If we want a better, freer, richer Europe, the time has come for 'less' Europe: let's repeal all the Directives

 

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I have been reading what the press has published about the Draghi Report. The analyses are rather critical and hopeless. The less critical believe that it includes good ideas to pull 'sleeping beauty Europe' out of a lethargy that has lasted at least twenty years, but they are sceptical and pessimistic about the possibility of its implementation. And the most critical believe that the general orientation of the report is wrong. These are the old bad ideas: more public spending, mutualisation of debt and more regulation. In view of the failure of the NextGeneration funds, one tends to agree with the critics: we should try to stop doing again and again what has failed in the past. And we should keep in mind

• the loss of state capacity that Europe has suffered in the last twenty-five years (reflected in the lack of knowledge, training and experience of those who hold public positions of political election or appointment;
• the growing inability of its politicians to convince citizens of anything;
• the appalling ageing of the European population that progressively limits the discretion of public spending (half of Spanish public spending is caught by pensions for the elderly)
• the growing 'fondness' of the population for populist and redistributive policies (the greater political influence of women has something to do with it);
• the contempt for meritocracy in the assignment of public offices and
• the disregard for competition in the allocation of public resources that leads to their inefficient allocation

What could Europe do to improve the long-term well-being of Europeans and reduce the costs of running businesses while increasing the freedom of individuals to run their lives as they prefer?

I believe that the European Commission should 'deharmonise'. Limit the 'production' of new Directives or Regulations to those areas in which it is intended to build a European market that, at the time of enactment of the Directive, does not exist. And repeal all the Directives whose fundamental function was for all European countries to have a similar law but which do not contribute substantially to reducing transaction costs between Europeans.

I believe that the most promising area to start "deharmonization" is Private Law. All the Company Directives, the Consumer Directives and the unfair competition Directives should be repealed. In fact, they were enacted, not because anyone believed that having such a regulation on unfair terms throughout Europe would create a European market for mortgage loans or insurance, but because they wanted to ensure that, throughout Europe, consumers enjoyed a high and similar degree of protection. The same in the case of company law (it was about protecting shareholders and creditors) and the same in the case of Unfair Competition Law or misleading advertising.

It is time to leave it to the States to decide whether they want to protect their consumers or the shareholders in their companies too much or too little. States have incentives to do what is best for their shareholders and for their consumers. And competition between legal systems can - as it always has - improve the general welfare of European society.

In addition, repealing all the Directives would significantly reduce the transaction costs of companies. Harmonisation does not prevent a Danish company from asking a Madrid lawyer about the Spanish regulation on misleading advertising when it has to launch an advertising campaign that extends to Spain. So their costs do not increase if there is no European regulation of Spanish advertising, because the Directives are not normally complete.

But we would also greatly reduce the costs of administering the law. I do not have to remember the thousands of millions that the Directive on unfair terms has cost the Spanish economy. That's millions in net losses (i.e., discounting the 'fair' redistribution of funds from banks to customers). Hundreds of thousands of lawsuits would have been avoided if the national legislator and the national Supreme Court would have had the final say in matters affecting their citizens. In this sense, the value of having European jurisprudence - the value of the CJEU's jurisprudence - has diminished a lot once a certain homogeneity has been achieved between the laws of the member countries. It is an inevitable consequence of the law of diminishing marginal returns.

All Directives relating to Labour and Social Security Law should also be abolished (the EU should only regulate 'intra-community' matters, i.e. those with an 'element of internationality' as professors of Private International Law say). Again, states have adequate incentives to protect their workers and we can expect great benefits in terms of their mobility to the jobs that most value their skills, training and experience if not only companies but also states compete to establish the most efficient labour regulation.

I am not knowlegdeable in other areas of European law (I don't think there is much to 'disharmonise' in the tax field or in the field of technical regulations or in the field of the stock market or in banking prudential legislation) but I believe that this 'disharmonization' should extend to data protection, to the regulation of artificial intelligence and 'digital' markets, criminal law or administrative offences and "constitutional" regulation (states must be able to free themselves from European tutelage in this area, although the EU's ability to sanction countries that do not comply with the requirements of the rule of law must be strengthened).

Instead of worrying about harmonization, the European Commission should concentrate on promoting interstate conferences to improve national regulation with 'model laws' in the style of the American Restatements.

Repealing all the Directives that are not essential to build a single market and 'unleash' competition at all levels of the public and private sector is a low hanging fruit that the European Commission can unilaterally implement. It can start proposing to the European institutions the systematic repeal of European legislation. Of course, this repeal does not imply that national laws are repealed. Only that the most efficient states and economic operators will gain market share for the benefit of European citizens and consumers.