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The EU dilemma: competitiveness versus over-regulation Back  
This summer, the political and economic agenda of the European Union is dominated by the results of the French and Dutch Constitutional Treaty referenda. Yet, while media attention continues to focus on the issues of political discord within the Union, various directives originating from the European Commission, the European Court of Justice and other regulatory bodies, can put new pressure on companies operating within the EU. Two articles published in this issue focus on current trends in the European approach to regulation.

As argued by Fiona Murray of Athronan on page 4, European financial services leaders have responded positively to the signs of the Commission’s commitment not to introduce new policy by a direct fiat from Brussels. Given its past record of over-regulation and the tendency of the Commission to favour a one-policy-fits-all approach to legislation, it is not surprising that the European Banking Federation (EBF) has welcomed the Commission’s commitment to subject future legislation proposals to consultations with the industry and proper impact assessment. As highlighted in the EBF’s response to the Commission’s Green Paper, the European financial services sector remains sceptical about the ability of the Commission to deliver on its promises. With this in mind, the current political stalemate in Brussels and the UK’s Presidency promises to re-orient the EU in a more business-friendly direction, can we hope that this time around the Commission will opt for less authoritarian economic policies?

Realistic or not, the Commission’s commitments are only a small part of the EU regulatory agenda. As revealed in a new survey by trade magazine International Tax Review (ITR), (see story opposite), various European regulatory directives are placing increasing costs on European businesses in terms of tax and financial compliance requirements.

In some cases, these burdens represent a direct charge through required advisory costs or higher staff and management outlays. In other cases, the EU restrictions may act to reduce the opportunity space available to European businesses, making some financial and service transactions too costly to be economically feasible in competitive global environments. However, in all instances, the ever-growing propensity for Brussels bureaucrats to over-regulate business and entrepreneurial activities, as highlighted in the ITR report, signals EU willingness to sacrifice economic competitiveness for the sake of artificial regulatory harmonisation.

With this in mind, the article on property investment on page 4 by Sharespread’s Bruno Doutrelepont, offers what may well turn out to be well-timed advice on currency risk hedging in real estate transactions outside the Eurozone for readers disheartened by the lack of pro-market reforms within the EU. As increasing numbers of Irish investors are turning to non-EU destinations for investment opportunities, management of FOREX risks is becoming a major issue in developing a well-diversified portfolio. On the other hand, holding unhedged dollar-valued property in Florida can itself be a good instrument for diversifying away the risk of Irish investors’ exposure to a slow-growth regulation-happy European economy.

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