Europe says No to EU Regulation

March 3rd, 2025

Daniel Song

Since US President Donald Trump’s election, Europeans have felt an overwhelming sense of insecurity stemming from Trump’s lack of commitment to the US-EU transatlantic alliance and his tariff threats. However, despite their differences, there may be one shared goal between the EU and US: deregulation. Since taking office, Trump has promised to slash regulation, and business leaders and CEOs in Europe have cheered his moves and pushed the EU to follow suit. The common critique from European businesses is that the EU’s excessive regulations are stifling business, reducing competitiveness, and harming European economic growth. Specifically, from 2019 to 2024, the EU has issued over 14,000 new regulations, forcing European businesses to spend $150 billion a year on administrative compliance.

Some have blamed the EU’s regulations on the fact that innovation investment has stagnated, with US tech companies spending more than twice what European tech firms do on research and development. Former Italian Prime Minister and European Central Bank leader Mario Draghi, who was commissioned by European Commission President Usula von der Leyen to create a report on how to revive the European economy, called it “an existential challenge.”

However, unlike American DOGE-style, headline-grabbing, chainsaw-wielding initiatives, President von der Leyen has led a more moderate deregulatory effort by working to simplify regulations and protect small and medium businesses from regulatory overburdens. Von der Leyen’s EU Commission has promised a large omnibus bill to simplify regulations, with three key provisions. One, a large group of businesses will be exempted from complying with sustainability reporting rules, with only the largest companies subject to regulation. Two, companies will no longer have to look beyond suppliers with which they have a direct business relationship to find potential human rights violations in their supply chains. Critically, companies will no longer be forced to end contracts with suppliers that do not improve human rights. Third, companies’ requirements to follow a climate transition plan will be relaxed. With conservative businessman Friedrich Merz’s likely ascension as chancellor of Germany, von der Leyen, who comes from the same political party as Merz, will likely find a powerful ally in her deregulation push. Merz himself has staunchly supported deregulation and creating a pro-business environment to promote European economic growth and innovation.

Politically, von der Leyen’s deregulation effort has significant backing, not just from her own center-right European People’s Party (EPP,) but also from the far-right. Jordan Bardella, the leader of the far-right French national rally, has reached out to the EPP, saying that they should unite to form a conservative majority in the European Parliament to slash regulations and eliminate the Green agenda. With support from the European Parliament, the deregulation push is more likely to succeed.

Unsurprisingly, there has also been significant political pushback from left-wing groups worried that the rollback of regulations could lead to environmental harm without boosting competitiveness and stimulating economic growth. In fact, it was recently reported that the proposed regulatory rollback was even more extreme at first, but some dialed back after dissent from several EU commissioners and lawmakers. The first version of the Commission proposal would have made two controversial changes: 1) some companies could still count as sustainable and receive sustainable finance funds even if they caused “not significant” harm to one of the EU’s sustainability objectives, and 2) the compliance with the regulatory classification would have been made voluntary for all companies. Ultimately, the sustainability fund exemption was only applied to one of six objectives, pollution reporting, instead of all six. Some EU legal experts have also criticized the deregulation push because it would undermine investor confidence in green industries and lead to legal instability as companies and green groups sue over the interruption of the new “simplified” rules and their legality.