Europe needs deregulation

From the reader. For more than three decades, the EU has laid the foundation for the free movement of goods, services, capital and people. The EU presents the internal market as one of its most significant achievements. This is only part of the truth. The internal market is still limited by an excessive regulatory burden and complex legislation.

The European Commission’s simplification program includes, among other things, SME, competitiveness and appropriateness assessments, stress tests and ten omnibus proposals. The program aims to reduce the administrative burden on SMEs by up to 35 percent, which would mean an annual relief of around 12 billion euros for companies and the European economy. These steps are welcome, but not enough. We need more to strengthen Europe’s competitiveness.

Europe has a growth problem. Our economy is growing more slowly than most other major economies. The economic gap between the EU and the US is always growing: in 2021, the difference in GDP per capita was already 82 percent. If the trend continues, the difference between European and American average wealth will be as large in 2035 as the difference between European and Indian today.

The economic potential of the EU is still considerable. Studies show that barriers to the internal market are practically equivalent to tariffs: 44 percent for goods and 110 percent for services. According to the International Monetary Fund (IMF), productivity could increase by more than seven percent if the EU reached the level of the United States in the openness of trade in services.

The impact assessment of EU legislation shows that the legislative proposals currently under consideration cause 71–86 billion euros in recurring costs for companies and administrations every year. The EU must create a real readiness to deregulate, not only to make the regulatory system more efficient, but also to reduce it. It’s about removing existing rules, not just simplifying them.

Abundant regulation in the internal market has led to duplication, inconsistent enforcement and high costs. SMEs spend up to 10 percent of their resources on regulatory compliance, and sometimes need to hire staff just for reporting. In Europe, too many people spend their time complying with the rules, when they should be able to focus on developing operations.

Depending on the country, companies face different standards, licensing systems and control practices. Reducing the regulatory burden on businesses requires that deregulation go hand in hand with more uniform enforcement of the rules.

We want the following things from the EU:

1. Simplify, harmonize and adjust only once

The EU should adopt the principle “regulate once, use often”, whereby information is collected only once and is used across silos. All new regulation should have mandatory revisions to ensure that the regulation remains relevant and outdated rules are systematically removed. The harmonization of terminology in EU legislation would reduce legal uncertainty and improve regulatory consistency.

2. Smarter regulation through better evaluation

Effective regulation requires continuous monitoring. The EU must assess the functionality of the regulation throughout the legislative process with thorough impact assessments. Every new proposal needs to be vetted to ensure that it really promotes innovation and growth. Companies and stakeholders must be involved from beginning to end, so that the rules also work in practice and not just on paper.

3. Mere simplification is not enough – deregulation is needed

Deregulation eases the burden and encourages new companies to enter the market, which promotes innovation and economic growth. When heavy and restrictive rules are removed, companies can price more freely, develop new products and expand more efficiently.

If we want a competitive Europe, we need to unlock the full potential of the single market – not by increasing regulation, but by removing those rules that no longer serve their purpose. A more efficient internal market is both an economically decisive issue and a political necessity.

Europe needs to dismantle bureaucracy, remove barriers and unleash the full power of the single market. Growth does not come from many rules, but from the freedom to compete and innovate.

Matias Marttinen, Minister of Labor of Finland

Benjamin Dousa, Swedish Minister of International Development Cooperation and Foreign Trade

Erkki Keldo, Minister of Economy and Industry of Estonia

Viktors Valainis, Minister of Economy of Latvia

Wolfgang Hattmannsdorfer, Austrian Minister of Economy, Energy and Tourism

Andrzej Domański, Polish Minister of State Finance and Economy

Edvinas Grikšas, Minister of Economy and Innovation of Lithuania