One of the most common criticisms of the European Union is the regulatory burden it inflicts on its member states. This is, in fact, one of the reasons those calling for Britain to leave the union most frequently cite for their Brexit stance.
Here, Jiri Sindelar (pictured), a Fédération Européenne des Conseils et Intermédiaires Financiers (FECIF) board member, argues that Europe’s continuing failure to hear the calls for less regulation could spell disaster for the bloc’s small- and medium-sized enterprises.
Even though the European Union has been given a series of warnings regarding its effort to regulate anything and everything, it has not slowed down.
Despite proclamations about “changing the course” and “smart regulation”, from November to December 2015, FECIF´s office in Brussels once again was buried under more than 1,000 pages of consultations, surveys and questionnaires from the Commission and the supervisory authorities.
Yes, you read correctly: one thousand pages in just two months! For those who are now wondering about the origin of this infinite flood of paper, let me tell you a story.
A long time ago, there was a kingdom called “Brusselium”. Although its Council of Elders ruled liberally in the first years, over time it became fond of imposing numerous edicts and rules that entangled lesser kingdoms and duchies. A large number of clerks and administrators found jobs in the Brusselium palace, and did what they were hired to do: they wrote new rules imposed by the Council.
But the people of Brusselium were not foolish; they would not give up their freedom (and money) easily. A long time ago, they mandated to the Council and its servants that only acts with sufficient public support and necessity shall be presented to the kingdom’s senate.
As the number of edicts increased, and public support declined, the elders in the kingdom’s Council thought about how to induce “public support”, when eventually there was none. So they invented the Brusselium Social Fund to artificially empower citizens to raise their voice by supporting them monetarily to do so.
Now, let us switch back from that unfortunate kingdom to the European Union. Why do many consultations start, and what are the objectives behind them?
From the start, the EU created an image of discussion, with stakeholders and “participative” regulation, also called “co-regulation”. This is important, since in this environment, no one can complain that someone put a Spanish boot on their feet before giving them a chance to sign a confession.
But critics argue that these extensive consultations are also used as a PR instrument, creating “problems”, and generating public support for more regulation. And this is where activists and NGOs play a more and more significant role. In many cases they are (co-)funded by the EU institutions themselves, just like the EIOPA, ESMA and EBA.
Not surprisingly, the vast majority of NGOs with EU funding usually agree with the EU’s aims, and support more regulation. For who, after all, would dare to doubt the word of consumers, citizens and voters?
So remaining opposition gradually melts away, swamped by the rapid tempo of consultations. The sheer scale of the workload involved discourages many – particularly opponents with small resources – and pushes them out of the game.
Those who remain in the ring, meanwhile, face the constant danger of missing any new paragraph that slips in undetected.
Of course, you might well say that the above scenario looks like an exaggeration, which it is. But frustration among industry professionals about the way Brussels and its institutions over-regulate the financial market is growing.
This is especially true among the small- and medium-sized enterprises that form the backbone of Europe´s economy: they feel more and more helpless against the pro-regulation tsunami of the Commission and the EU-funded NGOs.
SMEs simply lack the resources to keep pace. Thus the winners are, once again, the big players that can afford to cope with the new regulation.
We believe the time has come to remind Europe that its wealth and stability traditionally comes from its SMEs – the very sector that is being most harmed by the circle of over-regulation that continues to play out in Brussels. Because if Europe does not quickly find its way back to a more practical, less-regulated approach, there will be no SME entrepreneurs left to benefit from the Single Market.
Member of FECIF board of directors
Rising incomes in Asia will probably be the most important investment story of the 2020s. Asia is home to 60% of the world's population, with both China and India each accounting for about 18% of the global total.