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EU watchdog warns Ursula von der Leyen against rushing deregulation

European Commission risks eroding trust by using urgent procedures to cut red tape, ombudsman says

The EU’s independent watchdog has warned Ursula von der Leyen against rushing through deregulation without the proper safeguards, intensifying pressure on the commission president ahead of a no-confidence vote.

European Ombudsman Teresa Anjinho said that the commission risked eroding trust by pushing through its simplification drive without consulting civil society, warning against complacency as President Donald Trump rolls back oversight in the US. 

Simplifying the laws itself isn’t the problem, Anjinho told the Financial Times in an interview. ‘‘The problem is when you attach to the simplification urgency procedures that deviate from the normal legislative procedures.”

The commission has come under scrutiny over von der Leyen’s use of urgent procedures to fast-track the simplification of some climate laws introduced in her first mandate, as she tries to boost competitiveness by cutting red tape for businesses.

Von der Leyen is facing a no-confidence vote on Thursday over transparency concerns and allegations about bypassing parliament, the bloc’s only directly elected institution, while being too accommodating to EU capitals. In exceptional circumstances, the commission can propose passing legislation without going through parliament.

Separately, Anjinho has opened an inquiry into the commission’s review of corporate sustainability due diligence rules as part of its simplification drive, after NGOs complained that Brussels had broken its own guidelines. The commission’s proposals would water down rules forcing companies to track and report on human rights and environmental issues in their supply chains.

To act quickly, the commission did not consult with civil society organisations or conduct a so-called impact assessment of the new rules, which is usually required before they are tabled for adoption.

“The way these decisions are being perceived, . . . is that competitiveness is, in a way, coming at the cost of these legislative procedures and pre-established laws,” Anjinho said, warning that there was a perception that “these decisions are being taken behind closed doors, that they are being rushed’.’

The EU ombudsman can carry out inquiries and make recommendations to the commission, but they are not legally binding.

Following procedure is part of the democratic process, said Anjinho, who took office in February. “Democracy is something that should not be taken for granted.”

Anjinho, who previously served on the supervisory committee of the EU’s anti-fraud agency Olaf, has opened two other inquiries into the EU executive’s use of accelerated procedures. These are on amendments to agricultural funding giving farmers greater leeway in following environmental rules, and on rules to fight migrant smuggling, for instance including harsher penalties for related offences.

The latter was opened following a complaint by the NGO Picum, which alleges that “the Commission’s failure to conduct an impact assessment overlooks flagrant human rights violations” linked to the migrant smuggling rules, such as criminalising people who help migrants.

Anjinho said human rights impact assessments were particularly important to “evaluate the consequences and the risks of certain decisions”.

She acknowledged that the legislative process was time consuming, but said that “the procedures exist to guarantee also that there is fairness”.

“There are situations where you can derogate from these impact assessments, but they are normally exceptional,” Anjinho said, adding that she would now seek “clarification” from the commission.

The Portuguese official also warned against complacency in enforcing democratic norms, at a time when US President Donald Trump is abolishing watchdogs and regulations protecting citizens and businesses.

“The US is influencing geopolitically everything that we are talking about . . . from the simplification, the question of competitiveness, to defence,” she said.

Perfect Storm — how the west has wrestled with Moscow’s oligarchs and oil barons

Thane Gustafson’s economic history of post-Soviet Russia wonders how impervious Putin is to western sanctions

On a visit to interview President Vladimir Putin last year, the US conservative firebrand news host Tucker Carlson stopped at a Moscow mall to film a segment about how years of sanctions had impacted Russians’ shopping. As he strolled through a branch of Auchan, the French hypermarket chain, Carlson marvelled at the low prices and broad assortment of goods from other western multinationals. “Looks pretty non-sanctioned to me,” Carlson said, “but what do I know?”

The bounty (and Bounty bars) on offer were emblematic of Russia’s resilience to western economic pressure since Putin ordered the full-scale invasion of Ukraine. Instead of returning to the empty shelves of the late Soviet era, most western consumer goods remain widely available. Russia’s oil exports fund the Kremlin’s splurge on defence and trickle into ordinary Russians’ pocketbooks. The technocrats who led Russia’s efforts to integrate its economy with the west are now the vanguard of the Kremlin’s fightback against sanctions.

