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Europe’s Red-Tape Economy

WARSAW – Over the past 60 years, the project of European integration has confronted many challenges: post-war economic hardships, the heavy yoke of communism, and the uncertain footing of the post-Cold War world. But, while it has overcome them all, with the European Union now comprising 28 states, many of which now share a common currency, the EU faces another, equally important challenge – that of reducing the burden of regulation weighing down its major industries.

European business is bound up in rules and regulations, many of which originate from unelected officials in Brussels, whose laudable intention to harmonize business conditions across the EU is instead sapping the continent’s commercial creativity and dynamism. As a result, economic performance has become sluggish as competitiveness declines and unemployment, especially among young people, remains stubbornly high.

EU institutions issue thousands of regulations, directives, and decisions every year. In 2012, 1,799 laws were enacted; in 2011, there were 2,062. Some laws, enacted long ago for a European Community of six founding members, are still on the books. It is this thicket of red tape that hampers business and deters entrepreneurs.

One small but important example of this is the average cost of setting up a business, which is €158 ($212) in Canada, €664 in the US, and €2,285 in the EU (and as much as €4,141 in Italy). The sheer cost of getting started is as big a deterrent as one can imagine for a young entrepreneur trying to escape the bounds of unemployment.