The EU keeps writing reports about competitiveness. The single market remains unfinished. Sovereignty means nothing without operational reform.
On March 18, 2026, the European Commission published its proposal for EU Inc., a new corporate framework that would let startups register once and operate across all 27 member states. Setup cost: under €100. Registration time: 48 hours. Data submitted once, valid everywhere.
It's a good proposal. It's also a proposal that has been discussed, in various forms, for over a decade. The Letta report called for it. The Draghi report called for it. The European Parliament voted on recommendations for it in January 2026. Before the Commission even published the text, 27 startup associations wrote an open letter warning that it might arrive as a directive rather than a regulation, meaning 27 national transpositions, 27 interpretations, and 27 opportunities for the same fragmentation it was designed to fix.
This is Europe's pattern. Diagnose the problem correctly. Propose the right solution. Then dilute it through process until the outcome is indistinguishable from the status quo.
The gap between rhetoric and reality
The sovereignty conversation in Europe is louder than it has ever been. In November 2025, France and Germany convened a summit on European digital sovereignty and launched a joint task force. The Cloud and AI Development Act is expected to establish EU-wide eligibility requirements for cloud providers. The Commission's Competitiveness Compass, published in January 2025, builds directly on Draghi's diagnosis.
And that diagnosis is brutal. The Draghi report, published in September 2024, described an existential challenge to European competitiveness. It called for €800 billion in annual investment. It proposed a 28th regulatory regime, capital markets reform, regulatory simplification, and a new approach to innovation funding.
Every single member state endorsed the report. So did the European Parliament.
Then almost nothing happened. The European Policy Innovation Council tracked implementation and found that one year later, of 383 recommendations, only 43 had been fully implemented. That's 11.2%. Another 77 were partially done. The remaining 263 were either in progress or untouched.
Every member state endorsed the report. Barely one in ten recommendations made it through.
What's actually broken
The conversation about European sovereignty tends to focus on big, visible dependencies: American cloud providers controlling 65% of the European market, Chinese hardware in critical supply chains, US trade policy that shifts with every election cycle. These are real concerns. But they distract from a more fundamental problem.
The EU's single market, its greatest structural advantage, barely functions for the companies that need it most.
The IMF estimated in 2024 that internal barriers to trade within the EU are equivalent to a 45% tariff on goods. For services, the figure reaches 110%. The methodology behind these numbers has been challenged by economists who argue the model conflates consumer preferences with actual regulatory barriers. But even the most conservative reading of the data points to the same conclusion: trading across EU borders is far more expensive than it should be, and progress on reducing these costs has largely stalled since the 2008 financial crisis.
The same IMF analysis found that the cost of moving workers between EU countries is roughly eight times higher than moving between US states, and that European venture capital investment runs at about one quarter of American levels. Between 2013 and 2023, pension funds accounted for only 7% of EU venture capital funding.
None of this is news to anyone who has tried to scale a company across European markets. But it keeps being treated as a background condition rather than the central obstacle it is.
Regulation as identity
Europe is very good at writing rules. GDPR set a global standard for data protection. The Digital Markets Act targets gatekeepers. The AI Act is the world's first comprehensive framework for artificial intelligence regulation. The Digital Services Act created new accountability requirements for platforms.
This is real achievement. And it is not the same thing as building the infrastructure for companies to grow.
The Draghi report put this imbalance plainly: Europe has spent years building the regulatory apparatus to constrain tech. It has not spent equivalent energy building the operational infrastructure to enable it. Regulation without simplification produces a system that is excellent at saying no and terrible at making yes easy.
The Commission itself acknowledged this. Its Competitiveness Compass promised an "unprecedented simplification effort." A new Vice President for Simplification was proposed. The target: a 25% reduction in reporting obligations, with up to 50% for SMEs.
But simplification is structurally harder than regulation. Writing a new rule requires one legislative process. Removing friction requires coordinating 27 national implementations, each with its own bureaucratic inertia and political interests. The incentives are asymmetric. A politician who introduces a new regulation can point to a concrete achievement. A politician who removes a barrier gets credit for something not happening.
What sovereignty actually requires
The sovereignty conversation will go nowhere useful if it stays at the level of declarations and summits. Sovereignty is not a statement of intent. It is the operational capacity to act independently. And right now, the EU does not have that capacity for its own companies.
Three things would change this more than any summit declaration.
First, the 28th regime needs to arrive as a regulation, not a directive. A regulation applies uniformly. A directive gets interpreted 27 different ways. The startup associations were right to sound the alarm. If EU Inc. becomes another layer of fragmented implementation, it will join the long list of good ideas that Europe talked about and then compromised into irrelevance.
Second, capital markets integration has to move beyond proposals. European households save at roughly three times the rate of American ones. But the money does not reach the companies that need it. The savings and investment union initiatives announced in late 2025 are a start. Until European pension funds and institutional investors actually allocate to venture, European startups will keep raising money in the US because that is where the money is.
Third, enforcement of existing single market rules has to become a priority, not an afterthought. When the Commission brings an infringement case against a member state for violating single market rules, it now takes an average of 45.8 months to resolve, 31% longer than in 2019. That's nearly four years per case. And even after a court ruling, member states take over five years on average to actually comply, double the figure from five years ago. The Commission has quietly retreated from its role as enforcer of the single market while expanding into new areas like defense and geopolitics.
The window
For the first time, the political pressure matches the diagnosis. US tariffs have turned trade policy from a stable backdrop into an active threat. American tech platforms are being questioned as dependencies rather than accepted as infrastructure. European governments are auditing their reliance on US cloud services and collaboration tools. The sovereignty conversation has moved from think tanks to procurement offices.
Anyone who has tried to scale a company across European markets knows what the friction looks like. Setting up a subsidiary in a new member state means new legal entities, new employment contracts, new tax registration, new compliance requirements. Offering stock options to a distributed team turns into a cross-border accounting project. VAT compliance for B2B sales still operates on logic designed for physical goods at physical borders. These are not abstractions. They are the daily tax on every European company trying to compete at the scale that the single market was supposed to enable.
This is the moment where the EU has to decide whether sovereignty is a speech topic or an engineering project. The diagnosis is done. Draghi wrote it. Letta wrote it. The IMF quantified it. The Commission acknowledged it.
What's missing is not another report. What's missing is the willingness to do the boring, unglamorous work of actually removing the barriers that have been documented for decades.
Europe does not lack ideas. It does not lack talent. It does not lack capital in absolute terms.
It lacks follow-through.