Today’s economic warfare is rooted in three decades of failed attempts to draw Russia closer to the west, Thane Gustafson, a professor at Georgetown University, argues in Perfect Storm. Instead of drawing the cold war adversaries together, efforts to integrate Russia into the capitalist system gave each side powerful weapons against the other. When Putin’s tanks rolled into Ukraine in 2022, Kyiv’s allies responded by expelling Moscow from global markets and supply chains. Russia cut Europe off from cheap gas supplies and crowed that the continent would soon freeze.

Gustafson traces how the euphoria that greeted American-style capitalism’s arrival in Russia masked a brooding resentment at the Soviet empire’s defeat. Russians stood in lines for hours at Moscow’s first McDonald’s when it opened in 1990, but were less excited about swallowing triumphalist, often condescending advice from their western betters — or “spinach”, as former senior US diplomat Victoria Nuland put it. “I know you guys would like to come here and teach us heathens how to eat with a fork and knife and just to make sure we brush our teeth the right way,” the Russo-Georgian tycoon Kakha Bendukidze quipped.

In any case, the Russians had their own way of doing biznes. Boris Yeltsin’s liberal economic reformers lamented the lack of a Marshall Plan for Russia, as the US had arranged to rebuild Europe after 1945, but did much to discredit western capitalism themselves. Their “shock therapy” reforms immiserated millions, while a loans for shares deal to keep Yeltsin in power enriched a tiny coterie of oligarchs. As western companies leapt to get their hands on Russia’s riches, those who had already made it in biznes headed the other way. Inflows into the country totalled over $630bn from 1992 to 2020 but were dwarfed by an estimated $800bn of Russian money held outside the country.

This created a vulnerability that western sanctions have sought to exploit, limiting Russia’s ability to sell commodities abroad and import irreplaceable goods for its war machine with the proceeds. But predictions of economic disaster, made in Washington and Moscow alike at the war’s outset, have not come to pass. Gustafson finds the sanctions have been too incremental, often laxly enforced, and rarely with a clear goal in mind. The most successful have constrained Russia’s financial flows. He writes: “the Russian dependence on the western financial system became its greatest source of vulnerability”. Russia has proved skilful at evading those, too — as evidenced by the western components found in missiles that strike Ukraine, often smuggled through its ally China.

Gustafson holds out hope that what remains from Russia’s opening to the west could help the sides reconcile once Putin is finally gone. He even sketches out a future president’s speech in which Moscow renounces Putin’s imperialism, accepts its goals in Ukraine are unattainable, and rejects its dependence on Beijing.

Putin’s war, however, has laid new foundations that will be difficult for any successor to shake off. Power and wealth are in the hands of a venal elite in the security services. Sanctions have fuelled resentment even among an elite that once looked to the west. No western companies have made an effort to return to Russia. And those who have profited in their absence are in no rush to welcome them back. Or, as Putin put it last month when he backed efforts to block McDonald’s from returning: “Only cowards pay their debts.”

China could give luxury titans a run for their money

Local jewellers chip away at European dominance in domestic market as consumers move towards homegrown products

Chinese consumers have been increasingly turning to local brands across a wide range of industries. In sectors such as sportswear, beauty and electric vehicles, local names have surged ahead, driven by rising national pride and improving product quality. Yet amid this shift towards homegrown products, luxury jewellery remained a category resistant to change. For decades, European brands such as Cartier and Van Cleef & Arpels have held an unyielding grip on the Chinese market.

That dominance is beginning to erode. Driving this shift is local rival Laopu Gold, a once-traditional jeweller now leading a transformation in China’s high-end jewellery sector. Laopu reinvented itself by embracing Chinese designs, making 24-carat gold pieces adorned with culturally significant symbols such as dragons and phoenixes. These designs, rooted in heritage, have been popular among a new generation of affluent young locals seeking luxury that reflects their identity. 

