The notion that the current Schengen treaty (which is what I assume the topic is talking about) is effecting the European Unions economy is absurd. As mentioned on a previous post, the issues facing Europe is huge fiscal mismanagement on the part of the Eurozone countries. A realisation that Southern European countries such as Greece, Italy and Spain has such an unbalance is down to a few factors.
2. Tax evasion
3. No central EU bank to take control of the Eurozone finance as a whole.
This is bad for Southern European countries, rich (or poor) Europeans retreat to Southern Europe in the hopes of retiring... This means that no money is being paid out, is vastly more significant, than the money being received.
2. Tax Evasion
Another crippling part of the big problem, in Greece for example, it was common to NOT pay taxes, a rarity to actually pay them, yet Greece simply continued to pay out for its public services and state pensions, thanks to financing from the Eurozone. This is still true in Greece, Italy, Spain and Portugal.
3. Central Bank
Finally, it has been addressed now, that in the Eurozone (as of 2016) there will be one bank regulating the budgets of all EZ members. Before, it was typical that the youth/immigrants and works were in the north, whilst (as mentioned before) they retired in the south. In fact, more vehicles were produced in one car factory in Hull, UK, than the whole of Italy. This central bank should now allow memberstates to be governed better, and most likely will result in an economic boost for the EU in the next 3 years.
The only time the Schengen treaty comes into question, is the flow of works from periphery to core, which in the case of enlargement in Eastern Europe is a massive concern for the west. It will be the fine agreement, potentially to be settled between the UK and EU which will change this.
The main reason so many countries in the EU (such as Greece, Spain, Portugal) are struggling is not because of generous vacation laws. It's economic mismanagement and corruption. Look at Germany: workers on average take 20-25 days off a year, and their economy is the strongest performing in Europe. From what I've read these policies aren't having a negative effect on business, big and small.