The EU executive has announced “an unprecedented simplification effort” to cut regulations and boost innovation in an attempt to reverse Europe’s economic decline and better compete with China and the US.
In her first major policy announcement since starting a second term as the European Commission president last month, Ursula von der Leyen outlined policy proposals intended to boost Europe’s flagging economy.
The plans, in a document titled the Competitiveness Compass, respond to a hard-hitting report from the former Italian prime minister, Mario Draghi, who warned that the EU risked “a slow and agonising decline” without urgent action.
The document reaffirmed the EU’s 90% greenhouse gas emissions reduction target for 2040, which von der Leyen has promised to enshrine in law.
However, the commission president said the EU had sometimes imposed “complex” and “partly contradictory” requirements on companies, an apparent reference to laws passed during her own first term.
She said the simplification agenda matched the objectives of the EU’s green deal “because we have to speed up. The more complex [the legislation], the slower [to meet the climate targets].”
European business, she added, had sent a very clear signal that it faced “too much complexity” and “administrative procedures are too cumbersome”. She promised an “unprecedented simplification effort” that she said would reduce administrative costs for companies by 25%, and by 35% for small and medium-sized enterprises – assuming the commission’s proposals are adopted and followed.
The commission will next month unveil “far-reaching simplification” covering the corporate sustainability reporting directive, which entered into force in 2023, and the corporate sustainability due diligence directive, which will affect companies in a staggered timeline from 2027 and 2029.
The directives oblige companies to report their impact on society, the environment and human rights, but businesses have complained about the high costs and time-consuming demands of gathering the data.
However, campaigners at the Climate Action Network said the commission had taken “a dangerous misstep by framing regulation as one of the primary obstacles to competitiveness”.
The Competitiveness Compass document set out von der Leyen’s economic agenda for the next five years, with measures targeted at boosting green tech, artificial intelligence and quantum computing.
It promised “AI factories” that would allow startups and researchers to train and develop AI models. A separate AI strategy will aim to boost that technology in sectors including manufacturing, automotive and financial services.
Looking to one of Europe’s traditional industries, it promised “possible flexibilities” to help carmakers facing fines for failure to meet 2025 emissions reduction targets.
Von der Leyen will meet car industry leaders on Thursday for a “strategic dialogue” with the sector that is struggling to adapt to the technological shift in the face of fierce competition from China.
The EU executive chief said the EU’s business model for the past 20-25 years had relied on “cheap labour from China, presumably cheap energy from Russia” and “partly outsourcing security”, but “these days are gone”.
Echoing the Draghi report, she said Europe had a static industrial model, “with too few startups emerging with new disruptive technologies”. The former president of the European Central Bank highlighted in his report that no EU company with a market capitalisation over €100bn had been set up from scratch in the past 50 years, while all six US companies with a valuation above €1tn had been created in this period.
In a note to clients on the current “do or die moment”, Eurasia Group’s managing director for Europe, Mujtaba Rahman, said von der Leyen’s intervention was Brussels’ “most ambitious push” for deeper EU economic integration since the eurozone crisis. But, highlighting the challenge of winning support from the EU’s 27 member states, he said “success is far from certain”.
BusinessEurope, the pan-European employers’ association, called for urgency in delivering “meaningful changes for companies in their daily operations”. But the European Trade Union Confederation said that a mooted “28th regime” – EU-wide laws on labour, tax and insolvency that firms could choose to follow instead of national law – was a “recipe for disaster” that risked undermining employment legislation.
Bas Eickhout, co-president of the Greens in the European parliament, said his group was concerned that the compass was “too narrowly focused on CO2 reduction alone and not on protecting nature”. He warned the commission against reopening sustainability laws: “We support simplification as a tool to make people’s lives easier, but not as a byword for deregulation aimed at gutting environmental regulations.”
