Why EU businesses want a break from red tape and green rules

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Good morning. EU foreign ministers yesterday told Yulia Navalnaya that they would punish Russia for the death of her husband Alexei Navalny. Here’s our profile of the woman who has vowed to continue his political struggle.

Today I explain why business executives are assembling in Antwerp to demand the EU gets serious about industrial competitiveness. And my Brussels colleague reports on the peace negotiations between Poland and the EU.

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Regaining the edge

Europe is deindustrialising and needs a series of pro-business policies to counteract red tape created by the EU’s green policies and compete with global rivals, scores of executives will warn today.

Context: The EU’s competitiveness has slumped in recent years, hit by a surge in energy costs linked to Russia’s war against Ukraine, the pull factor of financial incentives provided by the US, and industrial overcapacity in China.

Hosted by Belgian Prime Minister Alexander de Croo, a summit of CEOs in Antwerp today will endorse a joint statement with a number of demands for the next European Commission, a day after president Ursula von der Leyen announced she wanted another five years in charge.

Senior ExxonMobil executive Karen McKee said in an interview that the US oil major had $20bn set aside for decarbonisation projects between 2022 and 2027, but that it was likely to prioritise “other parts of the world” amid increasing frustration at the regulatory burden linked to getting projects off the ground in Europe.

Business figures from companies including Bayer, BASF and Ineos will jointly call for the creation of a clean tech deployment fund, a single market for waste and recycled materials, a stronger “competitiveness check” for new legislation, and the appointment of a “first vice-president” of the commission to make it all happen.

“We need to keep industry in Europe because the industry will deliver the climate solutions Europe needs,” the joint statement, seen by the FT, will say. “Both large companies and SMEs face the most severe economic downturn in a decade, [as] demand is falling, production costs increase and investments move to other regions.”

“A competitive European industry, based on a European Industrial Deal, is the conditio sine qua non for the successful delivery of the EU Green Deal,” it will say. This should include “incentives for businesses to invest in clean technologies” rather than “prescriptive and detailed implementing regulations”.

The commission is aware of the challenges. Von der Leyen herself said in September that Brussels would “keep supporting European industry throughout this transition” and has tapped former ECB president Mario Draghi to write a report on how to fix the EU’s competitiveness.

“It would be encouraging if that’s the direction of travel,” said McKee. “Words are good, but we need action.”

Chart du jour: Recovery fund report card

Halfway through the implementation period of the EU’s landmark post-pandemic recovery fund, has the €800bn debt-financed bazooka been a success?

Defusing

If using the EU’s Article 7 against Poland was akin to arming a nuclear bomb, now Brussels and Warsaw are working hard to defuse it. Today, Poland’s justice minister Adam Bodnar and EU justice commissioner Didier Reynders present plans to nullify the threat, writes Paola Tamma.

Context: Article 7 of the treaty of the European Union contains punishments for member states breaching fundamental EU values, including stripping them of voting rights. The European Commission launched such a procedure against Poland in 2017, on the grounds that reforms enacted by the then-ruling Law and Justice party posed “a clear risk of a serious breach of the rule of law”. 

Now a new, Brussels-friendly government is keen to extricate itself from the legal arm wrestle its predecessor had begun. The question is: how? 

Punishment under the article requires meeting a high bar: unanimity of all countries except for the indicted member. As Poland could count on Hungary’s support, the punishment was never implemented. But there are no clear instructions on how to pull back from the initiated procedure now.

“Honestly it’s a bit of unknown territory, there’s no clear rule in Article 7 on how to drop the procedure,” said Jakub Jaraczewski, head of research at Democracy Reporting International, an NGO.

The move, however, carries political risks: the commission can’t be seen to show favouritism with friendly governments. Prime Minister Donald Tusk hails from the same political family as commission president Ursula von der Leyen.

Hence today’s talks, as Poland and the commission try to navigate a way forward in uncharted waters to ensure the procedure is dropped. Call in the bomb squad.

What to watch today

1. European Industry Summit, Antwerp.

2. Meeting of EU general affairs ministers.

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