Dark Side of EU Deregulation
Over the past two years, European Commission President Ursula von der Leyen has been distancing herself from her signature legislative achievement, the European Green Deal. Instead, she has launched a sweeping deregulatory push that risks undermining the EU’s role as a global standard-setter.
The winds of deregulation are blowing across the Atlantic, with the European Union following in America’s footsteps and launching its own push to unleash the magic of the market. At first glance, this shift might seem like a direct consequence of US President Donald Trump’s return to the White House. But that interpretation overlooks the deeper structural forces at work.
Since early 2023, amid widespread farmers’ protests and growing calls from some EU leaders for a “regulatory pause” European Commission President Ursula von der Leyen has been distancing herself from her signature legislative achievement – the European Green Deal. The reversal caught many by surprise, but it ultimately helped her secure a second term.
Meanwhile, former European Central Bank President Mario Draghi’s report on the state of the EU’s economy, commissioned by von der Leyen, has reinforced the idea that many of the bloc’s competitiveness problems stem from “inconsistent and restrictive regulation.” In response, von der Leyen has introduced the Competitiveness Compass – a roadmap aimed at drastically reducing the EU’s administrative burden by “simplifying the regulatory environment” and “favoring speed and flexibility.”
These pledges are hardly new. As early as 2002, the Commission sought to stimulate economic growth by cutting red tape and subjecting all new initiatives to rigorous impact assessments. Ironically, the very provisions of the European Green Deal currently under scrutiny had already undergone such assessments – and passed.
What is new, however, is the Commission’s decision to advance its deregulatory agenda by using a controversial and opaque legislative mechanism: the omnibus bill.
Omnibus bills bundle together numerous unrelated measures into a single, sprawling piece of legislation, often fast-tracked with little or no public input. This approach breaks with the long-standing legislative principle that each bill should focus on one subject. The principle is so fundamental that even Roman law prohibited such legislation, referring to it as lex satura (“mixed law”).
The EU has historically used omnibus bills sparingly, reserving them for modernizing outdated regulatory frameworks in areas like consumer protection and financial supervision. By contrast, the Commission’s proposed Omnibus Simplification Package represents a sweeping and systematic overhaul of recently enacted policies that have yet to be fully implemented.
The full draft of the much-anticipated proposal will not be revealed until February 26. But it is expected to roll back key legislation, including laws that have entered into force over the past two years, such as the Corporate Sustainability Reporting Directive, the Corporate Sustainability Due Diligence Directive, and the EU’s sustainable finance taxonomy.
This unprecedented rollback would effectively dismantle the carefully negotiated regulatory framework for sustainable development before it has a chance to deliver meaningful results. But other omnibus packages for different sectors will follow, affecting financial regulation, taxation, and public procurement.
More broadly, the EU’s embrace of omnibus bills as its privileged legislative method signals a fundamental shift in the European Commission’s regulatory approach that threatens both the legal predictability on which businesses rely and the legal certainty needed to attract investments for the green and digital transitions.
Rather than making it easier for businesses to access private funding – as envisioned by the Savings and Investment Union initiative – the Commission’s deregulatory turn could undermine investor confidence and regulatory stability at a time when the EU is desperate to attract capital and strengthen its competitiveness. Amid growing policy uncertainty, European green investments are already faltering, having declined by 6.5% in 2024.
Moreover, the Commission’s unconventional policymaking approach will most likely trigger a wave of costly legal battles over the interpretation of the “simplified” rules and their legality. Worse, it could limit the Commission’s ability to perform one of its core functions: regulating the EU economy and shaping social policies that deliver prosperity and security for European citizens.
Future historians may well view the Commission’s embrace of the omnibus bill as the defining moment in a lost decade of European policymaking. Five years spent building an inclusive, forward-looking regulatory framework would be followed by five years of systematically dismantling it at the behest of a privileged few.
If the EU moves ahead with its deregulatory agenda, it risks losing one of its most valuable assets. For years, effective regulation has driven economic and social progress and bolstered the bloc’s global influence. Massive deregulation could prove to be a self-inflicted debacle that impedes the EU’s ability to protect Europeans and severely undermine what remains of its credibility as a rule-maker.
The EU’s simplification effort – as embodied by the omnibus bills to come – aims to enhance Europe’s competitiveness, but by eroding the “Brussels effect,” it is bound to have the opposite effect. The bloc now faces a stark choice: it can either continue to set global standards, or it can dismantle its regulatory backbone and diminish its influence on the world stage while dramatically undercutting the commitment to the rule of law upon which the entire EU edifice lies.
Writing for PS since 2024, Alberto Alemanno is a Professor of EU Law at HEC Paris, and he is Democracy Fellow at Harvard University’s Ash Center for Democratic Governance and Innovation.