Investing.com — Deregulation is underpinning President-elect Trump’s second-term agenda in the U.S. and has boosted U.S. stock markets since the election.
According to Jefferies analysts, this has increased pressure on the European Commission (EC) to improve the region’s competitiveness by improving the functionality of Europe’s rules-based governance.
One of the questions arising from this is whether the DOGE – referring to the deregulation of governance and financial frameworks – could reach Europe.
While “liberation” has been the cornerstone of US policy change, the EU is on a different path. As the Jefferies note states, “Deregulation is not a term favored by EU policymakers.” Instead, Brussels is pursuing what it calls “simplification,” aiming to reduce legislative complexity rather than scrap regulations entirely.
“The EU’s efforts to streamline, not deregulate, should be watched by investors,” strategists led by Luke Sussams said in a note. “The Commission has already stated that it will simplify the existing rules to achieve a new balance between ‘green’ measures and short-term economic growth.”
The Draghi report on European competitiveness provides some context, revealing that between 2019 and 2024, some 3,500 pieces of legislation and 2,000 resolutions were enacted at the US federal level. By contrast, the EU adopted around 13,000 acts in the same period. This regulatory burden adds urgency to efforts to streamline governance, with simplification seen as a necessary counterweight to ensuring competitiveness.
Valdis Dombrovskis has been appointed Commissioner for Implementation and Simplification, signaling the EU’s intention to tackle this regulatory burden. His mandate includes reducing corporate reporting requirements by at least 25%, with small and medium-sized enterprises (SMEs) potentially seeing a 35% reduction.
“The first 100 days of the new Commission will arguably be the most useful for investors,” notes Jefferies, noting the importance of each Commissioner’s initial roadmap.
In its report, Jefferies highlights key tools for investors tracking regulatory simplification.
The OECD’s Product Market Regulation indicators and the World Bank’s Doing Business database offer valuable information on administrative burden and ease of doing business. Furthermore, the European Investment Bank’s Annual Investment Surveys consistently highlight regulation as a major barrier, with 61% of companies citing it as a barrier to long-term investment.
According to Jefferies, a key concern is whether simplification could affect the EU’s sustainable financial framework. Regulations such as the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy and the Sustainable Financial Disclosure Regulation (SFDR) impose significant costs on businesses.
The memo lists CSRD compliance costs ranging from €150,000 for unlisted companies to over €1 million for listed entities. Ursula von der Leyen recently acknowledged this challenge in a recent press conference, announcing that the Commission is looking at ways to consolidate these regulations into a single framework that aims to “reduce redundancies” without modifying their basic principles.
Although not as aggressive as US deregulation, the EU’s simplification efforts could affect competitiveness. Jefferies notes that investors should watch the 2025 Annual Work Plan, which will be released on February 11, for more clarity.