After failing to agree on an investment shock to support European competitiveness, on Friday 8 November the Heads of State or Government of the EU Member States pledged to simplify the European rules that apply to businesses. They were meeting in Budapest for an informal summit on the theme of competitiveness, which they opened in the presence of Mario Draghi and the President of the European Central Bank (ECB), Christine Lagarde. The EU27 leaders then met to discuss the measures to be taken in response to Mr Draghi’s report on competitiveness (see EUROPE 13478/1).
Among his proposals, the European Council agreed on two main ideas: the need to reduce the regulatory burden on businesses and the need to break down the remaining barriers to the internal market. These two issues are broadly covered in the Budapest Declaration adopted by the Heads of State and Government (see EUROPE 13518/8).
Bureaucracy. “60% of European entrepreneurs say excessive bureaucracy hinders doing business in Europe. We need to change that”, warned Estonian Prime Minister Kristen Michal on his arrival.
For him, as for the Prime Ministers of Sweden, Luxembourg, Hungary or the Austrian Chancellor, this is the greatest evil affecting European growth.
In their declaration, the EU27 call for a “drastic” reduction in the regulatory, administrative and reporting burden on businesses.
The European Commission has heard this message hammered home by Member States and businesses for several months: it is preparing an ‘omnibus’ legislative proposal to cut red tape. The aim is to tackle several pieces of European legislation, such as the Taxonomy Regulation and the Corporate Sustainability Due Diligence Directive (CSDDD). “The information we collect is sometimes redundant, so it’s our job to reduce this burden”, explained the President of the European Commission, Ursula von der Leyen. And she emphasised that the aim is not to change the purpose of these texts, but to adapt the way they work. The timetable for this proposal has not been specified.
Internal Market. The regulatory burden on businesses also lies in the fragmentation of legislation across the EU’s twenty-seven jurisdictions. Ursula von der Leyen therefore endorsed Enrico Letta’s proposal to create a 28th regime for companies. “It would be a single set of rules for the whole of the EU, accessible to all on a voluntary basis”, she explained.
As requested by the European Council, the Commission will present a broader strategy on the internal market in June 2025, following on from Enrico Letta’s report on the same subject.
Energy. Among the other obstacles hampering businesses, the issue of energy prices still weighs heavily for many. The leaders therefore reiterated the need to continue to take joint action to bring down energy prices further, which are two to three times higher in the EU than for rivals USA and China.
In an interview with Agence Europe, the Greek Prime Minister, Kyriákos Mitsotákis, said that the issue of interconnections was the top priority for increasing competitiveness. His latest appeals to the European Commission to deal with the mini-crisis in electricity prices that hit his country last summer bear witness to this (see EUROPE 13482/16).
Energy sovereignty will therefore be one of the central points of the Clean Industrial Deal expected during the first 100 days of the next European Commission, Ursula von der Leyen insisted at the end of the meeting.
Capital Markets Union. Given that private capital tends to be invested outside Europe, Enrico Letta’s ‘Savings and Investment Union’ seems essential.
The leaders are therefore in agreement on the finalisation of the Capital Markets Union (CMU), insofar as everyone recognises that the massive investment needed for business growth must come largely from the private sector. In fact, it is the number one issue for strengthening European competitiveness, Latvian Prime Minister Evika Siliņa told Agence Europe.
And Austrian Chancellor Karl Nehammer added: “We actually have too few capital markets in the Union, we need the Banking Union, a common financial centre, venture capital that can then be used to stimulate and drive forward investment, and also to relieve national budgets”.
To get there, however, the EU27 have a long way to go. The completion of the CMU by 2026, the objective set by the Budapest Declaration, requires agreement on issues such as market supervision and harmonisation.
For Belgian Prime Minister Alexander De Croo, the leadership of the EU’s Heads of State or Government on this issue is crucial. “It is a discussion that got lost in extremely technical matters. I think we need to take this issue to leader level so that they can give a direction, and it’s up to the finance ministers to finish up on the technical side. It’s very clear that all the discussions are moving in this direction”, he explained to a number of journalists, including Agence Europe.
While the 2026 timetable seems disconnected from Mario Draghi’s call for urgent action, several sources assure us that measures can already be put in place in the short term to facilitate the mobilisation of private capital. These include the European savings product, also suggested by Enrico Letta, where work can proceed more quickly.
Financing. The mobilisation of private capital has naturally taken precedence over the debate on European public funding, on which the Member States are still divided. The fact that the final declaration of the EU27 still mentions new own resources for the Multiannual Financial Framework, as well as the new financial instruments to be explored, is nothing short of miraculous.
Indeed, the Swedish Prime Minister, Ulf Kristersson, in particular, was critical of the calls from certain Member States to create European financial instruments: “We always see this risk of quickly falling into the question of major public investment, whereas in the United States it’s mainly private investment. So let’s not jump to conclusions”.
Despite his stance in favour of European public investment and common debt, Mario Draghi himself has admitted that a whole range of actions could be put in place before tackling the question of common public financing.
See the ‘Budapest Declaration’ on EU competitiveness: https://aeur.eu/f/E8Y (Original version in French by Léa Marchal and Pauline Denys)