E.U. Tackles Competitiveness

The Commission's roadmap to strengthen growth, innovation, and resilience

E.U. Tackles Competitiveness

Mario Draghi’s report last September on European Competitiveness underscored the challenges facing the EU’s economic model and signaled the need for reforms to increase productivity and global influence. The much-respected EU statesman and former president of the European Central Bank outlined key areas where the union risks falling behind if it does not take decisive action. Now, the European Commission has taken the next step with a strategic framework aimed at restoring Europe’s economic dynamism: the Competitiveness Compass.

This week in Brussels, the Commission unveiled it as a roadmap to strengthen growth, innovation, and resilience in the European economy. The initiative aims to enhance Europe’s competitiveness by boosting investment, streamlining regulations, and improving access to affordable and clean energy.

Here is European Commission President Ursula von der Leyen and Executive Vice President for Prosperity and Industrial Strategy, Stéphane Séjourné, presenting the plan:

Source: European Commission, via Youtube

Key proposed priorities for the next five years include fostering innovation, decarbonization, strengthening economic security, and making it easier for businesses to scale within the EU rather than expanding outside the EU to overcome regulatory hurdles. A notable proposal is the introduction of a "28th legal regime," which would provide a harmonized set of rules across member states, reducing bureaucratic complexity for companies operating in multiple jurisdictions across the E.U.

The plan builds on the findings of the Draghi Report and Enrico Letta's report on the future of the EU Single Market which were commissioned by the previous von der Leyen Commission. It aligns with the European Commission’s ongoing efforts to bolster strategic sectors such as defense, skills development, capital markets, and sustainable transport. If successfully implemented, it could significantly improve the EU’s ability to compete with the U.S. and China in key industries such as clean tech, defense, artificial intelligence, and financial markets. For example, the Commission estimates that European companies could raise €470 billion in additional funding if they had a more integrated capital market.

However, the proposals are not without challenges. Achieving consensus among all E.U. member states may not be straightforward. While this week's proposal does lay out an ambitious vision, its success will depend on sustained political will across the union. It could prove to be a difficult task, particularly regarding areas such as regulatory harmonization and the financing of large-scale projects. Some member states may resist measures that reduce their national control over economic policies. Moreover, businesses will no doubt be watching closely to see whether regulatory simplifications actually translate into tangible commercial benefits. Additionally, questions remain about how effectively these initiatives can be implemented in the face of political uncertainty, global trade tensions, and competition from other economic powers eager to attract global talent and inward investment. The coming years are crucial for the E.U. as the global economic landscape continues to undergo transformational change.