Over regulation is a sign of too much bureaucracy which is a sign of too much "comfort" and not enough "growth". All societies go through this. A lack of military threat and lack of technological innovations tend to cause this.

For Europe to improve, a country like China would need to invade parts of Europe and kill off all the Europeans that they conquered this sparking the remaining Europeans to get scared of also being killed which would cause them to improve by reducing bureaucracy. Or some new innovation needs to be invented that essentially makes the people who currently hold wealth in Europe to become less wealthy (wealth transfer due to technological innovation which will lead to growth).