The European Commission has presented the Competitiveness Compass, the first major initiative of this mandate that establishes a strategic framework to guide the economic and development policies of the European Union.
The goal is for Europe to become the global epicenter where future technologies, innovative services, and eco-friendly products are invented, produced, and marketed, while ensuring that the continent achieves climate neutrality ahead of any other region in the world.
However, the stagnation in productivity growth over the past two decades has caused the EU to lose ground against other major economies. Despite having a highly skilled workforce, a robust single market, and a unique social infrastructure, the EU urgently needs to act to eliminate structural barriers that limit its development.
“Europe has everything it needs to lead the race to the top. But we must address our weaknesses to regain competitiveness. The Competitiveness Compass turns the recommendations of the Draghi report into a clear roadmap. Now we have a plan and the political will. What matters is speed and unity. The world does not wait for us. All member states agree on this. Let’s turn this consensus into action,” emphasized Ursula von der Leyen, President of the European Commission.
Three Key Pillars for the EU’s Transformation
The Draghi report, the foundation of this new strategy, identified three transformation imperatives that are now being translated into concrete actions within the Competitiveness Compass:
1. Closing the Innovation Gap
Europe needs to regain its leadership in innovation and technology. To achieve this, the Commission will promote:
- Initiatives such as ‘AI Gigafactories’ and ‘Apply AI’, aimed at accelerating the development and adoption of artificial intelligence in key sectors.
- Action plans in advanced materials, quantum computing, biotechnology, robotics, and space technologies.
- A EU Startup and Scaleup Strategy, removing obstacles that hinder the growth of emerging companies.
- A simplified legal framework (the proposed “28th legal regime”) that will harmonize corporate, tax, and labor regulations throughout the EU, reducing costs and bureaucracy.
2. Decarbonization and Industrial Competitiveness
The transition to a low-carbon economy must go hand in hand with industrial growth. The Commission proposes:
- The Clean Industrial Deal, a decarbonization approach based on competitiveness that will attract investment in energy-intensive industries.
- An Affordable Energy Action Plan, aimed at reducing energy prices for businesses and consumers.
- A Regulation for Accelerating Industrial Decarbonization, to expedite permits in transitioning sectors.
- Specific action plans for key industries such as steel, metals, and chemicals, essential sectors that are highly vulnerable to the ecological transition.
3. Reducing Strategic Dependencies and Reinforcing Security
Europe needs to diversify its supply sources and strengthen its value chains to reduce its vulnerability in strategic sectors. To this end, the EU:
- Will sign new Clean Trade and Investment Agreements to ensure access to raw materials, renewable energy, and clean technologies from international markets.
- Will review public procurement rules to favor European companies in critical sectors.
- Will strengthen its trade network, which currently covers 76 countries and nearly half of the EU’s trade.
Five Key Elements to Strengthen Competitiveness
The Commission’s strategy is complemented by five cross-cutting facilitators that ensure that the measures adopted have a positive impact across all sectors:
- Simplifying regulations and reducing bureaucracy
- Reducing administrative burden by 25% for businesses and by 35% for SMEs.
- An Omnibus legislative package to streamline access to EU funds and administrative processes.
- Eliminating barriers in the single market
- A strategy for the modernization of the internal market, removing internal obstacles and preventing new restrictions.
- Accelerating the harmonization of standards processes in key sectors, with a particular focus on SMEs and startups.
- Facilitating access to financing
- Establishing a European Union for Savings and Investment, with new financial products and incentives for venture investment.
- A more strategically focused EU budget.
- Developing talent and quality employment
- Launching a European Skills Union, with continuous training, labor mobility, and qualifications recognition.
- Attracting and retaining skilled talent from abroad.
- Better coordination between national and European policies
- Creating a Competitiveness Coordination Mechanism to ensure efficient implementation of shared policies.
- A new Competitiveness Fund that will replace multiple European financial instruments with similar objectives.
A New Direction for the European Economy
The launch of the Competitiveness Compass marks a turning point in the EU’s economic strategy. This initiative, based on the Draghi report, is designed to equip Europe with the necessary tools to regain its global competitiveness and ensure sustainable growth.
“The Competitiveness Compass signifies a shift in mindset for Europe. We are simplifying, investing, and accelerating our economic priorities. We are making Europe more predictable without losing our identity: a social economy that respects our values,” emphasized Stéphane Séjourné, Executive Vice President for Prosperity and Industrial Strategy.
The success of this strategy will now depend on speed and coordination with member states, given that global competition is advancing without waiting for Europe. Digital transformation, technological innovation, and sustainability will be the pillars on which the EU will consolidate its leadership in the coming decades.
For more information about the Competitiveness Compass and its key initiatives, visit European Commission