Europe's Broken Promise: Reducing Red Tape

In March 2000, EU heads of state and government agreed at their summit meeting in Lisbon to make the EU “the most competitive and dynamic knowledge-based economy in the world, capable of sustainable economic growth with more and better jobs and greater social cohesion.” One of the main issues for the realisation of the so-called Lisbon Agenda was the “reduction of red tape to promote entrepreneurship.”

Despite this agreement, EU rules and regulations make up an increasing share of the overall administrative burden. A recent study by the Danish government shows that the regulatory burden for Danish companies is close to 4.1 billion Danish Kroner (550 million Euros) and that 40% of this burden is due to EU rules and regulations. And this is only with regard to the Department of Labor.

When the present Danish government came to power in 2001 it promised to reduce the overall regulatory burden for Danish companies. The government has succeeded in reducing the overall level of Danish regulations, but at the same time, notwithstanding the Lisbon agreement of 2000, the EU regulations have increased by the same amount.

This is not only an example of the EU saying one thing and doing another. It also shows how widespread the European idea is that regulations should be implemented on an international scale to level the playing field with little or no regard to whether those regulations are actually beneficial to the people. Levelling the playing field in Europe means that everybody should carry the same number of shackles, rather than removing obstacles on the ground. For people who understand economics it is a constant source of wonder, why European politicians continue to believe that you can promote growth by tying people down.

Europe suffers from high levels of regulation with regard to employment, an expensive government financed welfare system and an extremely high level of taxation, to name but a few of the many problems. Europe’s growth rates are far lower than those of the United States or even Turkey.

If the EU is to rise again, European politicians need to make drastic reforms in the welfare systems; they need to follow the example of the new member states from the East and lower taxes, preferably introducing a flat tax system. Europe also needs to follow through with the Lisbon Agenda. It has to put its regulatory machine in reverse and not just talk about it.