Over the past decades, the European Union has achieved significant success by creating a single market, reducing trade barriers within Europe, and establishing global trade agreements. This progress has led to economic growth, job creation for citizens, and increased competitiveness for European companies.
However, since the start of the 21st century, growth in Europe has slowed compared to other global regions. For instance, the GDP gap between the US and the EU widened from 17 percent in 2002 to 30 percent in 2023.
Representatives of the European People’s Party (EPP) warn that the primary reason for the weakening domestic economy is the substantial pressure created by complex administration and numerous obligations related to climate goals.
Referring to a report by Mario Draghi, former president of the European Central Bank, titled The Future of European Competitiveness, the EPP highlights that strict regulations continue to impose burdens on the economy, particularly on small and medium-sized enterprises (SMEs).
EPP leaders gathered on January 17-18 at a summit in Berlin to shape the EU’s future through a „determined, ambitious, and comprehensive agenda of deregulation and simplification”.
In a joint document, key leaders such as European Commission President Ursula von der Leyen, likely future German Chancellor Friedrich Merz, Greek Prime Minister Kyriakos Mitsotakis, and Finnish Prime Minister Petteri Orpo propose a return to policies that dominated before 2019, prior to the onset of the green wave of policies, Euractiv reports.
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Reducing Regulations and Easing Climate Policy
More than half of SMEs in Europe identify regulatory barriers and administrative burdens as their biggest challenges. Although regulations can benefit companies by harmonizing various national and technical rules, the EPP emphasizes that they also impose numerous additional obligations and burdens, accumulating over time.
Moreover, while the EU has adopted ambitious climate goals and policies for achieving them, their implementation must not lead to the deindustrialization of Europe, the EPP warns.
If climate policies hinder competitiveness and growth, they will not only lose the support of European citizens but also risk increasing global emissions as industries relocate to regions with higher emissions.
Another burden on the European economy is the high cost of electricity and natural gas. The party notes that access to affordable energy is a key prerequisite for growth and job creation, while EU companies currently face electricity prices that are two to three times higher than in the US, with natural gas prices up to five times higher.
Therefore, EPP representatives support the EU’s intention to leverage all available energy solutions, including renewable energy, nuclear power, hydrogen, bioenergy, and carbon capture, utilization, and storage.
Regarding the EU Emissions Trading System (ETS), the party described it as a straightforward system that encourages market efficiency and reduces carbon emissions. However, they added that excessive regulations, such as mandatory renovations for homeowners, are unnecessary.
To address high energy costs, a larger portion of ETS revenues should be allocated to energy-intensive industries, such as support for green hydrogen or carbon capture and storage solutions. In this context, the party welcomes the Commission’s plan for a „Clean Industry Deal”, which aims to combine green growth with industrial competitiveness on a global level.
The Carbon Border Adjustment Mechanism (CBAM) must also be examined for its effects on bureaucracy and competitiveness across different sectors of the economy.
„If we want the EU to create new growth and jobs, the European Commission, as well as the European Parliament, the Council, and national and local authorities, must show restraint regarding every new regulation. This requires a new way of thinking. Not every good idea needs to become law—EU efforts should focus on major issues rather than regulating every aspect of people’s lives. This is how the EU’s successful story of the past decades can remain successful in the future”, the party states.