Fixed pricing, exclusive product releases and a loyal fan base have helped give the company a unique position, winning market share as global peers struggle to localise fast enough to compete. Same-store sales at its flagship locations have more than doubled this year, while online sales have risen fourfold, reflecting continued sales momentum.

That position is reflected in its share price. Since its listing last year, shares of Laopu Gold have risen more than 14-fold, pushing its market value past HK$170bn ($21.7bn), surpassing Chow Tai Fook, long the dominant name in China’s jewellery market. It is now one of the fastest-growing luxury groups in Asia.

Yet Laopu remains heavily dependent on the domestic market, with growth closely linked to Chinese consumer sentiment and the investment appeal of gold. Unlike global luxury rivals such as Hermès or Richemont, it has yet to prove it can maintain premium pricing during economic downturns. It also lacks an international presence and diversification across product categories. While its revenue has been growing rapidly, more than doubling last year, it remains a fraction of the turnover of legacy groups such as Richemont or Chow Tai Fook. 

Despite these limitations, Laopu’s rise nevertheless marks an inflection point. China was already the most important buyer of luxury; now it is transitioning to become a credible supplier too. To join the ranks of global luxury groups, it will need to demonstrate resilience across market cycles and build a brand identity outside of local markets. But even now, Laopu shows progress that once seemed far beyond China’s reach.

Britain cannot afford to scare foreign residents away

The end of the non-dom tax regime has been badly handled and risks economic damage

The Somerset town of Bruton has a number of wealthy homeowners, including the former chancellor George Osborne, who in 2015 took the first steps towards abolishing Britain’s non-domiciled tax regime for foreign residents. Until recently, it was also home to Iwan and Manuela Wirth, Swiss co-founders of Hauser & Wirth, the global contemporary art gallery.

The Wirths have relocated to Switzerland, having been officially resident in the UK since 2016. They had family and professional reasons and were not non-doms, a status that was finally abolished by the government in April. But all wealthy foreign residents now face a 10-year deadline after which their global assets are liable to UK inheritance tax of up to 40 per cent.

They are among many in this group who are leaving the UK, some alienated by rapid changes in a tax regime meant to lure them. “I looked at the 10 reasons I was given for coming and they’d all changed, so I decided to go,” one reports having been told by another. Departures include Lakshmi Mittal, the steel billionaire, and Nassef Sawiris, Egypt’s richest man.

The full impact will not be known for a year or two, as tax returns reveal how many of the 74,000 non-doms have left, and tax advisers and financial lobby groups have reason to exaggerate. But there is a growing risk of the Treasury not only failing to gain an estimated £33.8bn in taxes over five years, but losing revenues if more than a quarter of those affected leave.

It is plain that UK chancellors were lulled into a false sense of security by the fact that Osborne’s initial abolition of permanent non-dom status did not provoke much flight. Jeremy Hunt followed in 2024 by limiting to four years the full fiscal benefit of foreign residency and Rachel Reeves added 10-year inheritance tax liability. Big mistake.

The latter is scaring away many foreign residents whose estates would be lower taxed elsewhere. Italy has attracted many former UK non-doms with an offer of being able to shelter overseas assets for 15 years in return for an annual payment of €200,000. It also has an inheritance tax rate starting at only 4 per cent of an estate.

The 200-year-old non-dom regime was arbitrary and indefensible. But the rapid transition to a regime that fails Reeves’ claim of being “internationally competitive” has proved very unnerving. It does not really help that Nigel Farage, Reform’s leader, has promised a 10-year offshore tax shelter for a one-off payment of £250,000. Who could depend on any of this?

Consider why the UK needs a special regime for foreign residents. The US has global taxation for all, despite Donald Trump’s offer of a $5mn “Trump Card” route to citizenship. But US taxation is generally lower (it has a much higher estate tax threshold) and the economic opportunity is greater. The UK must compete, along with others. 

There is a straightforward tax incentive to host wealthy foreigners: the UK received £6.2bn in taxes from non-doms in the 2022-23 tax year, despite the fact overseas income and assets were mostly sheltered. By definition, they can pick where to settle, while the UK depends on its high earners, given that 29 per cent of all income tax is paid by the top 1 per cent.

