The EU Commission President wants less bureaucracy in the EU.
(Photo: AP)
Brussels The EU Commission is making a new attempt to reduce bureaucracy. Commission President Ursula von der Leyen (CDU) recently instructed her officials to make proposals by autumn. She also set a specific goal: 25 percent of the reporting obligations for companies should be eliminated in order to make Europe a more competitive location.
Now Brussels is frantically looking for rules that could be abolished. That turns out to be not so easy. “My dear colleagues are not enthusiastic,” reveals a senior Commission official.
The problem: Existing laws are often the result of laborious political compromises – and are therefore extremely long-lived. “Reducing bureaucracy is not so easy because there is no consensus on what is important and what is not,” says Klaus-Heiner Röhl, an economist at the German Economic Institute (IW), who has been dealing with the topic for 20 years. “The rules wouldn’t exist if everyone thought they were superfluous.”
Moritz Hundhausen, Head of European Politics at the Foundation for Family Businesses, believes that the 25 percent of superfluous reporting obligations can be easily identified. But getting rid of them is another question.
Finally, Commission proposals often have to be approved by the European Parliament and the Council of the 27 member states. Different interests quickly lead to a blockade.
Dispute over sustainability, supply chains, posting
Business associations across all sectors are particularly critical of three EU laws:
- Sustainability Reporting: The Corporate Sustainability Reporting Directive (CSRD) has been law since December. Under the previous directive, only large, publicly traded companies with more than 500 employees were required to prepare sustainability reports. In Germany, this affected 500 companies.
From 2025, the reporting requirements will apply to all companies with more than 250 employees. That’s around 15,000 in Germany, most of them medium-sized companies. Companies have to report up to 2,000 pieces of data, for example on environmental standards, social factors and governance.
“A medium-sized company has to despair at the abundance of specifications,” says Hundhausen. The Commission still has to work out the details in delegated acts. Hundhausen therefore hopes that the authorities will readjust here after von der Leyen’s promise.
- Supply Chain Law: The supply chain directive, which is only available as a draft so far, expands sustainability reporting to the entire supply chain worldwide. Companies must check all their suppliers for compliance with environmental standards and human rights – and are liable for violations.
The requirements of the EU law go beyond the German supply chain law, which has been in force since January. During the deliberations in Parliament and Council, a dispute over the strict requirements is inevitable.
- Secondment policy: The law was originally intended to prevent companies from hiring cheap workers from poorer EU countries and undermining domestic social standards. However, according to IW economist Röhl, it is being misused by a number of governments to seal off their own economy from competition.
For example, a German fitter cannot simply drive to France to service a machine, but first has to register in a laborious process. “This is where the Commission should start and enforce the freedom to provide services,” demands Röhl. In order to reduce the bureaucratic effort, a simple electronic registration should be sufficient throughout the EU.
The fact that the head of the Commission is now taking on her own bureaucracy has to do with two things: Firstly, competitiveness has been at the top of the agenda since the USA passed its massive subsidy program for green technologies, the Inflation Reduction Act (IRA), last year . Europe wants to counter this with its own subsidies and faster approval procedures.
On the other hand, the election campaign for the 2024 European elections will soon begin, and von der Leyen is looking for the support of the Christian Democrats in the European Parliament. Your party friends from the European People’s Party (EPP) declared reducing bureaucracy a priority years ago.
Bureaucracy is the key sticking point, and the Commission has understood that. Christiane Canenbley, Deputy Head of Cabinet to EU Commissioner Margarete Vestager
That is why the Commission is now signaling that it is taking the companies’ complaints seriously. “Bureaucracy is the central sticking point, that has arrived in the Commission,” said Christiane Canenbley, Deputy Head of Cabinet for Competition Commissioner Margrethe Vestager, recently at a discussion in Brussels.
Even Stoiber wanted 25 percent less stress
Von der Leyen’s 25 percent target has a certain tradition: in 2007, the former Bavarian Prime Minister Edmund Stoiber was commissioned by the then Commission President José Manuel Barroso to head a working group on reducing bureaucracy. At that time, the bureaucracy costs for companies should drop by 25 percent. Five years later, the Commission declared that the goal had been achieved.
The former Commission President also had plans to reduce bureaucracy.
(Photo: dpa)
Barroso’s successor, Jean-Claude Juncker, also took up the cause of reducing bureaucracy. Since then, laws have been subjected to “fitness checks” and sometimes adjusted. But after the commission tried for a while, the enthusiasm flagged again, says Röhl. The “one-in-one-out rule” officially applies under von der Leyen: This means that an old rule should be dropped for every new rule.
In practice, however, the brake on bureaucracy does not work: the bottom line is that the number of rules is growing every year. In particular, the climate protection legislation, a matter dear to von der Leyen’s heart, means a wealth of new regulations.
Less bureaucracy through digitization
IW economist Röhl says the renewed attempt to remove rules is correct. However, two other methods are more promising: First, a more thorough impact assessment is necessary before the EU decides on new regulations. In this way, unnecessary burdens can be avoided from the outset.
>> Read here: Read, suffer, punch – bureaucracy madness in Germany
Second, the Commission should issue more uniform rules for digitization. Then the member states would be forced to digitize their administration faster – and would reduce bureaucracy in this way.
Last week, Justice Commissioner Didier Reynders presented a new proposal for digitization: Small and medium-sized companies should be able to do business in other EU countries more easily in the future because all public company information should be recorded in an EU-wide database. Companies would then only have to register in one member state.
When expanding abroad, the government there should be able to access the data already stored directly, and there is no need for further registration. Company information will also be automatically available in several EU languages, making it easier for companies to apply for public contracts across Europe.
When it comes to digital administration, Germany has a lot of catching up to do compared to other EU countries. On this issue, the companies are quite happy with a little more pressure from Brussels.
More: Bulgaria and Romania could overtake Germany in digital administration