A new study by the European House-Ambrosetti (TEHA) in collaboration with Amazon, finds that fragmentation across EU Member States, spanning infrastructure, energy, digital governance, skills, regulation, and the rule of law, is contributing to an estimated €120 billion in missed investment each year. The study argues that Europe’s answer lies not in replicating external models, but in scaling and connecting the national success stories already delivering results within the Union.
This comes as the EU faces an estimated €600 billion annual investment requirement between 2025 and 2030 to remain globally competitive: €150 billion for physical infrastructure, €300 billion for energy and €150 billion for digital, according to the analysis. At the same time, EU foreign direct investment inflows have remained below US levels since the pandemic, while the Gulf and ASEAN economies have become increasingly prominent greenfield investment destinations.
The study maps successful approaches across Member States: from Italy’s high-speed rail network competition and Spain’s dual strengths in competitive energy and global content production, to France’s AI leadership, German vocational training, Poland’s workforce development, Nordic energy integration, Estonia’s digital infrastructure and the Netherlands’ specialised Commercial Court, the only European court which operates entirely in English.
“Europe does not need to look elsewhere for answers. Some of the most compelling investment models are already operating within the EU. They simply have not been connected or scaled,” said Diego Begnozzi, Senior Consultant of TEHA. “When Italy opens high-speed rail to competition and prices fall 15%, when Spain builds a global content production hub through smart regulation, when France and Germany lead the continent in AI investment, these are not isolated experiments. They are proof of what a more integrated Europe could deliver."
The cost of fragmentation is measurable
The study finds that Europe’s investment challenge is not simply a question of insufficient capital but rather how effectively Europe converts its existing assets into investable opportunities. The costs of fragmentation are significant:
- Sectoral fragmentation creates significant differences in operating costs: national Digital Services Taxes can result in effective tax rates of 10% to 100%, while streaming obligations vary 50-fold across Member States, concentrating 58% of streaming investment in just two EU countries.
- Civil and commercial case disposition times vary by more than seven-fold across Member States, while 37% of EU companies do not trust investment protection mechanisms in their country.
- European businesses paid around 2.8 times more for electricity than US businesses in Q1 2025, while greater Single Market integration of national energy systems could generate up to €43 billion annually by 2030.
- Cross-border train services are 23.4% slower than comparable domestic routes, despite nearly 40 years since the start of railway liberalisation, limiting the value of the Single Market’s physical infrastructure.
- Europe faces a projected shortage of nearly 30 million workers by 2050. Only 3.8% of working-age EU citizens live in another Member State, despite 75% of employers reporting difficulties in filling roles.
These examples point to a broader opportunity: Europe’s diversity can be an economic asset if national strengths are connected, combining the scale of the Single Market and access to it.
“Europe’s diversity is not a weakness, it is an untapped resource,” said James Waterworth, Amazon's Director of EU Public Policy. “Amazon invests across the EU and we see first-hand how differences in infrastructure, regulation, skills, and institutional quality affect investment decisions. The challenge is to build the connections that allow what works in one Member State to benefit the entire continent.”
“This report makes an important contribution by translating Europe’s investment challenge into a clear map of the barriers holding back capital and growth, while demonstrating that many of the solutions are already within reach,” said Debora Revoltella, Chief Economist, European Investment Bank. “By identifying successful approaches across Member States and setting out practical measures to replicate, connect and scale them, it moves the debate from diagnosis to delivery. At a time when Europe urgently needs to strengthen its competitiveness and mobilise investment at scale, this is precisely the kind of evidence-based and actionable analysis that policymakers and investors need”.
"Investment does not fear diversity; it fears uncertainty and fragmentation,” said Isaac Baley, Associate Professor and ERC Distinguished Researcher, Universitat Pompeu Fabra. “When investments are costly to adjust or reverse—whether in physical capital, organizational capabilities, intangibles, or other assets— uncertainty makes waiting more attractive. Firms delay, experiment less, and become more cautious about scaling. That is why frictions in regulation, enforcement, or access to data can matter much more than their direct compliance cost would suggest. The same is true in labor markets. As technologies and demand change, competitiveness depends on how easily capital and workers can move toward new opportunities. Europe’s diversity is a strength. The real challenge is to make sure that diversity creates specialization and opportunity, rather than friction”.
“Europe does not need to reinvent the wheel: many of the solutions to its investment and competitiveness challenges already exist within the EU,” said Justus Haucap, Director, Düsseldorf Institute for Competition Economics, Heinrich Heine University. “The real opportunity is to scale successful national approaches and remove the fragmentation that prevents them from generating benefits across the Single Market. But integration should not mean uniformity. Europe’s diversity is an economic asset when Member States can build on their different strengths and approaches, while an integrated Single Market allows those strengths to be combined and scaled across Europe”.
Six policy priorities for European competitiveness
The study calls for European and national policymakers to:
- Treat investment attractiveness as a joined-up framework, not as isolated interventions. Reform packages must be assessed for their combined effect on project execution, operating costs, skills availability, legal certainty, and capacity to scale.
- Recognise diversity as a source of specialisation. Enable Member States to build on distinctive assets while ensuring energy, transport, data, capital, and talent can move efficiently between them.
- Make coordination the organising principle. Cross-border infrastructure, energy networks, digital public services, and labour mobility generate benefits that national decision-makers cannot capture alone.
- Place regulatory harmonisation at the centre of competitiveness. Common rules are insufficient when implementation diverges. Reduce gold-plating, clarify responsibilities and prevent one European framework from becoming 27 different operating regimes.
- Scale what already works. Create systematic mechanisms for identifying and adapting Member State best practices.
- Build a European investment environment greater than the sum of its parts. National reforms raise the quality of individual locations; European integration increases the value of each location as a gateway to a large, predictable and sophisticated jurisdiction.
The research benefited from the insights of a distinguished Scientific Committee comprising Debora Revoltella (Chief Economist, European Investment Bank), Justus Haucap (Director, Düsseldorf Institute for Competition Economics, Heinrich Heine University) and Isaac Baley (Associate Professor and ERC Distinguished Researcher, Universitat Pompeu Fabra).
