsidy races, growing trade barriers, and the threat of reindustrialization in other regions of the world, Europe is under pressure. Without the consistent completion and modernization of the Single Market, there is a risk of lost prosperity and the gradual deindustrialization of strategically important sectors such as industry, mechanical engineering, and logistics.

How critical is the situation? The signs are clear. Almost all relevant reports, from BusinessEurope to Enrico Letta to Mario Draghi and the European Commission itself, warn of increasing regulatory fragmentation, high bureaucratic costs, stalled harmonization, and the risk of falling permanently behind in the international technology race. Competitiveness is suffering from high energy prices, a lack of economies of scale, inadequate capital market integration, and a lag in innovation – especially compared to the US and China.

What must the EU do now? The single market is in greater need of reform than ever before, particularly with regard to industrial value creation, mechanical engineering, and logistics, including heavy-duty logistics. The following question-and-answer format outlines the most important outstanding issues and discusses proposals for a comprehensive modernization roadmap.

What are the ten most serious problem areas in the EU single market?

The European Commission names a “Top 10” of the most serious, so-called “Terrible Ten”:

Complex business start-up and management, especially across borders
Overly complex and inconsistent EU regulations; national “extrapolations” (gold-plating)
Lack of uniform implementation and self-responsibility of the member states
Limited or contradictory recognition of professional qualifications and licenses
Lack of common standards, especially for products, packaging and services
Fragmented national regulations on packaging, labeling and waste management
Insufficient product conformity (CE marking, safety standards, market surveillance)
Restrictive and differing national service regulations (e.g. construction, logistics, maintenance)
Bureaucratically burdensome regulations for the posting of workers
Unjustified territorial restrictions on supply and distribution.

These obstacles not only affect cross-border trade in goods and services, but also stifle innovation, green-tech investments, and the growth of small and medium-sized enterprises (SMEs). The impact is particularly noticeable in service sectors such as machine installation, maintenance, and logistics.

Why does fragmentation have a particularly strong impact on industry and mechanical engineering?

What challenges does this pose for the core industrial sector? The mechanical engineering, industrial plant, and electrical engineering sectors, along with their associated service providers, are particularly affected. Their strong export orientation means that companies must navigate multiple national legal regimes, tax systems, certification requirements, and reporting obligations. Frequently diverging technical standards, differing product safety regulations, and variations in working hours, minimum wages, and social security obligations result in significant additional workload.

How high are the costs? Studies show that medium-sized companies in the mechanical engineering sector, in particular, have to shoulder bureaucratic costs of up to 6.3 percent of their annual revenue – a burden that exceeds their gross profit margin and total research and development expenditures. This is equivalent to several full-time positions. Small businesses with fewer than 250 employees are especially affected by this cost burden, which limits their innovative capacity and competitiveness.

Does this also affect larger companies? Although the relative share of bureaucratic costs is somewhat lower in larger companies, the resource expenditure there also amounts to several dozen full-time positions annually and restricts agility and growth.

What specific challenges exist in the area of certification and standardization? The harmonization of technical standards is making little progress. Numerous machines bear CE markings but often fail to meet basic EU requirements because control and monitoring mechanisms are inadequate and national implementations are contradictory. This situation creates legal uncertainty and severely hinders the free movement of goods within the EU.

What are the biggest current risks for mechanical engineering and industry?

In international comparison, European industry – particularly German mechanical engineering – is rapidly losing competitiveness. High energy costs, administrative burdens, and an increasingly uncertain legal environment are leading to losses in market share not only in third-country markets but also within Europe.

Export barriers such as tariffs, differing product safety requirements, complicated approval procedures, and complex digitalization regulations are making market access increasingly difficult both outside and within the EU. Particularly burdensome are the additional US tariffs on steel, aluminum, and machinery, which have risen significantly due to political uncertainties and trade conflicts. Many companies anticipate revenue losses in the mid-double-digit percentage range as a result and fear job cuts.

