The big gnashing of teeth begins

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  Thomas Wulf
  

Panic is spreading in Brussels. Donald ante portas. Anything seems possible, nobody really knows what to do. The Member States are just as headless as the Commission, as are the MEPs in the EU Parliament. Really all MEPs? But no, a group of right-wing and traditionally very EU-critical parties from many countries, which has grown quite large since the EU elections in June and is spread across three political groups, is pleased, not so secretly, that things are finally starting to shake up. However, these colleagues are also wondering what exactly is starting to shake and whether the tower of blocks will then fall in the desired direction, to stay with the image. In turn, they are just as clueless as everyone else, despite hectic transatlantic flights with press appointments for the future president’s staff.

The only thing that is clear is that there is a lot of rattling in the EU box at the moment. Pragmatic and, as usual, quick to throw her colours to the wind, Ursula von der Leyen has largely renounced the excessive fixation of her first term of office on sustainability at any price (“Green Deal”), at least as far as new regulations are concerned. It was not just the criticism from industry that was too strong, which might have been acceptable. Over the last few months, Europe’s rather sluggish civil society has also become a powerful force. It slowly realized that the ambitions of the EU climate plans approved by the member states could only be achieved at the expense of prosperity. In many countries on the old continent, these will probably involve massive job losses in an industry that is in the midst of a rather unprofitable transition to full sustainability and has become slow to innovate due to the weak euro. Volkswagen sends its regards.

The new mantra in Brussels is “competitiveness”, which has been tossed around for some time, along with “strategic autonomy”. If the intellectual awakening experience with regard to the latter can somehow be justified by the surprising supply catastrophe in the healthcare sector at the start of the pandemic, many people are rubbing their eyes as to why competitiveness now requires special consideration. Was it not there before? On closer inspection, however, the answer is clear – no, it didn’t. The facilitation and promotion of healthy and, as far as possible, state-free entrepreneurial competition was and is still considered by many officials, both at EU and national (!) level, to be very unsophisticated. A short anecdote may illustrate this.

“In many places, the regulatory framework simply does not fit the business reality of the regulatory addressee – it is too complex, overly administratively intensive and inappropriate, i.e. anti-competitive.”

For years, it has been a well-known curiosity (a “running gag”) among lobbyists in Brussels that the “impact assessments” that are dutifully added to every new regulatory proposal are usually already ready in the drawer before the legislative proposal is even published for discussion. On paper, however, this exercise is intended precisely to prevent a law from overshooting the mark in its application and subsequently having an unruly effect in practice, i.e. unnecessarily hampering competition on the free market. Apparently, this can be judged perfectly and conclusively from the office in the Berlaymont in Brussels. Consequently, 99.98% of all “impact” analyses that the author has seen in his twenty-five years in the EU quarter come to a positive conclusion. Honi soit, qui mal y pense.

Unfortunately, in the old Europe, the state is still often dominated by a spirit from the pre-industrial age. The government is therefore primarily there to permanently regulate. It is now gradually dawning on even the last backbencher that excessive regulation will eventually lead to the branch on which they are sitting being sawn off. The first warning shot has already been fired in the financial sector in the form of the US refusal to implement the global Basel III standard for all domestic banks since 2013. In many places, the set of rules simply did not fit the business reality of those subject to the regulations – it was too complex, overly administratively intensive and inappropriate, i.e. anti-competitive. Pragmatism of this kind is alien to Europeans. This also and above all applies to the many member states that seem to enjoy making the already highly restrictive EU rules, which they helped to enact, even more complicated with euphemistically so-called “gold-plating”.

However, as the USA and Europe are not so different in this respect, a quick change of course will require a word of power from the top. The revised mandates of the Commissioners appointed at the end of 2024 by their old new boss would probably not have been enough on their own. The adoption of the competitiveness slogan in the public discourse of the French and German governments did help, despite the unstable situation of both bodies. The term sums up the essence of the problem too well. After all, many things can be tested for competitiveness and new (and often always annoying) results can be obtained each time the reference, i.e. the comparative reference of the test, is changed.

“But there are also small rays of hope in Brussels.”

Although it is still mostly the USA against which everything from Brussels wants to be measured, other nations also come into play from time to time, be it Norway with regard to the investment policy of sovereign wealth funds or even individual EU states when, as in the case of Sweden, they grant investors enormous freedom of choice when it comes to pension provision. We can only hope that Switzerland’s highly effective cantonal tax competition will also be viewed in a more positive light once the Commission realizes the importance of tax in the investment sector (an aspect that regularly falls by the wayside, partly because the EU has no competence outside of VAT).

However, there are also small rays of hope in Brussels. The unloved Retail Investment Strategy (“RIS”), which was poorly prepared, technically unfeasible and entailed a completely abstruse administrative burden, has been on ice since July. The new Financial Markets Commissioner, Maria Albuquerque, a Portuguese former finance minister and asset manager who knows the sector inside out, will decide on the next steps by the end of the quarter. Nobody wants this dossier, which, both in its original version and in the various amendments by the Council and Parliament, has provoked nothing but criticism from all sides. In view of the growing pressure not to throw more sticks in the wheels of domestic industry and the financial sector, a complete withdrawal, a partial revision or the often-practiced postponement until the never-never day are all conceivable. We will see. Perhaps a nudge from the other side of the pond will help here too.

Greetings from Brussels, as always undauntedly optimistic,

Yours, Thomas Wulf

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The views expressed in the article are solely the author’s own.