France is as renowned for its red tape, paperasse, as it is for its culture and cuisine.
However, some exasperated business leaders are asking the question, is it possible to make a similar move towards deregulation as in the U.S.? Can France borrow a little from Donald Trump, Elon Musk, and Argentina's Javier Milei to reduce bureaucracy and increase government efficiency?
France's bureaucratic regulations are intricately tangled in processes that date back centuries to the Royal Court and Napoleonic directives. However, many business people cite the example of the reopening of Paris' Notre Dame Cathedral as a way forward.
Can France borrow a little from Donald Trump, Elon Musk, and Argentina's Javier Milei to reduce bureaucracy and increase government efficiency?
After the dramatic fire that engulfed and destroyed it in 2019, President Emmanuel Macron gave an ambitious five-year target to reconstruct the ancient building, which almost everyone said was impossible. However, the government quickly passed laws to bypass many bureaucratic processes, increasing efficiency and allowing for a quick reopening in December 2024.
It is possible to simplify regulations and increase efficiency where political will exists.
As reported in Le Monde, EDF's CEO Luc Rémont and TotalEnergies' CEO Patrick Pouyanné have recently criticized the complexity of French regulations, which they argue stifle investment and efforts to decarbonize.
They argue that it’s far easier to develop large-scale projects in the U.S., with Pouyanné warning that companies can’t continue to invest in France when there are such low returns.
Regulatory asymmetry?
The biggest concern is that EU multinationals are increasingly valued well below their U.S. counterparts because of the harsher regulatory environment in which they operate. This makes European companies less competitive.
When Mario Draghi, the former governor of the European Central Bank, issued a recent report on declining EU competitiveness, he cited the "regulatory asymmetry" between the EU and the U.S.
Since 2019, for example, the EU has passed 13,000 laws compared to far fewer in the U.S., just 3,500 pieces of legislation and 2,000 resolutions at the federal level.
Among the big sticking points in Europe are the new environmental legislation, the Corporate Sustainability Reporting Directive (CSRD), and the Corporate Sustainability Due Diligence Directive (CSDDD). In November, Jean-Laurent Bonnafé, director general of BNP Paribas, spoke out against the directive, saying it was excessively restrictive.
Since 2019 the EU has passed 13,000 laws compared to far fewer in the U.S., just 3,500 pieces of legislation and 2,000 resolutions at the federal level.
The business impact of these two new pieces of legislation could be immense, forcing companies to publish sustainability data on everything from emissions, water usage, chemical leaks, and even the effect of a changing climate on staff working conditions. They would also have to do the same for their suppliers, regardless of where they are globally.
The largest companies might manage, but for a mid-sized French firm, for instance, the CSRD could cost as much as €800,000 in the first two years of implementation because there are so many data points to cover.
This legislation was hailed as great news for the environment, aiming to "put Europe at the forefront of a worldwide green revolution," according to Politico. Still, it disadvantages EU companies because it is incredibly costly, and, more importantly, other governments and jurisdictions haven’t followed suit.
Is DOGE a good role model?
In the U.S., Elon Musk is in charge of the Department of Government Efficiency (DOGE), a nongovernmental group formed in November to rescind government rules and save money, proposing to save "at least $2 trillion" from the $6.75 trillion federal budget by, amongst other things, drastically reducing headcount.
Headcount is only a tiny part of the maths, however. Labor costs only account for 4-5% of the U.S. budget, so a loss of even 25% of all federal jobs would only reduce 1% of federal spending. 59% of the federal budget comprises Social Security, food stamps, Medicare, defense spending, and net interest on the national debt. All of these are hard to challenge.
Whether in the private or public sector, rolling back regulations that require years to evolve or repeal is difficult. In all cases, there might be headaches with trade unions and legal challenges.
The new Competitive Compass
The European Commission has heard the complaints, though, and President Ursula von der Leyen recently announced plans to cut red tape to improve EU competitiveness.
Called the Competitive Compass, the EU has outlined plans to simplify legislation and catalyze business, including reducing the commitments required by such legislation as the CSRD. Von der Leyen intends to reduce reporting obligations by at least 25% in the first half of 2025; paradoxically, many of these trim legislation she brought in during her first term.
It's a delicate balancing act. Environmentalists believe that backtracking on the green agenda and environmental laws like the CSRD plays into the hands of the political right wing. Ironically, too much red tape may also cause many French business people to start seeing a convergence between business interests and far-right political narratives, such as those of Marine Le Pen's party, the Rassemblement National (RN).
Add the complaints around high corporate taxes and demands for pension reform into the mix, and these forces will likely reshape France’s political and economic landscape in the next couple of years.