What role does digitalization play? The sluggish expansion of digital infrastructure, as well as unilateral national approaches to the digitalization of administrative processes, are hindering the necessary digitalization, particularly in mechanical and plant engineering. The incomplete implementation of the "once-only" principle, a lack of interoperability between digital administrative portals, and fragmented data regulations are leading to expensive and risky isolated solutions.

How do these obstacles manifest themselves in practice? Examples from the everyday work of industrial and mechanical engineering companies

– Companies must submit thousands of posting declarations annually for the cross-border assignment of employees – often for each country, instead of a single, centralized submission. Incorrect or incomplete information can lead to liability, fines, and even criminal charges.
– Product approvals (CE, REACH, WEEE, packaging) are subject to specific national regulations that require separate registrations and documentation in each destination country.
– Custom-made products (e.g., special-purpose machinery) often require complex individual approvals and new product registrations, even if the product has been sold in a similar form across the EU for years.
– Delays in the mandate and publication of (harmonized) European standards create legal uncertainty. Companies often do not know which standard will be binding at any given time – a problem that is becoming increasingly significant, particularly in rapidly innovation-driven sectors (e.g., digitalization, AI applications, cybersecurity).

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What are the consequences of fragmentation for competitiveness?

Studies indicate that the level of bureaucracy in the EU single market is equivalent to an average internal tariff of 44 percent for industrial goods – and even 110 percent for services. From a company's perspective, this means that the single market environment almost resembles international exports, with corresponding additional costs.

The consequence: Many companies, especially SMEs, are foregoing EU-wide expansion or withdrawing from business activities in other member states. At the same time, large corporations and regional SMEs are losing market share to Chinese and US competitors who benefit from massive economies of scale, less regulation, and larger innovation budgets.

What is the state of logistics and heavy haul logistics in the internal market?

Transport, logistics and especially heavy haulage logistics (e.g. large and heavy transport of machinery, equipment, industrial goods) are systemically important for industry and are particularly affected in internal market hemispheres.

What are the main obstacles?

– Infrastructure is often not compatible across borders: differing bridge, tunnel, and route profiles, insufficient clearance heights, inadequate capacity, delayed expansion projects in the rail, road, and waterway networks, and a lack of military mobility corridors.
– Permit procedures for oversized and heavy transport vary nationally, are bureaucratic, and time-consuming. Permits must be applied for separately for each route, resulting in long processing times and uncertain conditions.
– The implementation of the "once-only" principle is just as inadequate in the logistics sector as in industry: data is collected and processed multiple times, often redundantly.
– Differing requirements for vehicle equipment, drivers, and accompanying regulations complicate cross-border operations.
– The digitization of logistics administrative processes is incomplete, leading to media breaks, misunderstandings, and inefficiencies.
– The development of efficient intermodal hubs (e.g. heavy transshipment terminals on waterways) is stalling in many places because national investment plans, responsibilities and regulations are not coordinated uniformly.

This is a particular problem for military logistics and the supply of large industrial plants, restricting not only business models but also Europe's strategic ability to act.

How could and should the EU address the key levers?

1. Completion and harmonization of the internal market

The key to overcoming fragmentation lies in the consistent harmonization of standards, regulations, and administrative procedures – both horizontally (across sectors) and vertically (across administrative levels). The EU must systematically reduce national go-it-alone approaches ("gold-plating"), divergent implementation of directives, and conflicting standardization processes.

Specifically, this means:

– Uniform product approval, labelling, and registration systems that are recognized EU-wide.
– Introduction of a single European company law framework (the so-called “28th Regime”) with simplified insolvency, tax, and labor law provisions as an alternative to 27 national legal systems.
– Efficient, digital access to central information portals such as the Single Digital Gateway for all important notification and reporting obligations.
– Rapid decommissioning of “expired” or obsolete standards, faster updating of harmonized standards, and greater transparency in standards development, particularly for SMEs and the skilled trades.

