has come up with a plan aimed at slashing the bloc’s overburdening regulation, digging into Europeans’ savings to raise finance and investing the money in European companies to lead in future technologies such as and .
EU Commission President unveiled the policy roadmap called Competitive Compass on Wednesday, warning that the 27-nation EU risks to be “stuck on a low-growth path, with less income for the employed, less welfare for the disadvantaged, and less opportunities for all.”
“The convergence between the EU and the US on innovation has slowed down, while China has caught up, and is winning the race for leadership in certain green technologies,” she told a news conference in Brussels.
A key message of the blueprint is that access to capital in should be as easy as movement of people.
‘Simplification shock’
The EU Commission’s recent focus on climate change and business ethics has left many companies complaining about excessive regulation compounding high energy costs and weak investments.
Therefore, Commission Vice-President Stephane Sejournee also called the new plan a “simplification shock,” with dozens of laws being revised including “rules on environmental and human rights, supply chain standards, reporting on corporate sustainability and chemical safety all facing a trim.”
The EU said two out of three companies find the regulatory burden to be a key obstacle to long-term investment. Especially smaller firms wouldn’t have access to resources required to trace and track the supply chain.
In order to make it easier for them to compete, Brussels said it wants to overhaul the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CSDDD).
In addition, the EU proposes the creation of a new category of mid-sized company to reduce the regulatory burden for around 30,000 firms, according to the text. The aim is for them to “benefit from a single, harmonised set of rules on insolvency, labor law and taxation.”
The policy roadmap also deals with high energy prices in the EU, noting that the bloc’s green transition must go hand in hand with industrial competitiveness.
An upcoming so-called Clean Industrial Deal, therefore, will set out a “competitiveness-driven approach to decarbonization” that maintains the EU as an attractive manufacturing hub and yet promote clean technologies. Specific plans are to be drawn up for troubled sectors such as chemicals, steel and automotive.
EU plan stirs controversy
Climate activists, however, believe the Compass plan is taking a dangerous misstep by framing regulation as a primary obstacle to competitiveness.
Anna Cavazzini, a Green member of the European Parliament, called the planned reductions of business reporting requirements “politically motivated” argueing that respective laws had just been passed last year, with one regulation not even implemented.
“How could CSDDD hurt companies when it is not even in place yet?” she told DW, adding that “over-compliance in the CSRD can be tackled with guidelines.”
Rachel Kennerley from the UK-based Center for International Environmental Law (CIEL) told DW the plan should “point toward bold climate action, not industry appeasement and deregulation.”
Peter Chase, a visiting senior fellow with the German Marshall Fund (GMF), believes though the EU’s reporting requirements were, indeed too cumbersome, especially for smaller businesses.
“Large companies have the local presence and the manpower to verify their supply chains, smaller companies do not. Medium sized companies can do some, but perhaps not all,” he told DW.
And Chase’s colleague at the GMF, Penny Naas, added that the plan’s objectives are “laudable,” because the required information “just isn’t easily available, even in larger firms.”
“Simplification and streamlining these rules would be a win-win for Europe, improving effectiveness while increasing competitiveness,” she told DW in a statement.
Innovation offensive and funding
Apart from massive deregulation, Brussels wants to boost innovation and venture capital schemes as part of a so-called Savings and Investment Union to be presented in the second quarter of 2025, and an “EU Start-up and Scale-up Strategy.”
The EU Commission believes “lower growth prospects for EU startups and higher costs of failure weaken their attractiveness” in the eyes of investors. “As a result, many seek funding in the US and relocate there to benefit from a larger market and customer base,” it said.
Therefore, the EU proposes a single, harmonized set of rules which will “simplify applicable rules, reduce the cost of failure and offer access to capital.”
Echoing former chief Mario Draghi, whose last year is part of the foundation of the new plan, the Compass paper noted if Europe “accepts a managed and gradual economic decline, it is condemning itself to a slow agony.”
At the time, Draghi estimated the EU would need annual investment to the tune of €800 billion ($833 billion) to revive the bloc’s sluggish industrial growth.
Under the Compass plan, the EU Commission now wants to mobilize the savings of European citizens for that goal. It noted that the EU savings rate was 65% larger in 2022 than those of US citizens, while global venture capital flows to the bloc were only 5% compared with with 52% to the US and 40% to China.
Therefore, EU savings should now be used to encourage investments across Europe under a scheme called Savings and Instruments Union.
Brussels-based economic think tank Bruegel found in an analysis that much of those savings are “stuck in banks because households prefer cash over market investments.”
GMF’s Peter Chase says the new EU finance vehicle could “spread savings around the EU.” Although he isn’t sure whether all EU member states would agree to such an investment vehicle, he said: “As long as savers know their accounts are insured by deposit insurance schemes, I doubt they would have any concern where their money is used.”
Edited by: Uwe Hessler
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