- no longer accept uninvited resubmissions of proposals
- constrain "repeatedly unsuccessful applicants" to submit only one application over a 12-month period
In the letter there is a definition of "repeatedly unsuccessful applicant" which does not bear repeating here.
I have figured out what is wrong with this policy: far from relieving pressure on peer review, it has the opposite effect. Note first that the research proposals that now end up getting prohibited were always easy to criticize, while the proposals that survive this cull are the ones where you have to think hard about how they rate in competition with each other. That does not in itself explain why it becomes harder to review a proposal --- the reason why it gets harder, is that a reviewer now has a much heavier responsibility to "get it right": if a proposal fails, someone's research agenda has just been closed down permanently (they can't resubmit) and in the worst case, they get personally blacklisted, just for good measure.
Based on some brief web searches, it seems that Schlimmbesserung is a variant of a more standard German word Verschlimmbesserung, meaning an improvement that makes things worse. (The claim is that English-speaking fans of long German words usually prefer "Schlimmbesserung". This page is informative.)