EU Under Pressure to Cut Red Tape
But also — Sanctions against Russia
Hello! Today is January 29th, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on Twitter and LinkedIn.
The Briefing
Under pressure from Member States, businesses, and facing criticism from third countries, Brussels is embarking on a vast regulatory simplification reform. The goal? To cut off red tape, stimulate innovation, and avoid losing ground to the United States and China.
TRUMP • "I’m trying to be constructive, because I love Europe. I love the countries of Europe. But the process is a very cumbersome one, and they do treat the United States of America very, very unfairly with the VAT taxes and all of the other taxes they impose" said Donald Trump on January 23, via videoconference, at the World Economic Forum in Davos.
Taking advantage of this platform in front of the world's top economic decision-makers, the American president openly attacked the EU. In his sights: the trade deficit with the United States, taxes on multinationals, VAT, fines imposed on digital giants (Apple, Google, Facebook), as well as regulations and landing rights for airlines.
"They don’t take our foreign products, and they don’t take our cars, yet they send cars to us by the millions. They put tariffs on things that we want to do", he continued.
Donald Trump also criticized the slowness of authorization processes within the EU, which he described as "very cumbersome." He said that it sometimes takes "five or six years" to get the green light for a "big project."
These criticisms echo those of business leaders present in Davos and BusinessEurope, the main European business association. In a report published on January 22, the organization urged the European Union to cut off red tape and strengthen competitiveness — or risk being outpaced by other major economies.
"Companies operating in Europe urgently need a bold signal that the EU is set to cut the regulatory burden as its major priority," the report reads.
REGULATORY PAUSE • National governments are also joining this call. France recently requested a "massive regulatory pause" covering various sectors, from chemicals to financial directives. German chancellor Olaf Scholz, in a letter to Ursula von der Leyen, urged the Commission to reduce costs related to bureaucracy and increase the innovation capacity of EU companies.
Polish Finance Minister Andrzej Domański said that simplification would be on the agenda of all Ecofin councils organized during the Polish presidency of the Council of the EU.
For her part, European Commission President Ursula von der Leyen has made simplification one of her priorities for her second term. "Too many firms are holding back investment in Europe because of unnecessary red tape," she acknowledged in Davos.
On February 26, the Commission is expected to unveil an "omnibus" legislation, aiming to reduce the administrative burden by 25% for businesses and 35% for SMEs.
This legislation should simplify several pillars of the EU’s ESG framework, notably the taxonomy, the corporate sustainability reporting directive (CSRD), and the corporate sustainability due diligence directive (CS3D).
The goal is to avoid subjecting small businesses to excessive reporting requirements that were not foreseen by lawmakers, the Commission wrote a draft version of the "competitiveness compass."
COMPASS • This “competitiveness compass” is a roadmap — which will be presented tomorrow but has already been obtained by Contexte — which is based on the recommendations of Enrico Letta and Mario Draghi in their respective reports. It should be presented today by Ursula von der Leyen and Commissioner Stéphane Séjourné.
The document outlines a set of projects that will come to life in the coming months through specific proposals aimed at strengthening European competitiveness.
Among the expected initiatives, the "omnibus" legislation should introduce a new, intermediate category of businesses between SMEs and large companies. This category will benefit from simplified reporting rules, details the competitiveness compass.
To catch up with the US and China, the Commission also plans to propose a unified legal framework, called the "28th regime". This system should allow innovation companies to operate throughout the EU under a single set of rules governing company law, insolvency, labor law, and taxation, Ursula von der Leyen specified in Davos.
In Case You Missed It
SANCTIONS • European sanctions against Russia were renewed on January 27. Until the very last minute, Hungary threatened to block the renewal, which requires a unanimous vote in the Council of the EU.
Hungary wanted to wait and see if the Trump administration would lift US sanctions on Russia, but this strategy was undermined on January 23, when Donald Trump threatened Russia to impose new sanctions on Russia if Moscow does not conclude a peace agreement with Kyiv soon enough.
The Hungarian leader responded by stressing that he will only support the renewal of sanctions against Russia if he obtains a guarantee from Ukraine on gas transport — at the end of December, Kyiv closed off transit of Russian gas to Europe through Ukraine, on which Hungary is heavily dependent.
In exchange for Hungary’s vote in favour of renewing the sanctions, the European Commission therefore committed to continuing negotiations with Kyiv to resume gas deliveries to Europe. One proposed solution lies in the transport of Azerbaijani gas through Ukrainian infrastructure. The Ukrainian president suggested he would be open to the idea.
What We’ve Been Reading
The FT’s Javier Espinoza reports on the ongoing debate on the future of EU competition policy.
This edition was prepared by Augustin Bourleaud, Antonia Przybyslawski, Solène Cazals, Antoine Ognibene, Edgar Carpentier-Charléty, Lucie Ronchewski, Hana Rajabally, and Maxence de La Rochère. See you next week!