Has the European Union become a self-perpetuating regulatory apparatus? – Image: Xpert.Digital
Brussels, the regulatory monster: Why every attempt to reduce bureaucracy fails miserably
The European Union between regulatory ambitions and competitive reality: A critical analysis
The question of the nature of the European Union touches upon a fundamental conflict between aspiration and reality. Originally conceived as a peace and prosperity project intended to create stability through the rule of law, competition, and economic integration, the Union now faces the accusation of having lost sight of its original goals. Empirical findings paint an ambivalent picture: While the EU does indeed possess complex institutional structures whose legitimacy and efficiency are increasingly being questioned, the data do not reveal a conscious mechanism of institutional self-preservation. Rather, they reveal a structural problem of fragmented responsibilities and insufficient coordination.
The European Commission itself no longer knows the exact volume of the European legal body. Its own calculation, dating from 2002, estimated 14,513 legal acts on 96,999 pages in the Official Journal. More recent estimates do not exist. This knowledge gap is symptomatic of a system that no longer fully grasps its own complexity. The EU's Official Journal grew from 759,590 to over 2 million pages between 2004 and 2023 – an increase of 150 percent. This quantitative expansion suggests that any simplification efforts, if they exist at all, are being overwhelmed by regulatory momentum.
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How many legal acts does the EU actually enact per year?
The often-cited figure of 370 new legislative acts per year dramatically underestimates the actual volume of regulation. The Draghi report, which analyzed European competitiveness in September 2024, identified a total of approximately 13,000 legal acts between 2019 and 2024, averaging 2,167 legal acts per year. This figure comprises 515 ordinary legislative acts, 2,431 other legislative acts, 954 delegated acts, 5,713 implementing acts, and 3,442 other legal acts.
But even this impressive figure significantly underestimates the reality. The European Commission alone adopts around 4,000 implementing acts per year, the vast majority of which are not published in the Official Journal and therefore do not appear in official statistics. These acts enter into force through notification to specific addressees or as internal Commission decisions. In addition, the Commission adopts approximately 3,000 further “decisions” annually, which are not implementing acts in the technical sense. The actual annual regulatory volume is thus likely between 7,000 and 8,000 acts – more than twenty times the publicly communicated figure.
This discrepancy between public portrayal and reality fuels legitimate doubts about the transparency of the EU legislative process. If even experts struggle to grasp the true extent of regulatory activity, how are citizens and businesses supposed to understand the impact of this legislation and democratically legitimize it?
Why do all EU red tape programs fail?
For over two decades, the EU has promised to reduce excessive bureaucracy. As early as 2003, an interinstitutional agreement on "better regulation" was adopted. This was followed by the Stoiber Group on reducing bureaucracy in 2007, "smart regulation" from 2010 onwards, the REFIT program from 2012, and finally the "better regulation" package under Jean-Claude Juncker. The current Commission under Ursula von der Leyen announced in 2020 its intention to reduce the administrative burden on businesses by 25 percent and introduced the "one in, one out" principle in 2021.
The result of these decades of efforts is sobering: the volume of legislation has not decreased, but has steadily increased. While 126 legislative proposals were withdrawn under Juncker, these included important environmental protection directives such as the EU Soil Protection Framework Directive. This raises the question of whether reducing bureaucracy has become a pretext for weakening protection standards.
The reasons for the failure are multifaceted. First, there is a lack of institutional cooperation. As expert Kuhlmann notes: “The three institutions – Commission, Parliament, and Council – are not working together. The interinstitutional agreement on reducing bureaucracy is not being implemented at all.” Second, there is a lack of effective monitoring. Systematic impact assessments of the bureaucratic costs of new projects are not being conducted. Third, many measures only address technical details of individual sectors, while the structural causes of the regulatory overload – such as the tendency to seek a legislative solution for every societal problem – are not addressed.
Crucially, however, a structural dilemma arises: every new EU competence creates new responsibilities, every new responsibility requires new actors, and new actors develop a vested interest in perpetuating and expanding their powers. This mechanism is not necessarily malicious, but rather follows the logic of any complex organization.
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What are the specific economic consequences of the EU regulation?
The economic impact of EU regulation is measurable and substantial. The annual administrative burden on European companies is estimated at around €150 billion. More than 60 percent of EU companies cite regulation as a barrier to investment, while 55 percent of small and medium-sized enterprises (SMEs) identify administrative burdens as their biggest challenge.
The Corporate Sustainability Reporting Directive comprises around 1,000 reporting items and is proving completely impractical for companies. GDPR compliance costs small and medium-sized enterprises (SMEs) an average of €130,000, and in some cases up to €500,000. Substituting individual chemical substances under the REACH Regulation incurs costs between €250,000 and €3 million per substance. A European Parliament study concluded that the transition to “safe and sustainable” chemicals is “unaffordable” for SMEs under the current approach.