The UK also gains wider economic benefits from foreign talent: the Wirths’ presence in London and Somerset has been vital to the UK’s contemporary arts industry. This works at a less visible level: if a private equity fund tries to recruit a senior executive to London, the latter will now think harder about whether it is worth coming.

The UK has attractions, of course, from language to a stable legal system and good schools and universities. But other places have made themselves more alluring and it has been pushing its luck since Brexit. Reeves has been considering changes amid intense fiscal pressure as the scale of flight by non-doms has emerged.

Labour should go further. The four-year period the UK offers for foreign residents to shelter overseas income and assets from tax is intuitively too short: it is uncompetitive with other countries and does not give a family time to settle and put children in school before leaving again. The point of a foreign resident scheme is to entice people not only to come but to remain.

I would lengthen it and make the offer simpler, a quality that is now sorely lacking. Allow foreign residents a decade of paying UK-based taxes for an annual fee of at least £200,000 (not a Farage Card). Then make them integrate fully, keeping only offshore assets in trust for inheritance tax purposes. This might not please Labour MPs but it would benefit the country.

Introduction of military service would make it harder for companies to recruit workers

The German army’s growing need for new recruits is making businesses anxious that their struggle to find staff will get even harder.

Corporate representatives told the Financial Times that they backed efforts to bolster the military of Europe’s largest nation as Nato seeks to strengthen its deterrence against Russia.

But they are concerned that a return to some form of conscription — as well as a drive to get more civilians to serve as reservists — would further strain companies that are trying to recruit skilled workers in a tight labour market.

“The security situation is dramatic,” said Steffen Kampeter, director of the BDA, the country’s biggest employers’ group, adding that he welcomed efforts to strengthen the armed forces. But he warned that the military would be competing with civilian demand for personnel.

“Yes, we need more active soldiers,” he said. “Yes, we need to expand the system of reservists. But only a strong economy can make that possible.”

German defence minister Boris Pistorius plans to introduce a voluntary conscription model that would initially see about 5,000 18-year-olds drafted into the military each year.

But he has also acknowledged that such a scheme is unlikely to fill the large gaps in the military, floating a fallback option of a return to conscription. Until 2011, young people were compelled to either do military service or a civilian alternative.

Pistorius, who is from the Social Democrats, has not said how an obligatory enlistment model should work. But he has expressed support for the system in Sweden, where roughly 10 per cent of young people are called up each year after a screening process. 

While employment is at record highs, Germany has the shortest average working hours of any wealthy economy, according to OECD data.

The country’s new government, led by conservative chancellor Friedrich Merz, has promised to get the nation working more as part of a push to revive the sluggish economy.

Merz hopes that boosting working hours will also help with acute skills shortages in sectors such as health, education and the engineering industry.

Kampeter said this effort would be even more vital if the armed forces were going to add to competition for workers. “If the necessary personnel are pulled away from us, that means issues like weekly working hours, the length of the working life, better integration of part-time workers into the labour market — all of those topics become even more important,” he said.

A representative of another business group, who asked for their association not to be named, said they had “a lot of questions” about a return to conscription.

The person said there was “no doubt that something has to be done” about recruitment to the Bundeswehr, as the German armed forces are known. But they added: “There are two conflicting goals — economic prosperity and defence.”

A study last year by the Munich-based Ifo Institute found that it was better to spend money making a voluntary military service programme attractive, rather than resorting to conscription.

The research, which was commissioned by the German finance ministry, warned that an obligatory model would carry high economic costs for the country, as well as taking a toll on individuals and their own financial prospects by delaying their entry into study or work.

“Different people are good at different activities,” said Panu Poutvaara, one of the authors. “If you have conscription, which is not voluntary, it would force people who are not good at being in the military to serve in the military.”

The Ifo Institute found that a well-paid voluntary model that persuaded 5 per cent of Germany’s annual cohort of 18-year-olds to sign up — about 39,000 people — would cost the government €1.5bn per year in salary payments. 

