Defragmenting the Single Market through ‘Enhanced Cooperation’ – why, when and where?

Europe’s new temptation: enhanced cooperation by default?

Several EU leaders are now considering enhanced cooperation if the co-legislators could fail to agree on key Single Market measures by the end of 2026. At the European Council retreat dedicated to competitiveness in February, Commission President von der Leyen and Council President Costa mentioned specifically the adoption of EU Inc. – an optional EU corporate legal regime for limited liability companies – and of Phase 1 of the Savings and Investment Union (speeding up the integration of European capital markets). Other leaders, including French President Macron and German Chancellor Merz, called for a ‘coalition of the willing’, while EU Parliament President Metsola has argued that a two-speed Europe could be a “pathway to unity”.

Built for a larger, more diverse Union

Rarely used so far, enhanced cooperation is the standardised mechanism provided by EU Treaties allowing a group of member states to go faster and further in basically all EU policy fields, except where the Union has exclusive competence (TEU Article 20 and TFEU Title III).

This largely ‘multi-speed Europe’ mechanism was introduced and strengthened ahead of the EU enlargements of 1995, 2004 and 2007, as a means of deepening before and after widening. Its first objective was to avoid the return to the paralysis of the 1980s. Even though differences between member states were smaller then, it was already clear that some problems could not be solved through the ‘Acquis Communautaire’ orthodoxy (according to which all member states march to the same beat, except for set transition periods and derogations linked to objective differences in situation – for example, outermost regions). Its second objective was to prevent EU-related policies from being designed outside the EU, as illustrated by multilateral arrangements such as the European Monetary System (1979) and border-free movement cooperation leading to Schengen (1985).

Several analysts have pointed to its comparative advantages. Unlike most other arrangements – whether inside, outside or partly outside the EU framework, such as the 2012 ‘fiscal compact’ – it avoids many of  the typical inter-governmental constraints such as: decision by unanimity; lack  of dedicated resources or budget allocation based on geographical return (‘I want my money back’); enforcement issues; sensitivity to political changes at national level (informal groupings disappearing and formal ones put on ice); etc.

It is not restricted to major players often suspected of shaping the agenda without a mandate to present the other member states with a fait accompli.

It is more coherent than unbridled ‘variable geometry’ integration, with its ad hoc opt-ins and opt-outs, duplications and overlaps in terms of territorial and material competences (whose graphic representation amounts to a ‘spaghetti bowl,’ according to Wessels and Gerards, 2019).

It does not generate frustrations as a ‘concentric circles’ approach does, where the core group decides on who moves to the centre, who stays in outer circles possibly for ever. This often creates resentment of non-core countries, protesting against their second- or third-class membership. Having de facto to adopt rules and standards decided by the core, they will occasionally adopt obstructive tactics and/or seek counter-alliances.

How it works in practice

In other words, if prior types of differentiated integration allowed to break deadlocks or brought impetus, enhanced cooperation scores better at several levels.

• Coherence: its objectives must further the Union objectives and reinforce the integration process; it can only be authorised (decision of the Council through qualified majority voting (QMV) in most cases) if these objectives cannot be attained within a reasonable period by the Union as a whole.
• Transparency: the request of member states wishing to establish enhanced cooperation must specify its scope and objectives; it is publicly addressed to the Commission which may submit a proposal to that avail; this proposal is subjected to the publicity rules applying to ‘normal’ Regulations or Directives.
• Oversight: authorisation to proceed with enhanced cooperation is granted by the Council, on a proposal from the Commission which verifies that the request is in line with the Union general interest); if a majority of voting MEPs reckon that it is not the case, the European Parliament may block the authorisation by refusing its consent; the authorisation phase and the implementation phase (adoption of enhanced cooperation acts) are within the remit of the Court of Justice of the EU.
• Inclusiveness: because enhanced cooperation requires the participation of at least nine countries, even a coalition made of the largest member states like the recent E6 initiative (accounting for more than 70% of the EU population and EU GDP) must convince at least three smaller states to join in.
• Openness: all members of the Council may participate in enhanced cooperation deliberations (without voting rights) and can join at any time subject to compliance with conditions of participation (set by the authorising decision) and acts subsequently adopted; the Commission is responsible of this compliance check.
• Simplicity: enhanced cooperation uses EU procedures and regulatory instruments; when subjected to a special legislative procedure, participating member states may decide to abandon unanimity for QMV thanks to the ‘passerelle clause’ embedded in the TFEU (e.g. for the definition and sanction of criminal offences).

What past cases reveal

Past record indicates that (1) considering the use of enhanced cooperation is sometimes sufficient to secure support for Union-wide solutions; (2) activating and implementing enhanced cooperation is not necessarily a long process; (3) the notion of last resort is ultimately a matter of political appreciation; (4) protracted implementation was the result of atypical features; and (5) enhanced cooperation can be used in relation to the Single Market.

