The issues raised in the interview given to "F" by Stefanos Mallias, President of the Employers' Group, of the European Economic and Social Committee, are extremely important.
Among other things, it notes that one of the most important obstacles for European businesses is the excessive complexity of regulations, which creates uncertainty and disincentives to invest.
In relation to productivity, he emphasizes that it is a common issue, which we encounter in many countries and is linked to the gap between the skills and needs of companies. Regarding the difficulties faced by businesses in the area of lending, he points out that access to capital is a major issue. Europe urgently needs to complete the Capital Markets Union, he says.
I have the impression that the trade war between the two giants, the USA and China, in addition to all the other consequences, has shown that Europe is not at the forefront of developments. It has lagged behind in terms of innovation, competitiveness and new business ideas. Do you agree with this and, if so, what is the direction in which we should move?
You are right. The EU's share of global GDP is declining and is projected to rise from 25% where it was in 1990 to 10% by 2050. Therefore, Europe has indeed been losing ground for some time, despite our warnings. For businesses, this translates into an unstable operating environment.
The EU should make a decisive shift to tackle dependencies. This requires a well-functioning Single Market, simplification of regulations, access to affordable energy and the industrial and technological capacity to compete globally on a level playing field.
There is a broader position that says that it is time for the EU to wean itself off the great powers, to stand on its own two feet...
Of course, the EU must once again become a world leader and not a follower. The war in Ukraine and the new U.S. administration have been wake-up calls. In this context, strategic autonomy is key. It is not about protectionism, it is about the need to ensure that Europe can maintain its economic and social model, while maintaining access to global markets through mutual regulation in the trade sector.
But we need to show resilience, and that is possible, through a comprehensive policy framework. Firstly, simplification of rules and provisions. Secondly, reducing energy prices and investing in renewable energy sources and grid infrastructure. Thirdly, a genuine 'Skills Union' to address labour shortages. Finally, reforms in the financial markets.
But we also need to invest in disruptive technologies. Our start-ups are leaving Europe because they can't scale their operations due to fragmented markets, limited supplies and regulatory delays. Meanwhile, in the U.S. and China, similar companies are benefiting from more integrated ecosystems, larger public procurement markets, and faster regulatory approvals. Clean tech startups raise three times less venture capital in Europe than their U.S. counterparts. This must be addressed urgently.
In recent years, Cyprus has managed to attract a significant number of technology (ICT) companies due to the incentives provided by the state, as well as the wider tax and economic environment. However, several companies speak of an overly regulated operating regime for companies within the EU. Do you think there is a basis for this argument?
Absolutely. One of the most important obstacles is the excessive complexity of regulations, which creates uncertainty and disincentives to invest. This hurts SMEs the most, as they often do not have the administrative and financial capacity to manage these burdens.
The issue is not the adoption of individual legislation, but the cumulative impact that will result from the simultaneous adoption of a large number of legislation. This forces companies to divert resources towards compliance and suspend innovation activities. According to recent data cited by the Commission, more than 60% of businesses consider regulation to be a significant barrier to investment, and simplification measures could reduce administrative costs by €37 billion by 2029, mobilising an additional €50 billion in public and private investment capacity.
While the Commission's Omnibus Simplification Packages are welcome, they must be followed by deeper reforms. Priority should be given to simplifying complex frameworks such as the EU Emissions Trading System (ETS), the Industrial Emissions Directive (IED), the Deforestation Regulation and the Packaging and Packaging Waste Regulation.
Simplification must become a structural principle of EU legislation. This requires mandatory competitiveness testing in any new legislation. The Employers' Group supports the use of AI-based tools – as developed in its recent study – to monitor regulatory burdens in real-time and to identify and eliminate excessive requirements.
The issue that concerns all businesses is none other than lending. How easy do you think it is for businesses to access loans? Do you think that the ECB is handling the interest rate aspect correctly? Do you also think that, in addition to banks, other ways of securing financing for businesses should be found?
Access to capital is a big issue. Europe urgently needs to complete the Capital Markets Union. Unlike the US, EU companies rely on bank lending. To give you an idea: Only 25% of EU corporate funding comes from equity, compared to 70% in the US. Investment in venture capital in the US is three times higher than in the EU.
We need more integrated capital markets that allow institutional investors and private capital to finance European companies on a large scale. Key steps to be taken include harmonising insolvency rules, simplifying listing requirements and expanding cross-border investment instruments.
There is a lot of debate in Cyprus about productivity, both in the public and private sectors. What do you think should be the approach to employers and employees and in general in what ways can productivity be increased in companies?
This is a common issue, which we encounter in many countries and is linked to the gap between the skills and needs of companies, especially for the green and digital transitions. In 2023, 75% of employers in 21 European countries reported difficulty finding workers with the right skills, up from 42% in 2018, while Europe's workforce is expected to fall from 205 million in 2022 to 184 million in 2025.
We have two structural challenges: stagnation in productivity and demographic pressure. To address this, the 'Skills Union' needs to become a reality and labour market rules need to be modernised to allow companies to adapt and workers to seize new opportunities. Education must be a driver of competitiveness. Furthermore, I believe that the public sector should be as small as possible and should never be in direct competition with the private sector.
A large part of the costs of businesses is channelled into the energy part. Are there ways to save costs, especially given that there is a lot of discussion about the transition to green energy and more environmentally friendly materials?
You are right. Energy prices in the EU are 2-3 times higher than in China or the US. In the short term, we need targeted support measures for energy-intensive sectors – such as temporary price caps, tax breaks or compensation for indirect carbon costs – while maintaining alignment with EU state aid rules to avoid market distortions.
In the long term, Member States need to accelerate investment in domestic renewable energy projects, modernise cross-border interconnections and simplify permitting procedures, which remain a major obstacle: for example, while EU permitting for wind energy takes 7-9 years, in the US the average is 2-5 years. Businesses are ready to invest in energy efficiency, but they are constrained by overregulation and fragmented national frameworks.
