Towards a Competitive Edge: Reforming the EU Regulatory Framework
Summary
Amidst an increasingly complex economic situation, Europe’s decrease in competitiveness is one of the most dangerous threats to the bloc’s long-term prosperity. With high energy prices, difficult access to finance, and skills and labour shortages, the EU’s regulatory burden is cited by businesses across the Union as a major obstacle, limiting investment, innovation, and productivity.
This problem has become more acute as the EU has responded to recent crises with an unprecedented regulatory push to advance its green and digital transitions. These goals are an integral part of the European Commission’s long-term strategy, but they come at a cost for European firms.
The question is how to combine these ambitious objectives with a regulatory environment fit for competitive businesses. This Discussion Paper looks at the unfulfilled potential of the EU’s Single Market and Better Regulation agenda. It presents the main challenges weighing on the EU’s evolving regulatory environment, and accompanying them with concrete policy recommendations to address the situation:
1. Turn competitiveness into an overarching goal of policymaking to alleviate the cumulative regulatory burden affecting all European firms (big and small), which stems from legislative uncertainty and complex reporting requirements.
2. Make regulation more sensitive to business size to relieve the disproportionate burden on small businesses and mid-caps, the ‘hidden champions’ falling just above the large-company threshold, which the EU has hitherto failed to identify.
3. Reinforce the Single Market as a top priority to ensure a level playing field across member states, by ramping up enforcement, harmonising service markets, and reducing state aid where asymmetric fiscal capacities threaten competition.
4. Generate greater international efforts to limit the possible fallout from supply chain regulation and to perpetuate Europe’s Brussels effect, by flanking regulatory initiatives with international partnerships and by taking a more integrated approach to regulatory, trade, foreign, and development policy.
