The EU’s Competitiveness Compass: Charting a Path to Sustainable Growth

In recent years, the European Union has demonstrated a strong approach and adaptability in navigating crises, from the pandemic to energy shocks. However, as the global landscape evolves, the EU faces mounting challenges, including widening productivity gaps, rising energy costs, and dependency on strategic imports. To secure its future as an economic powerhouse, the EU is working on a Competitiveness Compass, a framework aimed at fostering innovation, sustainability, and economic sovereignty. Our understanding is that the Competitiveness Compass will focus on the following areas when it is launched in the coming weeks.

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A New Vision for Competitiveness

The Competitiveness Compass will set out an ambitious roadmap to address the EU’s stagnating growth and productivity. Central to this vision is innovation-driven productivity, which seeks to bridge the gap with global leaders like the US and China. By focusing on cutting-edge technologies, decarbonisation, and robust industrial policies, the EU aims to create a dynamic economy that attracts investment, nurtures talent, and supports quality jobs.

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Key Pillars of the Compass

Closing the Innovation Gap

Europe’s innovation potential remains underutilised, with only a third of patents commercially exploited. To address this, the EU will launch initiatives such as the Start-up and Scale-up Strategy and the European Research Area Act, fostering a seamless environment for innovation. Enhanced access to venture capital and harmonised regulations across Member States are expected to empower start-ups and scale-ups, enabling them to thrive within the Single Market.

A Joint Roadmap for Decarbonisation and Competitiveness

As the EU accelerates its transition to a carbon-neutral economy, the focus will be on reducing energy costs and volatility. Initiatives like the Clean Industrial Deal and the Affordable Energy Action Plan aim to make clean energy accessible while incentivising low-carbon production. These efforts will not only address environmental goals but also position the EU as a leader in sustainable manufacturing.

Reducing Dependencies and Enhancing Security

Recognising the risks of over-reliance on concentrated supply chains, the EU plans to diversify its sources of critical materials and technologies. Measures such as joint procurement platforms and stricter enforcement of trade regulations will bolster resilience. Simultaneously, the EU will strengthen its defence industry and critical infrastructure to safeguard its economic interests.

Enabling Growth through Strategic Coordination

To maximise impact, the EU will adopt a holistic approach, integrating policies at the EU and national levels. Simplifying regulatory frameworks and fostering cooperation between Member States will be crucial. The Competitiveness Coordination Tool will align national and EU-wide objectives, ensuring resources are directed towards shared priorities.

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The EU also aims to revitalise its Single Market by removing barriers and harmonising standards. Enhanced access to capital markets through a Savings and Investment Union will mobilise the funds needed for transformative projects. Meanwhile, targeted investments in skills development will ensure the workforce is equipped to meet the demands of a rapidly changing economy.

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A Call to Action

The Competitiveness Compass is more than a policy framework; it is a call for collective action. By uniting around shared goals, the EU can navigate the challenges of global competition and secure a future of sustainable prosperity. The road ahead demands commitment and collaboration from all stakeholders, but the rewards, economic resilience, technological leadership, and social well-being, are well worth the effort.

Sources:

European Environment Agency (EEA). https://www.eea.europa.eu/en

European Commission (EU) https://commission.europa.eu/index_en