From Innovation to Inequality? Institutional Risks of the 28th Regime for Small and Midsized EU Member States

While the regime is designed to reduce regulatory fragmentation and lower the costs of cross-border economic activity, its present formulation carries the risk of reproducing internal asymmetries within the Union. If its adoption is primarily driven by core innovation hubs such as France and Germany, smaller and midsized member states (SMMS) may find themselves structurally disadvantaged. The concentration of capital flows in established financial centres, combined with the dominance of large multinational corporations, could erode the regulatory autonomy of SMMS, weaken national labour protections, and institutionalise forms of economic dependency rather than reduce them.

The authors Linda Monsees and Giulia Sommer caution that the 28th regime should therefore be approached as a strategic infrastructure rather than a neutral legal instrument. For SMMS, the implications are particularly acute. The paper identifies three principal levels of response:

• Nationally, SMMS must conduct a systematic assessment of their institutional capacities, legal safeguards, and economic vulnerabilities in domains such as labour law and insolvency frameworks. Strengthening national contact points will be essential to foster trust among domestic businesses and to enhance resilience.
• Collectively, alliances among like-minded SMMS are necessary to prevent marginalisation during negotiations in the European Commission and the European Parliament. Transparency and inclusivity in governance structures should constitute core demands.
• At the EU level, the institutional design of the 28th regime must incorporate equity safeguards that take into account both the structural disadvantages of SMMS and the growing influence of large multinational enterprises. Without such provisions, the regime risks functioning as a regulatory chokepoint controlled by a limited number of actors.

The policy paper concludes that the success of the 28th regime depends not only on its capacity to facilitate innovation and competitiveness, but also on its ability to safeguard cohesion within the Union. Trust between member states and equitable institutional representation will be indispensable to prevent the emergence of new forms of intra-EU inequality and to ensure that the EU’s pursuit of competitiveness does not come at the expense of its political unity.