By Adam Bartha, Director of EPICENTER, the network of leading European free-market think tanks
There was a time when Europe set the global economic pace. Not anymore. Today, we are outgrown, outbuilt, and outmanoeuvred.
The United States dominates the digital economy, with not a single European tech giant in sight. China is forging ahead in cheap and abundant energy, which is fundamental to AI and future economic prosperity. Russia, despite its backward economy, is still gaining ground on the battlefield and threatening our basic security. And Europe? We are becoming what many warned against during the eurocrisis more than a decade ago already: an open-air museum. Elegant and ageing, but increasingly irrelevant.
That decline is not a matter of bad luck. It is the outcome of a broken approach to policymaking. While the US slashed energy prices and enabled capital to be accumulated and channelled into high-growth industries, Brussels doubled down on extreme risk management in all policy areas: from energy to digitalisation, from finance to agriculture. It pursued regulatory micromanagement, left market fragmentation between the EU27 unaddressed, and elevated the precautionary principle above all else. Since the Maastricht Treaty, the volume of EU regulations has grown by a whopping 729%. Since the Lisbon Treaty, it has doubled again. This is not governance. It is economic asphyxiation.
The political class across Europe is starting to realise something has gone wrong. There is growing talk about competitiveness and simplification. But too often, these slogans translate into cosmetic changes. They offer minor relief measures, but never deal with the root cause: a deeply interventionist approach to regulation.
EPICENTER’s new EU Regulatory Observatory highlights where new EU legislation is leading us. It provides a clear assessment of whether EU legislation is moving toward greater liberalisation or further regulation. A panel of more than 30 policy experts from across the EU is scoring new proposals on a 0 to 10 scale. Zero means complete regulation. Ten represents full liberalisation. The methodology cuts through political spin and offers a reality check on Brussels’ policy agenda.
The first legislative file reviewed was the European Commission’s SME Relief Package. SMEs represent more than 99% of all European firms and employ around two-thirds of the private sector workforce. They are the backbone of the single market. But rather than empowering them, EU rules continue to suffocate them with complexity.
The SME Relief Package attempts to ease some of this pressure. The Commission has pledged to reduce administrative burdens by 25%, particularly in areas like sustainability reporting and data protection. This is a positive step.
The expert panel gave the package a moderately liberal score of 6.57 out of 10. There is real value in measures such as regulatory sandboxes, digital gateways, and more flexible reporting requirements. These changes could help improve liquidity and reduce compliance costs.
But the overall impact remains limited. Too many elements of the package are voluntary or symbolic. The creation of new bodies such as the SME Envoy and the SME Relief Tracker may actually add new layers of bureaucracy. Instead of removing burdens, they risk shifting them around.
This reflects a deeper flaw in the Commission’s approach. Brussels creates the problems, then offers solutions that only partially address them. It grants selective privileges rather than reforming the system itself. SMEs are given minor exceptions, while the larger regulatory framework remains unchanged. Legal equality suffers. Market neutrality is compromised. Responsibility and freedom are acknowledged only in principle, while the reality remains complicated. The result is a patchwork of initiatives that fail to deliver genuine simplification or long-term competitiveness.
🇪🇺📝 On Thursday, 31 July, we're launching the EU Regulatory Observatory!
📅✅ Be sure to mark your calendars for 12:30 CEST for the premiere of our conversation with @AnnaSturgkh MEP, @ChrisNasulea, and @CSaravakos.
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— EPICENTER – European Policy Information Center (@epicenterEU) July 23, 2025
If the European Commission is serious about reversing Europe’s economic stagnation, it must adopt a different strategy. One that starts with removing harmful rules, not adding new ones.
A credible plan should include:
- Repealing outdated, sector-specific regulations
- Applying rules consistently across firms of all sizes
- Embedding sunset clauses into every legislative file
- Requiring cost–benefit analyses as a legal standard
- Decentralising rule-making to member states wherever possible
- Introducing a “do no harm to businesses” principle, with clear, quantifiable evidence before new proposals are adopted
These are not radical ideas. They are basic principles for any economy that values growth, competition, and innovation. But many in Brussels often remain stuck in a managerial mindset, despite the warning sirens being on for years. Too many policymakers still assume that prosperity must be administered from above, rather than driven from below.
What SMEs need is not more targeted assistance. They need the freedom to operate in a competitive, open market without being smothered by endless compliance requirements.
Above anything else, Europe needs regulatory humility. Regulators need to remember that the best way to support entrepreneurs is to remove barriers that stop them from growing and then leave them alone.
Until this shift in mentality happens, Europe will continue to fall behind. And no amount of new Draghi and Letta warnings will be able to fix our downfall.
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