In some cases, the ‘shadow of enhanced cooperation’ was enough to bring reluctant member states into line, out of concern they might be left behind (for example, the 2002 Framework Decision on the European Arrest Warrant and the 2003 Directive on energy taxation).

Activating enhanced cooperation has been in some cases relatively fast, sometimes taking even just two months. The first authorisations came reasonably soon after the entry into force of the Lisbon Treaty (December 2009), which drastically simplified the mechanism: December 2010 for the law applicable to divorce and legal separation (Rome III Regulation); March 2011 for the European patent with unitary effect and January 2013 for the Financial Transaction Tax. Enhanced cooperation on the 2026-27 Ukraine Support Loan was exceptionally fast – envisaged on 19 December 2025 and adopted by 24 member states on 24 February 2026—while another element of the package requiring unanimity, the amendment of the EU 2021–2027 Multiannual Financial Framework Regulation, was blocked by Hungary.

Drawing on past experience, recent EU case law and new geoeconomic realities, enhanced cooperation could be considered more often and activated more quickly. The Court of Justice rulings in particular discarded maximalist interpretations of the limits set on enhanced cooperation: last resort, respect of the competences and rights of the non-participants, undermining the internal market (including cases brought by the UK against the Financial Transaction Tax as well by Italy and Spain against Unitary Patent).

Moreover, most future attempts will not have to overcome the specific hurdles that slowed down enhanced cooperation on the Unitary Patent and the European Public Prosecutor’s Office (EPPO), i.e. facing judicial challenges against their legality; adjusting the scheme as a result of Brexit; negotiating fees and the distribution of revenues; deciding on governance and seat(s) of new entities and/or resorting to an intergovernmental agreement to set a new entity (it took ten years to get the necessary ratifications for the entry into force of ‘Unified Patent Court’).

Finally, it is now clearly established that enhanced cooperation can be used in relation to the Single Market if it contributes to improve its functioning. It is indeed the case with the Unitary Patent which offers companies a much faster, wider and cheaper protection in participating countries (approximation of law) and with EPPO which offers a better protection against rogue traders engaged in ‘VAT carrousel fraud’. The Single Market is less fragmented when enhanced cooperation manages to replace 27 national rules with, say, one rule applying in 20 member states plus seven national rules.

Where it could be applied: future policy directions

The new momentum around enhanced cooperation could extend beyond EU Inc and Phase 1 of the Savings and Investment Union already mentioned. Various stakeholders and member states also point to other files, including the installation of a common corporate tax base (should the 2023 Commission’s BEFIT proposal fail); automatic mutual recognition of more higher education degrees and professionals qualifications – building on existing arrangements among Benelux, Nordic and Baltic countries – and the implementation of the principle of equal treatment outside the labour market.

In order to help SMEs seize the Single Market’s opportunities, one could also envisage the introduction of an optional EU regime for B2B transborder contracts (strongly advocated by the Association Henri Capitant in its 2026 study). This would be consistent with the Commission’s Single Market Strategy (May 2025) calling for a 28th regime that “will provide a single set of rules, potentially in a progressive and modular way” aligning with Enrico Letta’s vision for a ’European Code of Business Law’.

The litmus test for considering enhanced cooperation might be the following: ‘yes’ when time is of the essence and where centripetal dynamics are at play. This is particularly the case with so-called ‘club goods’, where enhanced cooperation gives an exclusive advantage to its participants – for instance, enhanced cooperation on EU Inc would make its participants more attractive for innovators. These centripetal dynamics are even stronger when non-participating countries are affected by the unintended consequences of integration, such as criminals engaged in cross-border VAT fraud shifting activities towards less protected jurisdictions outside EPPO coverage.

By contrast, centrifugal dynamics tend to dominate enhanced cooperation producing ‘public goods’, i.e. when outsiders cannot be excluded from the benefits of vanguard action. In this case, the only incentives for them to join rest on reputation costs (accusation of free riding) and the risk of being isolated on other files.

Overall, enhanced cooperation should be considered a matter of political expediency where EU defence and security are at stake.

Conclusion: a more pragmatic Europe is a differentiated Europe

Enhanced cooperation is a concrete translation of the ambition flagged by the EU motto, ‘United in Diversity’, namely to build a cohesive entity while preserving fundamental national interests.

This standardised multi-speed approach gives time to those unable to join from the start for practical reasons; demonstrates the added value of a solution to sceptics who prefer to wait and see; and allows those opposed as a matter of principle to measure how much it costs to stay out.

For this reason, resorting to enhanced cooperation in specific cases was already a key recommendation of the Letta Report (April 2024) and the Draghi Report (September 2024) as a way to help defragment the Single Market and strengthen EU competitiveness.

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.