That would be more than double the cost of a compulsory conscription model of the same size, which it assumed would offer a lower wage. But it would be offset by a smaller hit to gross national income. The effect would be greater if the government wanted to attract more recruits.

The military needs to expand by about 80,000 people over the next decade to meet Germany’s Nato commitments.

Senior military officials say that the size of the army reserves — made up of civilians who work with the military for a few weeks a year — needs to reach 200,000 in the years ahead.

Merz, who has cast himself as strongly pro-business, has called on the corporate world to make sacrifices to support this.

Jens Günther and his family-owned interiors business Günther-Innenausbau last year won a defence ministry prize for allowing one of their carpenters to serve 15-20 days per year as a reservist. He said it had been a positive experience. “I like to do my part . . . I get a motivated employee who broadens his own horizons a bit and brings things back into the company.”

But he said the company, which has about 20 employees, could not cope with having any more reservists. “If there were two or three, it wouldn’t be possible.”

Carlo Masala, a professor for International Politics at the Bundeswehr University Munich, said concerns about the economic impact of a return to some form of conscription were “overblown”.

Even under a compulsory model, he said, he expected that no more than about 25,000 young people would be called up each year — far less than the more than 200,000 West German conscripts at the height of the cold war.

“My general feeling is that the German business community has realised that they need to be involved in some positive way in the issue of defence,” Masala said. “At the end of the day, they have to accept it.”

Billionaire’s political threats have not stopped the president’s ‘big, beautiful bill’ hurting the electric-car maker’s profits

Elon Musk donated more than $250mn to elect Donald Trump. In return he received a bill that could cost Tesla billions.

Trump’s “big, beautiful bill” puts at risk a crucial source of profit for Tesla by neutering rules that allow the electric-vehicle maker to sell billions of dollars of emissions credits.

The bill deepens a crisis for the company that is already reeling from plunging sales and the loss of EV tax incentives. The legislation provoked a furious response from Musk.

While Trump worked to jam the bill through Congress this week, Musk called it an “abomination” and threatened to target lawmakers who supported it with hostile donations — and even launch his own political party.

Trump retorted that “without subsidies, Elon would probably have to close up shop and head back home to South Africa”. 

Their escalating feud threatens critical parts of Musk’s business empire — and leaves Republican legislators caught in a tussle between the US president and the world’s richest man.

“All family fights are ultimately about money,” said San Francisco-based tech entrepreneur Trevor Traina, who served as ambassador to Austria during Trump’s first term.

“This one seems to be no different . . . Billions in subsidies versus hundreds of millions in primaries.”

In public, Musk has argued against the fiscal bill on the grounds that it will vastly increase the US deficit. But the threat to Tesla is also central to his opposition.

Trump has vowed to kill the US’s three parallel systems of emissions credits, in the name of lower car prices — including one scheme run by the Environmental Protection Agency for greenhouse gas emissions and a second in the state of California based on EV and hybrid car sales.

His “big, beautiful bill” targets a third system, the federal “corporate average fuel economy” (Cafe) standards. The programme penalises automakers whose vehicles fall short of fuel-efficiency targets and rewards those that produce no emissions with clean air credits, which can then be sold on to gas-focused rivals to offset their fines.

Selling credits under Cafe and similar systems in other jurisdictions contributes a substantial and growing proportion of Tesla’s profit.

In the first quarter, Tesla’s reliance on the systems was stark: it would have made a loss if not for credit sales, which rose 35 per cent to $595mn, eclipsing Tesla’s overall $409mn of net income.

Last year, the company reported $2.8bn in revenue from selling regulatory credits worldwide, up from $1.8bn in 2023, and accounting for 39 per cent of its $7.1bn annual net income. It has made more than $11bn since 2015.

The budget bill negates Cafe by setting fines at zero. Tesla worries that traditional automakers will largely stop buying credits as a result, people familiar with the company’s internal debates have said.

“If there’s no penalty for cheating, there’s no reason to buy compliance credits,” said Dan Becker, director of the Safe Climate Transport Campaign at the Center for Biological Diversity. “I’m not sure how costly these [changes] will be compared to the damage that Musk did to Tesla by becoming Trump’s Tweedle Dee and a pariah.”

