EU’s dysfunctional red tape is hurting startups, warns Pieper

This article is part of our special report Reclaiming Europe’s promise with smarter governance and less bureaucracy.

The European Commission is once again pledging to cut red tape and boost innovation with a sweeping new strategy for startups and scaleups. But as bold headlines clash with a deeply entrenched bureaucratic culture, questions persist.

Behind the rhetoric, long-standing flaws in the EU’s policymaking structure are raising doubts among experts and entrepreneurs.

Can a system widely criticised for legislative overload, institutional opacity and patchy implementation really deliver the regulatory simplicity it now promises?

Few understand this better than Markus Pieper, former MEP and long-time rapporteur on better regulation, who was nominated as the EU Commission’s SME Envoy in 2024.

He ultimately turned down the position after it was stripped of promised authority – a move he now describes as symbolic of the deeper issues within the EU’s bureaucratic culture.

“The EU regulates with ETS, Taxonomy, CSRD, Eco-Design, climate banking, the Buildings Directive, forest and agricultural legislation – all at once,” Pieper told Euractiv. “Every commissioner wants to build their own environmental monument. It’s like wearing both a belt and suspenders. The result is a straitjacket for business.”

Trust the people

For Pieper, the issue is not just volume, but structure. Legislative proposals are often amended behind closed doors in trilogue negotiations, with no proper impact assessments applied to changes introduced by the Parliament or Council.

Worse, the Commission evaluates its own regulatory burden through internal metrics, bypassing independent oversight.

“Why does the Commission calculate bureaucracy costs itself? Why is the Regulatory Scrutiny Board under its own control? There’s no functioning external review,” Pieper said. “We need more trust in people, businesses, and the market economy!”

The new startup strategy includes initiatives aimed at improving access to research infrastructure, simplifying tax rules for cross-border remote workers, and promoting entrepreneurship through Erasmus+.

Yet Pieper warns that such efforts risk being layered atop a still-dysfunctional system.

Simplify, simplify, simplify

That warning resonates with EPP MEP Jörgen Warborn, a consistent advocate for regulatory simplification. He supports initiatives to boost startup growth but says they will fail unless implementation is streamlined at both EU and national level.

“The EU can propose better regulation, but if Member States gold-plate laws or apply them inconsistently, red tape will persist,” Warborn told Euractiv. “This is a shared responsibility across all levels of governance.”

He called for stronger mechanisms to control the cumulative regulatory burden, including a shift from the current ‘One-in, One-out’ approach to a ‘One-in, Two-out’ principle – aimed at actively reducing net costs across the legislative portfolio.

“We must also use digital tools to monitor how rules are applied on the ground,” Warborn said, in order to avoid regulating in theory and obstructing in practice.

Bureaucracy ‘killing’ youth initiative

And it’s not just MEPs raising alarms. Young entrepreneurs, often held up as the face of Europe’s innovation economy, continue to face serious barriers when trying to turn ideas into viable businesses.

According to Fernanda Bicalho, President of Junior Entrepreneurs Europe, bureaucratic complexity is one of the leading causes of startup failure among youth-led ventures.

“We consistently see young people with promising ideas held back – not by lack of ambition, but by the overwhelming complexity of starting up in Europe,” Bicalho said.

While she welcomes the Commission’s plan to simplify compliance and provide targeted support through the new strategy, Bicalho warns that access and inclusion must be prioritised.

“If Europe wants to see more youth-led businesses thrive, it needs to offer the right support and clear, practical guidance to help them grow with confidence,” she told Euractiv.

She advocates for an EU-wide ‘Youth Business Onboarding Kit’ that would offer ready-to-use templates for company registration, tax setup and licensing, tailored to each Member State’s context.

She also calls for broader access to legal mentorship, simplified entry requirements for very early-stage businesses, and support structures in multiple languages.

“Empowering youth entrepreneurship isn’t just about startups,” Bicalho adds. “It’s about equipping a generation to actively shape Europe’s economic and social future.”

No time for symbolic gestures

Amid the optimism of new initiatives, several analysts caution against underestimating the entrenched nature of Europe’s regulatory overgrowth.

Matthias Bauer, a senior analyst, describes the Commission’s efforts as “symbolic gestures” layered onto systemic inertia.

In a recent analysis, Bauer highlights how Germany, often viewed as the engine of Europe’s economy, now exemplifies the cost of bureaucratic stagnation.

German businesses reportedly lose €65 billion annually to compliance costs, with an additional €146 billion in lost potential due to delayed investment and outdated approval processes.

His point is not that reform is futile, but that Brussels cannot act alone. Without serious efforts by Member States to cut red tape and simplify tax codes, EU-wide startup strategies risk achieving limited impact.

“The time for symbolic gestures at the EU level is over – Brussels and national governments must prioritise dismantling the bureaucratic and regulatory burdens at EU and national levels,” Bauer argues.

[Edited By Brian Maguire | Euractiv's Advocacy Lab ]