To what extent does bureaucracy depress a country’s economic performance? States, economies and companies have been discussing this for a long time. The Chamber of Labor (AK) now warns against the undermining of social and environmental standards.
Especially since the late 1990s and early 2000s, EU legislation has increasingly been seen as a burden, especially for companies, according to the study ‘EU Better Regulation’ by Brigitte Pirchner of Södertörn University in Sweden, published by the Arbeiterkammer-Verlag .
There are more than 23,000 laws in the EU. For comparison: in Switzerland there are about 5,000. The scientist analyzes the European Commission’s agenda for better regulation and the measures that have changed over time.
“With all understanding of the industry’s economically difficult situation, we must be careful that by reducing bureaucracy we do not actually reduce democracy,” said AK director Silvia Hruška-Frank. “Much of what is proposed also does not make economic sense.” For example, she refers to a proposal from the European Commission for fewer reporting requirements for animal diseases. Furthermore, far too many companies are classified as small and medium-sized enterprises (SMEs).
Does the EU have an SME problem?
Regarding the possible undermining of social standards that she identified, the researcher writes that in a report on administrative burdens in 2023, the Commission has described new EU legislation to protect workers against asbestos as a burden for companies. At the same time, the benefits of maintaining workers’ health, employment and their contributions to taxes and social security were completely ignored.
Since the time of Commission President Ursula von der Leyen, almost all companies have been defined as SMEs. The bureaucracy problem is justified solely by the fact that EU legislation is too complex and too expensive for companies, especially SMEs.
However, the definition of SME is so broad that today 99.8 percent of all companies fall into this category. Cost is key. The political solutions would focus almost exclusively on costs, “while ignoring the value of a settlement,” Pirchner writes.
Signa bankruptcy as a warning
Overall, SMEs are already “often exempt from audit and reporting requirements”. This also applied to companies from the fallen Signa Group around René Benko, which were “often exempt from control and reporting obligations”. Signa’s billion-dollar bankruptcy is not only the largest bankruptcy in Austrian history, but also the largest insolvency case in the European real estate sector.
The Commission has announced that reporting requirements for companies will be relaxed after 2024, even though the authority has just been replaced. “However, these measures could lead to corporate interests being prioritized over social rights, endangering social systems and increasing the risk of precarious working conditions across the EU,” Pirchner writes. Sociopolitical goals are not central. The deregulation pushed by Von der Leyen also stands in clear contrast to Von der Leyen’s Green Deal, the study said.
Source: Krone
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
