The European Commission has recently unveiled a set of policy plans designed to stimulate economic growth across the EU, embodied in a comprehensive document known as the Competitiveness Compass.
Commission President Ursula von der Leyen describes the Compass as a “growth strategy,” a roadmap for the EU to strengthen its economy over the next five years. This 27-page document seeks to provide clear directions for policymakers and outlines numerous measures aimed at revitalizing Europe’s industrial and technological sectors.
One of the central aims of the Competitiveness Compass is to simplify the regulatory environment, which von der Leyen has acknowledged as a source of frustration for businesses. In particular, she notes that the complexity of EU regulations, many of which stem from climate-related laws, has been stifling innovation and growth. The Commission’s proposal includes an ambitious plan to cut through the bureaucratic red tape, aiming to save companies up to €37 billion annually by 2029. While this deregulatory agenda has generated concern among climate advocates, who fear it could undermine environmental goals, von der Leyen maintains that the EU will remain steadfast in its climate ambitions.
The European Green Deal remains a cornerstone of the Commission’s vision, with a firm commitment to reducing greenhouse gas emissions by 90% by 2040. The Compass emphasizes the need to balance environmental sustainability with economic progress, focusing on the green transition of industries and promoting new, climate-friendly technologies. Upcoming proposals, including the Clean Industrial Deal scheduled for February 26, will provide more details on how the EU plans to achieve these ambitious goals. As part of its sustainability agenda, the Commission will also prioritize initiatives aimed at improving resource efficiency, expanding circular economies, and encouraging eco-design principles.
Addressing specific sectors, the Commission recognizes that some industries, such as automotive manufacturing, face unique challenges in meeting emission targets. In response to lobbying from carmakers, the Competitiveness Compass hints at offering more flexibility to the industry, which could mitigate the financial penalties associated with non-compliance.
Another priority area is energy, where the EU has long faced higher electricity and gas prices compared to global competitors like the US and China. Von der Leyen proposes substantial investments in grid infrastructure, as well as changes to pricing and fee structures, to make energy more affordable for European businesses. However, much of the detailed policy for these reforms, including the Affordable Energy Action Plan, will not be revealed until the end of February.
On the technological front, the Competitiveness Compass stresses the need for breakthrough innovations, particularly in fields like artificial intelligence (AI), quantum computing, and biotechnology. The EU plans to establish “AI factories” and develop a comprehensive AI strategy, aiming to bring Europe up to speed in the global race for AI leadership, especially as countries like the US and China intensify their investments in this area. The Commission also plans to address the lag in AI adoption among European businesses, with only 13% currently implementing the technology. In addition to AI, the document outlines plans for further investments in other high-tech sectors such as robotics, advanced materials, and space technologies.
Securing funding for these ambitious initiatives is a key aspect of the Competitiveness Compass. The EU aims to streamline access to private capital, pushing forward on the long-delayed Capital Markets Union, now rebranded as the Savings and Investment Union. This includes expanding investment programs and enhancing the role of the European Investment Bank. The plan also suggests reforms in corporate law, insolvency procedures, and taxation to facilitate business growth and cross-border investments.
The Competitiveness Compass highlights the potential for boosting EU industries through public procurement reforms, which could favor domestically-produced goods and services. This approach, while potentially beneficial for local businesses, may spark concerns among trading partners about protectionism. Furthermore, the document mentions the establishment of an industry platform for securing strategic raw materials, a crucial step in reducing dependence on external suppliers, particularly in sectors such as electric vehicle production.
In terms of industrial policy, the document indicates that the EU will introduce tailored action plans for various sectors, including steel, chemicals, and defense, to enhance competitiveness and foster innovation. It also notes the importance of infrastructure development, with initiatives planned to improve cross-border rail connectivity and expand maritime and aviation strategies, particularly in relation to sustainable transportation.
While the Competitiveness Compass focuses heavily on innovation and industry, it also acknowledges the importance of agricultural policy. Although farming is not seen as a major driver of economic growth, the Commission outlines plans to ease administrative burdens on farmers and promote sustainability in the sector.
Politico, the Wall Street Journal, the Guardian contributed to this report.
