ERIF KEY MESSAGES 2024-2025
Draghi and Regulation
We fully agree with Prof Draghi’s concerns about the ongoing loss of European competitiveness and the threat this poses to quality of life and social welfare in Europe. The key to competitiveness is investment and investors must have a good business case. As Prof Draghi says, the rate of return must be above the cost of capital allowing for risk.
Regulation cannot force investors to invest and innovators to innovate. In fact, the high and constantly growing regulatory burden in Europe, combined with prolonged, uncertain and often inconsistent regulatory processes, acts in the opposite direction. It slows investment and innovation, and is one of the main reasons why Europe continues to slip behind the rest of the world in productivity and competitiveness.
To reverse the loss of investment and innovation, Europe needs to rethink its regulatory system, to focus on less and better regulation, applied in a consistent and proportionate manner. We strongly commend the Antwerp Declaration for a European Industrial Deal for its clear statements on this subject.
Our Key Messages
1. Better Regulation
2. Science in Regulatory Decision Making
3. Regulation and Innovation
Finally, it is clear to all regulatory practitioners that Europe would benefit hugely from more open dialogues and exchanges between industry and regulators. It is fully acknowledged that industry needs to be prepared to be more open (including with data). At the same time, there should be no obstacles to open exchange, at all levels, between representatives of the European institutions and industry. Indeed, such exchange should be actively encouraged and managed as a matter of transparency and not restriction. The Commission, in particular, should also look urgently at the possibility of seconding industrial expertise into the Commission services, at both expert and senior management level, to provide support in key policy areas including competitiveness, investment and innovation.
We fully agree with Prof Draghi’s concerns about the ongoing loss of European competitiveness and the threat this poses to quality of life and social welfare in Europe. The key to competitiveness is investment and investors must have a good business case. As Prof Draghi says, the rate of return must be above the cost of capital allowing for risk.
Regulation cannot force investors to invest and innovators to innovate. In fact, the high and constantly growing regulatory burden in Europe, combined with prolonged, uncertain and often inconsistent regulatory processes, acts in the opposite direction. It slows investment and innovation, and is one of the main reasons why Europe continues to slip behind the rest of the world in productivity and competitiveness.
To reverse the loss of investment and innovation, Europe needs to rethink its regulatory system, to focus on less and better regulation, applied in a consistent and proportionate manner. We strongly commend the Antwerp Declaration for a European Industrial Deal for its clear statements on this subject.
Our Key Messages
1. Better Regulation
- There is a huge regulatory overhang of over six hundred items of legislation still to be implemented from the outgoing Commission. This is a profound cause of uncertainty for investors and innovators. We strongly recommend that the Commission sets out a rigorously prioritized, fully resourced and transparently reported four-year programme to implement or otherwise withdraw these items. Otherwise, European business and industry will sink beneath the volume and uncertainty of what is to come.
- Review clauses embedded in much existing legislation should be used in a systematic way to review and reduce the legacy regulatory burden.
- The Regulatory Scrutiny Board is a successful EU innovation. We strongly advocate that significantly greater resources are allocated to the work of the RSB. The RSB should seek to estimate the ‘opportunity cost’ of significant regulatory proposals in terms of lost economic opportunity, and not only of administrative and compliance costs. RSB recommendations should be taken as mandatory, unless the College of Commissioners as a whole agrees to overrule.
2. Science in Regulatory Decision Making
- Our society is based on science. If we do not use science to the best advantage in our decision-making processes, we will not reverse the loss of European productivity and innovation. Scientific assessment should use the full range of qualified experts available. The potential for expert bias should be addressed through public disclosure and transparency and not through exclusion because of its origin.
- The Commission should move urgently to set out clear standards for best scientific practice, quality of studies, use of weight of evidence procedures, and distinction between identification of hazard and assessment of risk. These standards should be mandatory across all of the Commission and its agencies.
- These standards should be accompanied by the establishment of an independent science appeal process at Commission level, with a mandate to provide an opinion where complex scientific issues are subject to differing interpretations in the regulatory process.
3. Regulation and Innovation
- The Innovation Stress Test introduced by the European Economic and Social Committee, should be incorporated into Better Regulation guidance and best practice. It will provide a valuable tool for weighing the impact of regulation on innovation and the ability to finance innovation proposals.
- As Prof Draghi makes clear, the key to driving greater innovation in Europe, is a single European capital market offering substantially greater equity risk finance. Clustering of innovation resources in advantageous locations can also be a powerful driver. Neither of these are primarily regulatory issues but regulatory practice should support risk financing and clustering of innovation expertise to the maximum extent possible.
- ERIF believes that application of AI to regulatory processes could offer substantial benefits, both in terms of best use of data and for overall regulatory efficiency. We recommend that the Commission look seriously at greater use of AI in regulatory processes.
Finally, it is clear to all regulatory practitioners that Europe would benefit hugely from more open dialogues and exchanges between industry and regulators. It is fully acknowledged that industry needs to be prepared to be more open (including with data). At the same time, there should be no obstacles to open exchange, at all levels, between representatives of the European institutions and industry. Indeed, such exchange should be actively encouraged and managed as a matter of transparency and not restriction. The Commission, in particular, should also look urgently at the possibility of seconding industrial expertise into the Commission services, at both expert and senior management level, to provide support in key policy areas including competitiveness, investment and innovation.