2. Reduce bureaucracy and advance digitalization

Reducing reporting requirements and digitizing processes are stated goals of the current EU strategy (the "Omnibus" initiatives). By the end of 2029, the administrative burden for companies is to be reduced by at least 25 percent, and for SMEs by 35 percent. Key steps include:

– Central, EU-wide accepted digital reporting portals (e.g., for posting of workers, social security, product registrations)
– Implementation of the "once-only" principle, so that documents and data are only exchanged once with authorities and used for all purposes.
– Creation of an EU "digital identity wallet" for companies and employees.
– Promotion of innovation and the use of digital tools in compliance management.

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3. Support investment and industrial transformation

Reports like the Draghi Report call for massive investments in strategic technologies, infrastructure, and energy independence – with an annual investment requirement of approximately 750 to 800 billion euros.

Recommended measures include:

– Joint implementation and financing of key infrastructure projects (e.g., Trans-European Networks, cross-border electricity grids, military mobility)
– Reform of European funding policies (e.g., expansion and generalization of the “Important Projects of Common European Interest”, IPCEI)
– Sector-specific support programs for strategic industries, including mechanical engineering, plant engineering, clean tech and sustainable logistics
– Promotion of SME participation in research, standardization and investment projects

4. Protect and strengthen competition and trade relations

Stronger protection against distortions of competition through subsidies in third countries, as well as targeted European strategies against aggressive trade practices, such as those currently being pursued by China and the USA.

Recommendations include:

– Introduction of a European-coordinated investment screening process to protect strategically important industries
– Independent development of digital infrastructures (keyword: “EU Cloud and AI Development Act” as a basis for sovereign digitalization)
– Breaking dependencies on critical intermediate products and raw materials through targeted diversification

How can logistics be specifically strengthened?

In addition to the general measures, the following are particularly necessary for logistics and heavy haulage logistics:

Complete harmonization and digitalization of permit procedures for oversized and heavy transport. A central, EU-wide digital permit system with binding processing times could drastically reduce bureaucracy and delays.
Elimination of physical bottlenecks in the infrastructure (bridges, locks, tunnels, railway lines), including targeted refurbishment programs for the core network.
Strengthening multimodal logistics hubs, especially at inland ports (heavy-load terminals) for industrial projects, defense and energy supply.
Full implementation of standardized procedures at border crossings, Europe-wide harmonization of dangerous goods, customs and special permit regulations.
Investment initiatives for the modernization and digitalization of European waterways and the expansion of charging infrastructure along strategic corridors.

How can the implementation succeed? What tools are needed?

– Clear political prioritization and control at the highest level, with monitoring by an independent European body.
– Stronger sanctions against unilateral national actions that harm the single market, as well as greater European enforcement powers in cases of inadequate implementation or delays.
– Increased involvement of the business community, particularly small and medium-sized industrial enterprises and logistics companies, in standardization and legislative processes at the EU level.
– More flexible and agile adaptation of existing regulations to the pace of innovation and new business models through regular "regulatory fitness checks."
– Swift implementation of the European Commission's "Competitiveness Compass" and the recommendations of the recent Draghi and Letta reports as guidelines for a competitive location policy.

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Without a radical change of course, the EU will lose its industrial foundation

If the EU wants to defend its economic independence and industrial strength in a volatile, uncertain world, there is no alternative to achieving a genuine European single market. Eliminating administrative, regulatory, and infrastructural fragmentation is a necessary prerequisite for resilience, innovation, and economic sovereignty—especially in the key sectors of industry, engineering, and logistics. Only in this way can Europe overcome the "triple pressure" of geopolitical upheavals, global subsidy races, and technological disruption, and embark on its own sustainable path to prosperity.

This question-and-answer text comprehensively contextualizes the diverse challenges and opportunities. The actual implementation of the tasks at hand remains a mammoth undertaking – but is essential if the European economic area is to fully realize its strategic potential for the coming decade.