For decades, the European Single Market has been a cornerstone of prosperity, because of the fostering of the free movement of goods, services, capital, and people. Yet this grand project faces challenges that threaten its effectiveness and the competitiveness of EU enterprises. The reports by Enrico Letta and Mario Draghi served as a wake-up call: Europe must act decisively to remove regulatory bottlenecks that hinder to deepen the Single Market and rekindle the dynamism that once made it a global leader.
The European Commission’s Work Plan for 2025 offers a unique opportunity to address these concerns and place regulatory simplification at the heart of its strategy.
The Single Market at a crossroads
The European Single Market was designed to eliminate borders within the EU, ensuring seamless trade and investment; in turn, this fostered a more competitive and dynamic market by encouraging companies to innovate and create added value. However, recent years have seen a growing number of regulatory and legal barriers that hinder these fundamental freedoms. Businesses, especially SMEs and startups, struggle with fragmented rules, inconsistent enforcement across Member States, and excessive compliance costs. These obstacles not only slow down investment but also stifle innovation, preventing European companies from scaling up in a way that their American and Chinese counterparts do, operating in more investment and innovation-friendly regulatory environments.
The Letta and Draghi reports highlight an uncomfortable truth: while Europe debates strategic autonomy, it continues to lose ground in key industrial and digital sectors. The over-complexity of EU regulations, combined with market fragmentation, has weakened competitiveness. If left unaddressed, this trend will accelerate, leaving European businesses at a disadvantage in the global race for innovation, investment, and talent.
Regulatory simplification: The key to a thriving market
The European Commission’s 2025 Work Plan must be ambitious in implementing the cutting of unnecessary red tape and harmonizing rules across Member States. History offers a compelling lesson: in 1985, when Europe faced economic stagnation, the European Commission launched the groundbreaking “Completing the Internal Market” white paper, which proposed 300 legislative actions to eliminate barriers. The result? A revitalized European economy that attracted investment, spurred growth and welfare.
A similar bold step is needed today. Companies across industries—particularly in telecoms and digital services—urgently need a more coherent regulatory framework, that takes into account market realities and competitive dynamics, and fosters innovation rather than creating administrative burdens. Telefónica and other industry leaders have repeatedly called for reducing regulation, promoting level playing field, and ensuring that Single Market rules are applied consistently across all Member States.
In telecoms, for example, outdated regulations have led to artificial market fragmentation, making it difficult for operators to scale up, invest in next-generation networks like 5G and fiber. Current rules on merger control have had unintended consequences, discouraging market consolidation that could enhance efficiency, investments and competitiveness. Meanwhile, digital innovation is held back by regulatory asymmetries that place disproportionate burdens on telecom operators while allowing large tech companies to operate under more lenient frameworks.
A new vision for the Single Market
The European Commission must place regulatory simplification at the core of its competitiveness strategy. This means:
- Undertake a review of existing EU regulation and, where regulations are identified that hamper investment in networks and basic infrastructure, promote their removal.
- Ensure that competition decisions by European competition authorities promote sustainable market structures and do not create exit barriers for market players by imposing remedies that create artificial competition.
- Simplify regulation to reduce the administrative burdens and associated costs.
- A cost-benefit analysis of future regulations should be carried out in relation to the Single Market, thus preventing new unjustified or disproportionate barriers that negatively impact on the “four freedoms” on which it is based.
A defining moment for Europe
The new institutional and political cycle, and the findings of the Letta and Draghi reports provide a roadmap for the Single Market. A commitment to regulatory simplification and deeper market integration will not only boost European competitiveness but also ensure that the benefits of the Single Market reach businesses and citizens alike.
Telefónica and other industry leaders stand ready to support this effort. The path forward is clear: Europe must return to the fundamentals of the Single Market, removing barriers rather than erecting new ones. A more dynamic, investment-friendly regulatory framework is not just a policy choice—it is an economic necessity.
The 2025 Work Plan must rise to the challenge, ensuring that the Single Market remains a driver of growth, innovation, and prosperity for years to come. We urgently need a simpler EU that delivers prosperity.
