Interview of Stefano Mallia, President of the Employers' Group, for Phileleftheros

Read the interview of President Mallia by journalist Angelos Angelodimou for the Cypriot newspaper Phileleftheros.

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It’s my impression that the trade war between the two giants, the US and China, apart from all other effects, has shown that Europe is not at the forefront of developments. It has lagged behind in terms of innovation, competitiveness and new business ideas. Do you agree with this, and if so, what is the direction in which we should move?

You are right. The EU’s share of global GDP is in decline and is projected to fall from 25% in 1990 below 10% by 2050. So, Europe has indeed been losing ground for quite some time despite our warnings. For businesses, this translates into an unstable operating environment.

The EU should take a decisive turnaround to address dependencies. This requires a well-functioning Single Market, regulatory simplification, access to affordable energy, and an industrial and technological capacity to compete globally on fair terms.

There is a broader position that says that is time for the EU to be weaned from the great powers, to stand on its own feet and to chart its own course for the benefit of its citizens. Do you think that this can be done in the current environment?

Of course, the EU must again become a global leader rather than a follower. The war in Ukraine and the new US administration have been wake-up calls. In this context, strategic autonomy is key. It is not about protectionism, it is about ensuring that Europe can uphold its economic and social model while maintaining access to global markets through reciprocal, rules-based trade.

But we need to be resilient and that is possible through a comprehensive policy mix.

First, regulatory predictability and simplification. Second, energy price relief and investment in renewables and grid infrastructure. Third, a true “Union of Skills” to address labour shortages. Finally, financial market reforms.

But we need to invest also in disruptive technologies. Our start-ups are leaving Europe because they can't scale up their operations due to fragmented markets, limited procurement and regulatory delays. Meanwhile, in the US and China similar companies benefit from more integrated ecosystems, larger public procurement markets, and faster regulatory approvals. Clean tech start-ups raise three times less venture capital in Europe than their American counterparts. This must be addressed urgently.

In recent years, Cyprus has managed to attract a significant number of technology (ICT) companies due to the incentives granted by the state, but also the broader tax and economic environment. However, several companies speak of an overly regulated operating regime for companies within the EU. Do you think that there is a basis for this argument and that the regulated environment limits the development of businesses within the EU and at the same time does not help attract others?

Absolutely. One of the most significant barriers is regulatory overcomplexity which creates uncertainty, and disincentives to invest. This hits SMEs hardest as they often lack the administrative and financial capacity to manage these burdens.

The issue is not single pieces of legislation, but the cumulative impact of regulatory “peaks” where multiple new rules take effect simultaneously. This forces companies to divert resources toward compliance and suspend innovation activities. According to recent data cited by the Commission, over 60% of businesses consider regulation a major obstacle to investment, and simplification measures could cut administrative costs by €37 billion by 2029, mobilising an additional €50 billion in public and private investment capacity.

While the Commission’s Omnibus Simplification Packages are welcome, they must be followed by deeper reforms. Priority must be given to simplifying complex frameworks such as the EU Emissions Trading System (ETS), the Industrial Emissions Directive (IED), the Deforestation Regulation, and the Packaging and Packaging Waste Regulation.

Simplification must become a structural principle of EU lawmaking. This requires a mandatory competitiveness check on all new legislation. The Employers’ Group supports the use of AI-powered tools—as developed in its recent study — to monitor regulatory burdens in real time and to identify and eliminate excessive requirements.

The issue that concerns all businesses is none other than lending. How easy do you think it is for businesses to access loans? Do you think that the interest rate aspect is handled correctly by the ECB? Do you also believe that, in addition to banks, other ways of securing financing for businesses should be found?

Access to capital is a big issue. Europe must urgently complete the Capital Markets Union. Unlike the US, EU companies rely on bank lending. To give you an idea: only 25% of EU corporate funding comes from equity, compared to 70% in the US. Venture capital investment in the US is three times higher than in the EU.

We need more integrated capital markets that allow institutional investors and private funds to finance European firms at scale. Key steps include harmonising insolvency rules, simplifying listing requirements, and expanding cross-border investment instruments.

There is a great deal of discussion in Cyprus in relation to productivity both in the public and private sector. What do you think should be the approach of employers and employees and more generally in what ways can productivity in businesses be increased?

This is a common feature across many countries, and it is linked to the gap between skills and companies' needs, particularly for the green and digital transition.

In 2023, 75% of employers across 21 European countries reported difficulty in finding workers with the right skills, up from 42% in 2018, while Europe's workforce is expected to decrease from 205 million in 2022 to 184 million in 2025.

We have two structural challenges: productivity stagnation and demographic pressure. To address this, the "Union of Skills" must become a reality and labour market rules must be modernised to allow companies to adapt and workers to seize new opportunities. Education must be a driver of competitiveness.

In addition to this, I also believe that the public sector must be as small as possible and should never be in direct competition with the private sector.

A large part of the costs of businesses is channelled into the energy sector. Are there ways for cost saving, especially since there is a lot of talk about switching to green energy and more environmentally friendly materials?

You are right. EU energy prices are 2-3 times higher than in China or the US. In the short term, we need targeted support measures for energy-intensive sectors—such as temporary price caps, tax reliefs, or compensations for indirect carbon costs — while maintaining alignment with EU state aid rules to avoid market distortions.

In the long term, Member States must accelerate investment in domestic renewable energy capacity, modernise cross-border interconnections, and simplify permitting procedures, which remain a major bottleneck: for instance, while EU permitting for wind energy takes 7-9 years, in the US the average is 2-5 years.

Businesses are ready to invest in energy efficiency, but they are constrained by excessive regulation, and fragmented national frameworks.

The original interview in Greek can be found here.