Investing.com — Deregulation is a cornerstone of President-elect Trump’s second-term agenda in the US and has boosted US stock markets since the election.
According to Jefferies strategists, this has increased pressure on the European Commission (EC) to improve the region’s competitiveness by improving the effectiveness of Europe’s rules-based governance.
One of the questions arising from this is whether DOGE — which refers to the deregulation of governance and economic frameworks — will be able to reach Europe.
While “deregulation” is the cornerstone of US policy change, the EU is treading a different path. As the Jefferies note says, “Deregulation is not a term preferred by EU policymakers.” Instead, Brussels is pursuing what they call “simplification”, aimed at reducing the complexity of legislation rather than abolishing regulations altogether.
“Investors should monitor the EU’s efforts to rationalize, not deregulate,” strategists led by Luke Sussams said in a note. “The Commission has already stated that it will simplify the existing rules to strike a new balance between ‘green’ measures and short-term economic growth.”
Draghi’s report on European competitiveness offers context, revealing that between 2019 and 2024, approximately 3,500 laws and 2,000 resolutions were passed at the US federal level. In contrast, the EU passed around 13,000 acts in the same period. This legislative burden adds urgency to efforts to simplify 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. Its 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 are likely to be the most helpful to investors,” notes Jefferies, noting the importance of each commissioner’s initial plan.
In its report, Jefferies highlights key tools for investors following regulatory simplification.
The OECD’s Product Market Regulation Indicators and the World Bank’s Doing Business database offer valuable insight into administrative burdens and ease of doing business. Moreover, the European Investment Bank’s annual investment surveys consistently highlight regulation as the main obstacle, with 61% of companies citing it as an obstacle to long-term investment.
According to Jefferies, the key concern is whether simplification will affect the EU’s framework for sustainable finance. Regulations such as the Corporate Sustainability Reporting Directive (CSRD), the EU Taxonomy and the Sustainable Finance Disclosure Regulation (SFDR) impose significant costs on businesses.
The note states the costs of compliance with the CSRD ranging from €150,000 for companies that are not listed on the stock exchange to over €1 million for listed entities. Ursula von der Leyen recently acknowledged this challenge at a recent press conference, announcing that the Commission is examining ways to consolidate these regulations into a single framework aimed at “reducing redundancies” without changing their fundamental principles.
Although not as aggressive as US deregulation, the EU’s simplification efforts could still affect competitiveness. Jefferies notes that investors should keep an eye on the 2025 Annual Work Program, due to be released on February 11, for greater clarity.
