On January 29, 2025, the European Commission presented the competitiveness compass, its first major initiative of the term, which provides a strategic and clear framework to guide the Commission’s work.
The compass charts the course for Europe to become the place where future technologies, services, and products are invented, manufactured, and brought to market.
Over the past two decades, Europe has failed to keep pace with other major economies due to a persistent gap in productivity growth.
Ms. Ursula von der Leyen, President of the European Commission, stated: ” Europe has everything it needs to win the race to the top. At the same time, however, we must correct our weaknesses to regain our competitiveness. The competitiveness compass transforms the excellent recommendations of the Draghi report into a roadmap. So now we have a plan. We have the political will. And what matters is speed and unity. The world is not waiting for us. All EU member states agree. So let’s turn this consensus into action.”
Three key areas of action: innovation, decarbonization, and security
The Draghi report identified three transformative imperatives for boosting competitiveness, and the compass sets out an approach and a series of flagship measures to implement each of these imperatives:
- Reducing the innovation gap: The EU needs to revitalize its relationship with innovation. The European Commission wants to create an environment for new innovative startups, promote industrial excellence in high-growth sectors based on advanced technologies, and foster the diffusion of technologies in established companies and SMEs. In this context, the Commission will propose the “Giga-εργοστάσια τεχνιτής νοημοσύνης” and “Εφαρμογή της τεχνιτής νοημοσύνης” initiatives to promote the development and industrial adoption of artificial intelligence in key sectors. It will submit action plans for advanced materials, quantum technologies, biotechnology, robotics, and space technology. The EU’s specific strategy for startups and scale-ups will address the barriers that prevent the emergence and growth of new companies. The proposal for the 28th legal regime will simplify applicable rules, including relevant aspects of corporate law, insolvency legislation, labor and tax law, and reduce the cost of failure. This will allow innovative businesses to benefit from a single set of rules, wherever they invest and operate in the single market.
- Common roadmap for decarbonization and competitiveness: The compass identifies high and volatile energy prices as a key challenge and defines areas of intervention to facilitate access to clean, affordable energy. The upcoming clean industry agreement will set out a competitiveness-driven approach to decarbonization, aiming to establish the EU as an attractive location for manufacturing, including for energy-intensive industries, and promote clean technology and new circular business models. The action plan for affordable energy aims to contribute to reducing energy prices and costs, while the act to accelerate industry decarbonization aims to extend faster licensing procedures to sectors in transition. Additionally, the compass provides for tailored action plans for energy-intensive sectors such as steel, metallurgy, and chemicals, which form the backbone of the European manufacturing system but are most vulnerable at this stage of the transition.
- Reducing excessive dependencies and enhancing security: The EU’s ability to diversify its suppliers and reduce dependencies will be based on effective partnerships. The EU already has the largest and fastest-growing network of trade agreements in the world, covering 76 countries representing nearly half of EU trade. To continue diversifying and strengthening EU supply chains, the compass refers to a new range of clean trade and investment partnerships that will help secure the supply of raw materials, clean energy, sustainable transport fuels, and clean technology from around the world. Within the internal market, the revision of public procurement rules will allow for the establishment of a European preference in public contracts concerning critical sectors and technologies.
Five horizontal enablers of competitiveness
The three pillars are complemented by five horizontal enablers, which are essential for supporting competitiveness across all sectors:
- Simplification: This enabler aims to drastically reduce regulatory and administrative burden. It also includes a systematic effort to make procedures for accessing EU funds and EU administrative decisions simpler, faster, and less burdensome. The upcoming Omnibus proposal will simplify sustainability reporting, due diligence, and classification. Furthermore, the Commission will facilitate business operations for thousands of small mid-cap companies. The compass sets a target of reducing administrative burden by at least 25% for businesses and at least 35% for SMEs.
- Reducing barriers in the single market: For 30 years, the single market has been Europe’s proven engine for competitiveness. To improve its functioning across all sectors, the horizontal single market strategy will modernize the governance framework, removing obstacles within the EU and preventing the creation of new ones. Additionally, the Commission will seize the opportunity to make standard-setting procedures faster and more easily accessible, especially for SMEs and startups.
- Financing competitiveness: The EU lacks an effective capital market that converts savings into investments. The Commission will present the European Savings and Investment Union to create new savings and investment products, provide incentives for venture capital, and ensure the smooth flow of investments across the EU. The refocused EU budget will streamline access to EU funds in line with EU priorities.
- Promoting skills and quality jobs: The foundation of Europe’s competitiveness is its people. To ensure a good match between skills and labor market demands, the Commission will present an initiative to build a Skills Union focusing on investments, adult education and lifelong learning, creating future-proof skills, skill retention, fair mobility, attracting and integrating skilled talent from abroad, and recognizing various types of training that will allow people to work throughout our Union.
- Better coordination of policies at EU and national levels: The Commission will create a competitiveness coordination tool which, in cooperation with Member States, will ensure the implementation of common EU policy objectives at EU and national levels, and will help identify cross-border projects of European interest and implement relevant reforms and investments. In the next multiannual financial framework, the Competitiveness Fund will replace many existing EU financial instruments with similar objectives, providing financial support for the implementation of actions under the competitiveness coordination tool.
Source: https://ec.europa.eu/commission/presscorner/detail/el/ip_25_339
