European Commission unveils new competitiveness strategy: key measures and implications
The European Commission has introduced a new economic strategy to enhance the EU’s global competitiveness. The plan, known as the “Competitiveness Compass,” outlines key measures to simplify regulations, boost investments, and support technological innovation.
A shift in economic strategy
Commission President Ursula von der Leyen emphasized that Europe’s economic model has relied on cheap labor from China and affordable energy from Russia. These conditions have changed, necessitating a new approach. The Competitiveness Compass aims to position Europe between China’s low-cost workforce and the U.S.’s energy-driven economy.
The strategy includes 12 legislative initiatives targeting innovation, decarbonization, security, and economic resilience. The European Commission has also pledged to reduce administrative burdens for businesses.
Reducing bureaucracy and supporting businesses
One of the key pillars of the Competitiveness Compass is reducing bureaucratic red tape. The Commission aims to cut reporting obligations by 25% for all businesses and 35% for SMEs. The Carbon Border Adjustment Mechanism (CBAM), set to take effect next year, will also be streamlined to ease compliance for smaller enterprises.
Von der Leyen stated that these measures could save businesses over €37 billion annually. The first package of simplifications will focus on sustainable finance reporting and corporate sustainability due diligence.
Strengthening green energy and industrial competitiveness
Energy prices remain a crucial factor in Europe’s industrial competitiveness. The Commission is developing an Affordable Energy Action Plan to lower energy costs and strengthen electricity grids. Additionally, the Clean Industrial Deal will guide Europe’s transition to a sustainable, competitive economy.
The EU remains committed to its net-zero emissions target by 2050. A formal emissions reduction goal for 2040 is expected but has not yet been announced.
Advancing AI and digital innovation
Artificial intelligence plays a key role in the new competitiveness strategy. The Commission plans to establish a network of AI factories to promote collaboration and innovation. Von der Leyen highlighted the need for Europe to accelerate AI adoption, as only one in seven companies currently utilizes AI technology.
A European Cloud and AI Development Law is scheduled for the last quarter of 2025. These initiatives align with recommendations from a recent EU competitiveness report urging greater investment in digital innovation.
Promoting European investments and local sourcing
To counter global protectionist policies, the Commission will introduce a “Buy European” preference in public procurement. This measure is designed to support strategic industries and reduce dependency on foreign suppliers. France has long advocated for such a policy, especially in response to the U.S. Inflation Reduction Act.
Additionally, the EU aims to mobilize €700-800 billion annually for economic modernization and security. While European households save over €1.4 trillion each year, €300 billion flows to non-EU markets. To address this, the Commission will launch a European Savings and Investment Union in 2025 to facilitate venture capital investments and improve capital flow within the EU.
Future outlook
The Competitiveness Compass outlines an ambitious roadmap to enhance Europe’s economic resilience and innovation. However, uncertainties remain regarding the scale of regulatory rollbacks and the balance between economic growth and environmental policies.
As the EU moves forward, businesses and policymakers will need to navigate evolving regulatory frameworks while ensuring sustainable economic growth. The next steps will be crucial in determining the success of this strategic shift in European economic policy.
