Full power back or half power for now or…

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  Thomas Wulf
  

These days, Brussels is once again showing why EU officials are paid so well. Of course, such comparisons always depend on the reference values used – and it should be said straight away that they cannot compete with salaries in the banking sector in Zurich. But when comparing the salaries of functionaries at national level in the EU countries, we are not far behind. In gross terms, at least outside Eastern Europe, it is not necessarily noticeable, but it is particularly noticeable in net terms. Apart from a 10% tax, everything remains with the recipient, increased by various surcharges – no further national taxes are paid. If you are not a civil servant, but only employed on a temporary basis, you are not so well off, but, especially compared to the average Belgian wage, you still have plenty. However, all this comes at a price. For many employees of the EU Commission, this year’s price was the cancellation of their summer vacation. The reason for this is not only the customs negotiations with the USA that ran through July and August, but above all the big promises that the EU would finally be brought down from the leading position in global regulatory competition that it has held for so long.

It sounded impressive at the start of the year – everything would be different with the new EU Commission under (its old) Chairwoman Von der Leyen: Deregulation, strategic autonomy, global competitiveness and defense capability were the order of the day. No speech by the new or re-appointed Commissioners was complete without comments to the effect that they had understood the signs of the times and would now show the world that they also had global leadership qualities outside of rule-making.

The business representatives present in Brussels began to breathe a cautious sigh of relief and hope for a certainly lengthy but steady change of course in the EU Commission’s engine room. At the moment, however, everyone is still holding their breath and waiting to see whether the many words will be followed by action.

The test case for this is the so-called omnibus package. This has nothing to do with the reintroduction of postal buses in the Alpine valleys of the EU member states. Rather, it refers to a regulatory canon of information, disclosure, notification and documentation obligations of Kafkaesque proportions scattered across dozens of legal acts in the environmental sector, which the Commission (together with national governments and many willing parliamentarians, it should be noted) unleashed during Ms. von der Leyen’s first term of office. The massive impact of this Babylonian construct of half-baked and contradictory regulations probably remained hidden even from the knowledgeable officials. The latter point is, however, somewhat controversial. There is a persistent suspicion that a group of hardliners among European officials, who are above all loyal to their own ideology, wanted precisely these massive clarification and reporting obligations across all industrial sectors in order to help the captains of industry, who had supposedly not yet come to their senses enough, to get their act together on climate issues. True to the principle – the end justifies the means. Be that as it may, the measure was full. Ms. Von der Leyen was not only threatened by German conservatives with the withdrawal of her party political goodwill if she did not put an end to the goings-on soon after her reinstatement. Apparently, the message got through. Immediately after taking office, the Commission at least made a recognizable effort to take action. Due to a lack of alternative experience, it naturally did so in its typical manner. Since January, its countless experts have been racking their brains over how to replace individual rules identified as anti-competitive with better regulations. However, pragmatic deletions tend to be a last resort, preferring to postpone the date of entry into force or tweak the scope of application. The latter will at least lead to an exemption (to be confirmed by the Council and Parliament, as usual) for small and medium-sized companies from the most onerous reporting obligations when purchasing overseas.

It quickly became clear that although the simplification of laws is often and loudly desired, it is not so simple in practice.

It is foreseeable that, even outside of environmental law, officials will always walk the fine line between political pressure for quick successes in deregulation on the one hand and the ever-lurking danger that simplification rules knitted with a hot needle will make existing highly complex and half-baked regulations even more inappropriate and unrealistic. Meanwhile, everything is waiting for results. The administrators themselves are being bombarded by lobbyists with proposals, both pertinent and otherwise, and the salaries paid to officials in Brussels currently seem more like compensation for pain and suffering.

Despite all the understanding for the difficulty of quickly changing the course of the Brussels supertanker, the feeling remains that the current actionism on display is missing the root of the problem. The multitude of regulations on the table, regardless of whether they have already been enacted, are in the middle of the legislative process like the Retail Investment Strategy (RIS) or are just being drafted on the drawing board, are ultimately far too often an expression of a mindset that (!) needs to be changed. The binational former Prime Minister David Mc Allister, now a Member of the European Parliament, recently put the problem in a nutshell with the sentence: “We need a paradigm and mindset shift at the EU Commission.” This refers to the need to question not only in general terms whether the costs are commensurate with the benefits of a new regulatory idea. Rather, the Commission should start one step earlier and question its primary purpose. This should no longer consist primarily of drafting regulations. Instead, the Commission should train its civil service to interpret the treaty authorizations restrictively (subsidiarity principle), as was originally intended. Instead of creating new rules, it should consistently implement the existing rules, many of which are sensible, and dismantle internal market obstacles in the nation states that are contrary to the treaty.

The financial services sector in particular suffers massively from such shortcomings. For example, the cross-border use of securities prospectuses that have already been approved by a supervisory authority is being deliberately torpedoed with the help of national marketing regulations in other countries, or regulations are being issued that openly contradict European rules currently under discussion, or initiatives based on investor protection are being launched that are not supported in any other member state. The Commission could actually take good care of all such obstacles that block cross-border competition. Instead, all too often the search is still on for the philosopher’s stone in the form of a golden rule that regulates everything for all states in a specific problem area. One example is the fixed idea of European benchmarks for the intrinsic value of financial products, which in the aforementioned RIS ignored the tax aspects of enormous relevance to investors, which of course immediately rendered the whole exercise pointless. Let us therefore look forward to the end of the summer break. New proposals for the RIS are expected at the end of September.

Greetings from Brussels, confident and optimistic as always,

Yours, Thomas Wulf