The EU’s global leadership relies on strong companies

To sustain its prosperity and stability, the EU needs to reduce the regulatory burden for companies, finalise more trade agreements, and turn the Green Deal into a growth strategy in the coming legislative term, argues Markus J. Beyrer.

Markus J. Beyrer is the director general of the European business association BusinessEurope.

Will the EU continue to be a global anchor of peace, prosperity, security, and stability in the coming years? The past five years of permanent crisis, geopolitical tensions, and a more fragmented world where third countries are less and less willing to follow the EU regulatory example have created the conditions for a perfect storm which puts this at risk.

To meet these challenges, the EU must ensure that its companies stay globally competitive. It is only by bolstering its economic strength that the EU can continue asserting itself internationally, be resilient and secure, shape global politics, and achieve its digitalisation, environmental and social ambitions.

When we consider the current state of the EU economy, it is clear how much work needs to be done on this front. For example, in 2008, the EU and US economies were on par. Now, the EU’s economy is half the size of our US partners.

Our foreign direct investment (FDI) numbers tell a similar story; between 2019 and 2021, FDI in the EU dropped by two-thirds, while the opposite occurred on the other side of the Atlantic. Europe’s declining attractiveness for investment, as demonstrated by these figures, needs to be urgently addressed.

Following the European elections, EU institutions must therefore strike the right balance between protecting our economic security and delivering on the green and digital transitions, while ensuring that our companies can compete on the international stage.

The EU makes up only 6% of the global population and 85% of economic growth in the coming years will be generated outside the EU.

This makes it imperative for the EU to continue finalising trade agreements which offer access to new markets and open investment opportunities for European companies, along with being of significant geostrategic importance.

Europe will also need to find ways of engaging with all trading partners and not just with those that we consider like-minded. With the ever-changing political landscape, a like-minded partner today might not be a like-minded partner tomorrow.

This should be accompanied by an EU value proposition that reflects potential partners’ needs and combines trade and investment agreements, critical raw materials partnerships, capacity building and development incentives.

A second key focus for the next institutional cycle must be reducing the regulatory burden that is currently weighing heavily on European companies, particularly those that are SMEs.

This burden increased significantly from 2017 to 2022, with the European legislator producing a total of 850 new regulatory obligations directed towards companies, representing more than 5,000 pages of legislation.

Moreover, the development of crucial, future-oriented sectors in Europe, such as biotech and AI, has been set back by excessively complex approval procedures and overly prescriptive regulations.

From 2024 to 2029, European institutions and member states must reverse this trend and lessen regulatory obstacles to investing, producing and commercialising innovation in Europe.

This must be accompanied by halting unnecessary revisions of existing EU rules, along with a full application of competitiveness checks on these and all new regulations.

Finally, we must turn the Green Deal into a real EU growth strategy. European business is fully committed to greening our economy and reaching the EU’s climate neutrality goals, but this must be flanked by a comprehensive industrial strategy which alleviates critical bottlenecks like complex and lengthy permitting procedures.

To successfully decarbonise our economy, EU institutions must go beyond the current scope of the Net Zero Industry Act and enable investment across a broader range of sectors.

Moreover, it must go beyond the ongoing electricity market design reform to structurally address the energy cost differential between the EU and our major competitors. State support can be justified to support companies in their transition, along with building the necessary infrastructure and encouraging technological innovation.

However, this must be well targeted, limited in time and carefully monitored to avoid distortions of competition.

In a time where the multilateral rules-based order is being challenged and the world is becoming increasingly divided, it is pivotal that the EU maintain its position as a positive global leader. It can only achieve this by taking these urgent and necessary actions because stronger European companies make for a stronger European Union.