The European Commission has published a ‘Competitiveness Compass for the EU’, setting out a series of measures that it will take to “regain its competitiveness and secure its prosperity”.

The Commission explains that the EU has fallen behind the United States in advanced technologies and needs to “urgently tackle longstanding barriers and structural weaknesses that hold it back”. In pursuit of solutions, the Commission turned to Mario Draghi, who published a report that set out both the challenges Europe faces, as well as steps that could be taken as part of a new model that put innovation-led productivity “at the heart of European renewal”.

The Competitiveness Compass points to the “three transformation imperatives to boost competitiveness” that were identified by the Draghi Report, and sets out a number of measures that will be introduced to translate the measures into reality in the years ahead:

1. Closing the Innovation Gap

A new ‘EU Start-Up and Scale-Up Strategy’ will be launched to address existing obstacles that prevent new companies emerging in the EU. According to the Commission, it will improve relations between universities and businesses and create better prospects for patents to be commercialised. At the same time, a European Innovation Act will “promote the access of innovative companies to European research and technology infrastructures, intellectual assets generated by publicly funded R&I in view of increasing patenting, and regulatory sandboxes allowing innovators to develop and test new idea”. Also proposed is a ‘28^th legal regime’ which will make it possible for innovative companies to benefit from a single, harmonised set of EU-rules. The new regime will “simplify applicable rules and reduce the cost of failure, including any relevant aspects of corporate law, insolvency, labour and tax law”.

Alongside proposals in the areas of Bioeconomy, Space, and Advanced Materials, the Commission points to the need to ensure that Europe has the right conditions for advanced technologies to thrive. To that end, the ‘AI Continent Strategy’ will establish AI Gigafactories through its AI Factories Initiative and the EU Cloud and AI Development Act. The Commission will also propose a Data Union Strategy to “improve and facilitate secure private and public data sharing, simplify the regulatory regime and its application, and accelerate the development of new systems or applications”. Quantum technologies are also an area of focus, and a new Quantum Strategy and Quantum Act will “address regulatory fragmentation, align EU and national programmes and support investment in pan-European quantum computing, communication and sensing infrastructure”.

The Compass makes the point that competition policy is an important lever to strengthen Europe’s competitiveness. It commits to revising guidelines for assessing mergers “so that innovation, resilience and the investment intensity of competition in certain strategic sectors are given adequate weight”, alongside simplifying, speeding up, and better targeting enforcement.

2. A joint roadmap for decarbonisation and competitiveness

The Commission reasserts Europe’s ambitious framework to become a decarbonised economy by 2050. A new Clean Industrial Deal initiative will be introduced alongside an Affordable Energy Action Plan and Industrial Decarbonisation Accelerator Act.

‘Tailor-made action plans’ will also be introduced for energy intensive sectors such as steel, metals, and chemicals.

3. Reducing excessive dependencies and increasing security

New ‘Clean Trade and Investment Partnerships’ will “bring together targeted trade and investment rules, Global Gateway investments, and regulatory cooperation, into a single whole-of-government partnership”. According to the Commission, these new partnerships will help secure the supply of raw materials, clean energy, sustainable transport fuels, and clean tech from across the world.

In addition, the Commission will review public procurement rules with the aim of “reinforcing technological security and domestic supply chains, as well as simplifying and modernising rules, in particular for start-ups and innovative companies”.

Horizontal Enablers of Competitiveness

Supporting the three pillars are what the Commission identifies as five “horizontal enablers”:

1. Simpler, lighter faster: ensuring that EU regulation is fit for competitiveness

All EU, national, and local institutions are instructed to make a major effort to produce simpler rules and to accelerate the speed of administrative procedures. Efforts will be made to avoid a ‘regulatory ratchet’, to reduce the reporting burden, and ensure that regulation is proportionate to companies’ size (including the adoption of a new ‘mid-cap’ category of company that is bigger than SMEs but smaller than large companies).

2. Making the most of Europe’s Single Market

A ‘Horizontal Single Market Strategy’ will “modernise the governance framework, removing intra-EU barriers and preventing the creation of new ones, fostering collaboration with Member States, and proposing a new approach to implementation”. At the same time, a Single Market Enforcement Taskforce will ensure effective implementation and enforcement of EU legislation.

3. Financing competitiveness and a Savings and Investments Union

In order to meet the financing needs of the EU, work will be done to ensure that it has “deeper and more liquid capital markets”. In addition to other proposals, the Commission will present a Strategy on a Savings and Investments Union which will “enable wealth creation for EU citizens and mobilise capital for projects made in Europe”.

4. Promoting skills and quality jobs while ensuring social fairness

The Commission will present an initiative to build a so-called ‘Union of Skills’ which will focus on “investment, adult and lifelong learning, future-proof skills creation, skill retention, fair mobility, attracting and integrating qualified talents from third countries and the recognition of different types of training to enable people to work across [the] Union”.

5. Joining forces to maximise impact: A Competitiveness Coordination Tool

Finally, in order to ensure that national and EU policies can be coordinated more effectively, the Commission will propose a new ‘Competitiveness Coordination Tool’ to “act together with Member States on common competitiveness priorities in selected key areas and projects deemed of strategic importance and of common European interest”.

To read the Competitiveness Compass in full, click here.