The so-called “trickle-down effect” is particularly problematic: Large companies, which are themselves subject to reporting requirements, pass these obligations on to their SME suppliers in the value chain. A Dutch economic study found that the lack of regulatory harmonization between member states effectively acts like a 45 percent import tariff on goods traded within Europe. One directive results in 27 national implementing laws, which often differ from one another and thus fragment the internal market instead of unifying it.
This fragmentation undermines the EU's central promise: to create a single market with a level playing field. Instead, companies have to navigate 27 different legal systems, which is prohibitively expensive, especially for SMEs, and prevents economies of scale.
Why is Europe losing ground to the USA and China?
Europe's relative economic position has deteriorated dramatically. In 2008, the EU's nominal GDP per capita was about 77 percent of the US level, but by 2023 it had fallen to about 50 percent. Adjusted for purchasing power parity, the decline is more moderate – from 73 percent to 70 percent – but even these figures demonstrate a persistent productivity gap. Approximately 70 percent of the prosperity gap is attributable to lower productivity.
The reasons are structural. Between 2000 and 2023, investments in the Eurozone grew by an average of 0.8 percent per year, while in the US they grew by 2.2 percent. Private research and development intensity in the EU is 1.3 percent of GDP, compared to 2.5 percent in the US and 2.0 percent in China. The US share of global R&D investment is 42.3 percent, while the EU share is only 18.7 percent.
The innovation gap is manifest in concrete terms: Of the world's 50 largest technology companies, only four are from Europe. The Draghi report diagnoses a structural misspecialization: Europe concentrates on mature industries, while the US and China dominate highly dynamic technology sectors. In the ICT software sector, EU companies are globally marginal, while US firms account for 70 percent of global R&D investment in this sector.
This innovation gap has real consequences for business dynamics. In the US, there are approximately 758 unicorns – startups with a valuation exceeding $1 billion – with a total value of over $3 trillion. China boasts 343 unicorns valued at around $1 trillion. The EU, including the UK, has 173 unicorns valued at $0.9 trillion. The US unicorn ecosystem is larger than that of China and Europe combined.
The problem isn't a lack of innovation in the early stages. Europe produces many promising startups. The difficulty lies in scaling them into global corporations. Europe lacks deep late-stage capital, a unified, large domestic market, clear IPO and M&A exit pathways, and a higher risk appetite. Fragmented markets, thinner growth capital, and weaker exit opportunities slow the transformation of promising startups into globally dominant companies.
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From global player to museum: Europe's creeping path to irrelevance
Is Europe losing its best minds?
The brain drain from Europe is real and worsening. Net inflows of tech talent into Europe plummeted from 52,000 in 2022 to 26,000 in 2024 – a 50 percent decline. Europe is training highly skilled workers but is systematically losing them to the US, Canada, and increasingly to Asian markets.
The situation is particularly acute in the field of AI. A mapping of global AI professionals revealed that Europe has roughly 30 percent more AI talent per capita than the US. However, this apparent strength is deceptive, as Europe is unable to retain this talent. Germany and France are experiencing net losses of AI specialists, primarily to the US and the UK. Even AI hubs like Berlin and Munich are losing experienced professionals to the US, the UK, and Switzerland, despite attracting significant influxes of AI specialists.
The costs of this brain drain are enormous. Europe's AI workforce is highly educated and internationalized – on average, 57 percent of AI professionals in Europe completed their bachelor's degree outside Europe, compared to 38 percent in the US. Europe is therefore not only investing in the education of its own citizens, who then emigrate, but also attracting international talent who leave Europe again after a few years. The public sector finances this education with tax revenue, but the returns flow elsewhere.
The push factors are clear: high taxes, cumbersome regulation, bureaucratic inertia, rigid academic hierarchies, and limited funding opportunities. The pull factors for the US are equally clear: world-leading universities, dynamic labor markets, strong entrepreneurial ecosystems with abundant venture capital, greater academic freedom, and higher salaries.
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Is there a democratic legitimacy deficit in the EU?
The question of the EU's democratic legitimacy is complex and has been the subject of controversial debate for decades. Empirical evidence reveals a structural legitimacy problem that cannot be resolved solely through formal procedures. This so-called "democratic deficit" manifests itself in several dimensions.
First, the EU suffers from a transparency problem. Decision-making processes, particularly in the Council, take place behind closed doors. According to Novak, consensus in the Council often consists merely of the absence of explicit dissent, not of actual agreement. This lack of transparency reinforces the impression of an "impenetrable" technocratic elite, detached from the population.
Secondly, there is an accountability deficit. Studies on the accountability of EU agencies show that many control mechanisms are ineffective. Management boards, which are supposed to act as supervisory bodies, are in many cases “not the watchdogs they are formally meant to be.” Many delegates appear ill-prepared for meetings, do not participate actively, and seem to have no interest in the agency’s overall performance. The European Parliament, in turn, raises questions on issues outside the agencies’ mandates or on points already addressed in available reports.