Tesla does not break down its profits from regulatory credits by region, or between the three American programmes. But a person familiar with the matter said that on average as much as three-quarters came from the US, with the remainder from similar systems in the European Union and Asia.

The effect on Tesla’s bottom line will not be immediate as the company often negotiates multiyear contracts with rivals that will take time to wind down. However, some of those deals included force majeure clauses and language about legislative changes that could see them voided after Trump’s bill, one of the people said.

Tesla will still make money from credits overseas. It recently signed an EU emissions “pooling” arrangement with Stellantis, Ford, Mazda, Subaru and Toyota. UBS analysts said this could ultimately be worth more than €1bn if Tesla monetised its entire long CO₂ position.

In the US, there is little hope of reviving US federal emission credits while Trump is in office. But California has sued over the administration’s efforts to shut down its scheme, in which Tesla has by far the biggest balance of credits.

“There will be some level of credit trading until there is certainty . . . [but] the bottom has dropped out of the market long-term,” said one of the people at Tesla. “Trump has done it so fast and with such ferocity that the entire programmes might just go away.”

Tesla did not respond to a request for comment.

The carmaker has more to lose from Trump’s agenda. Beyond selling cars and credits, it also manufactures its own batteries, runs a network of about 2,600 US EV supercharger stations, builds solar roof tiles and commercial and residential battery storage packs.

Almost all of those businesses will lose significant federal support or tax relief; only energy storage subsidies remain in place. Particularly damaging will be the removal of a $7,500 federal tax credit for certain EV purchases and leases at the end of September.

In response to Musk’s attacks, Trump suggested that the so-called Department of Government Efficiency (Doge), which Musk himself founded, should cancel SpaceX’s and Tesla’s federal contracts.

Tesla has also warned that Trump’s unpredictable tariff policy and trade war with China will disrupt its supply chain, reduce its access to vital materials and make it a target for retribution because of Musk’s connection to the administration.

“This is terrible policy and a devastating blow for Tesla’s bottom line,” said a former Tesla executive. “It’s not just Cafe in a vacuum — it’s everything together: tariffs, the $7,500 consumer credit, manufacturing tax credits, charging credits and solar residential credits.”

“Elon has finally woken up to this, but talk about a day late and a dollar short,” they added.

The billionaire’s power to strike back to defend his empire appears to be limited, even with his huge war chest for future political donations.

Musk left his controversial role at Doge — slashing the federal bureaucracy — in May. Tensions between Musk and the White House over tariffs and the tax bill escalated in June, when he lashed out on X at the president’s signature domestic legislation.

The Trump-Musk relationship has been marked by dramatic swings. Last week, Eric Trump, one of the president’s sons, told the Financial Times that he was “enamoured” by Musk, calling him “one of the great geniuses of our time”.

But Musk amped up his opposition this week as the legislation faced final votes on razor-thin congressional margins.

The billionaire said anyone who voted for “the biggest debt increase in history should hang their head in shame” and “will lose their primary next year if it is the last thing I do on this Earth”.

Thomas Massie, a rare Republican House member who opposed the bill, thanked Musk for his “financial assistance to continue my mission as an independent voice” — after Trump vowed to oust Massie from office.

But few Republicans have rallied to Musk. Fifty of 53 GOP senators voted for the legislation, with a tiebreaking vote from vice-president JD Vance.

Many of Musk’s allies in the business community have also backed the bill, which would extend personal income tax breaks. James Fishback, an investor and former Doge adviser, has created a Super Pac to counter Musk’s political donations.

“Preventing the tax hikes is absolutely essential,” said tech investor Keith Rabois, who donated over $2mn with his husband, Jacob Helberg, to boost Trump’s 2024 campaign. Helberg has been nominated by Trump for a top state department position.

The bill cleared a final congressional vote on Thursday and will land on the desk of a triumphant president.

Traina, the Trump-appointed former ambassador, said: “I have endless respect for Elon, but I think Trump carries the bigger stick here.”