Schnabel urges common EU company rules to help firms scale

European Central Bank executive board member Isabel Schnabel has called for a unified EU company-law framework to help firms expand across borders, arguing that Europe’s main economic weakness is a lack of scale rather than a shortage of ideas or talent.

In a speech in Vilnius on Friday, Schnabel backed a proposed “28th regime” under which companies could choose a common European set of rules for incorporation and key aspects of corporate governance. She said it should be available to firms of all sizes and sectors, and ideally be established through an EU regulation applying directly across member states.

The framework could make it easier for businesses to raise capital and grow across the single market, Schnabel said. She warned that if countries could add their own requirements, the scheme risked reproducing the fragmentation it was designed to address.

Schnabel said European firms face a patchwork of legal systems, corporate rules and regulatory regimes when they expand into other countries. She argued that this can make growth costly and encourage start-ups to incorporate in the United States, including in Delaware, rather than under European law.

The proposal would not replace national company systems or harmonise labour and social-security rules, Schnabel said. Tax rates and tax bases would also remain decisions for member states.

She cited estimates that internal barriers in the single market are equivalent to tariffs of 96% for services and 67% for goods, while warning that the figures represent upper bounds. In services, which account for about 75% of gross value added, trade within the EU is no higher than trade with countries outside it, she said.

Schnabel also argued that comparisons of living standards between the euro area and the United States can overstate the gap. Europeans work fewer hours on average and have more equal incomes, she said, while warning that persistently weak productivity growth remains a serious challenge for Europe.

Her speech was a slightly updated version of one delivered in Vienna on 11 February. In September, Schnabel announced that she would leave the ECB on 3 January 2027 to take up a senior role at the International Monetary Fund; the ECB said the appointment was intended to begin the following day.