Third, the vertical transfer of powers to supranational institutions weakens national accountability systems without the creation of equivalent mechanisms at EU level. The horizontal shift of power from representative democratic institutions to an autonomous and non-representative judiciary further exacerbates this problem.
The trust of European citizens in the EU has not recovered as hoped after past crises. The population increasingly perceives the EU as a “monolithic bureaucratic bloc” that stifles the social, economic, and democratic needs and voices of its citizens. This perception is not unfounded when complex legislative processes are virtually impossible for non-experts to understand, and voter interest consequently declines.
Can soft power compensate for economic weakness?
The idea that Europe can compensate for its dwindling economic influence through normative strength and soft power is attractive, but deceptive. Soft power—the ability to influence through attraction rather than coercion—presupposes credibility and stability. But credibility ultimately rests on the ability to assert interests and overcome challenges.
The reality of international politics is sobering: influence does not arise from moral superiority, but from the ability to offer alternatives that are attractive or indispensable to others. Economic strength is not a secondary consideration, but a prerequisite for influence. Those who restrict freedom, competition, and the rule of law lose precisely what once made the EU strong.
Europe's geopolitical irrelevance is becoming increasingly apparent. While the US and China pursue aggressive industrial and military strategies to secure their global influence, Europe remains paralyzed by political disunity and slow decision-making. The EU lacks a coherent foreign economic policy, and its diplomatic efforts suffer from the absence of a unified voice, as individual member states prioritize national interests over collective strategies.
The fragmented structure of the EU separates economic instruments from geopolitical interests, thereby jeopardizing its economic sovereignty. China has already used its economic influence in Europe to pressure EU members to block or weaken resolutions on international arbitration over the South China Sea and on human rights. When economic dependencies dictate foreign policy positions, sovereignty becomes a fiction.
Soft power without an economic and, where applicable, military foundation is ineffective. Only relative security policy strength enables Europe to protect its political and economic interests, as well as its values, internationally. Only on the basis of this strength can Europe contribute to a stable order from which it benefits economically and within which it can fully develop its soft power.
Is the EU still reformable?
The central question is not whether the EU has problems – that is obvious – but whether these problems can be solved within the existing system or whether they are inherent to the system. An analysis of previous reform attempts raises doubts.
The Draghi report of September 2024 precisely diagnoses the problems and calls for fundamental changes: massive investments in innovation, a European industrial policy, the completion of the Capital Markets Union, deregulation, and a strengthening of the European defense industry. The European Commission responded to the Draghi report in January 2025 with the “Competitiveness Compass.” However, this compass falls short of Draghi’s proposals and once again promises “unprecedented simplification efforts”—a promise that has been repeated for over two decades and never fulfilled.
The structural problem runs deeper: as long as 27 member states must decide unanimously on fundamental issues, as long as particular national interests dominate collective European interests, and as long as the EU lacks its own substantial budget and relies on contributions from member states, fundamental reforms remain unlikely. The omnibus proposals for regulatory simplification are criticized by environmental organizations, which fear that under the guise of simplification, protection standards will be weakened. The business sector welcomes them but considers them insufficient.
A genuine paradigm shift would require: first, the enforcement of the principle of subsidiarity – the EU should only regulate what it can demonstrably do better than the member states; second, a radical simplification of the legal body with the aim of halving existing regulations instead of adding new ones; third, genuine harmonization instead of 27 national gold-plating implementations; fourth, a shift from input to output regulation, setting targets instead of dictating processes; fifth, a capital markets union that mobilizes European venture capital; sixth, joint financing of infrastructure and strategic industries.
But political economy argues against such reforms. Every existing regulation has beneficiaries—consulting firms, certifiers, inspectors, bureaucracies—who have a vested interest in maintaining it. National governments readily use EU regulation as a scapegoat for unpopular measures, while taking credit for successes themselves. The Commission has an institutional interest in expanding its powers.
What is at stake?
The question is not abstract, but existential. Europe faces a choice between a painful but necessary reform or further relative decline. Demographic trends exacerbate the situation: Europe's population is aging faster than that of the US or China, which further burdens productivity growth.
If Europe fails to strengthen its innovative capacity, retain capital and talent, reduce bureaucracy, and create a truly single market, its global influence will continue to decline. Economic irrelevance leads to geopolitical irrelevance. An economically weak Europe can no longer effectively represent its values and interests. It becomes a pawn in the game between more powerful actors.
The irony is bitter: A union founded to secure peace and prosperity through the rule of law, competition, and economic strength is threatened with collapse due to excessive regulation, fragmented markets, and a lack of competitiveness. This would be nothing less than the opposite of what this union was originally founded for.
The coming years will show whether Europe has the courage to undertake fundamental reforms or whether its relative decline continues unabated. The figures speak for themselves. The question is whether political decision-makers are prepared to listen and act accordingly. The time for cosmetic corrections is over. What is needed now is a fundamental change of course – or acceptance of a future in which Europe plays an increasingly insignificant role.
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