The EU Commission set out a major initiative Wednesday to strengthen EU competitiveness by boosting innovation and investment, securing access to raw materials and clean energy, and cutting red tape.

The EU’s new Competitiveness Compass sets a path for Europe to become a place where future technologies, services, and clean products are invented, manufactured, and put on the market, while being the first continent to become climate neutral.

The EU had to “fix our weaknesses to regain competitiveness”, said EC president Ursula von der Leyen. She said the EU’s business model over the last 20 to 25 years had “basically relied on cheap labour from China, presumably cheap energy from Russia, and partially outsourced security and security investments.”

The EU plan is very much a result of the findings of the Draghi report, a 2024 report authored by former ECB president and former Prime Minister of Italy Mario Draghi, addressing European competitiveness and the future of the European Union.

An EU plan to boost innovation will create ‘a habitat for young innovative start-ups’, says the EU executive, promoting industrial leadership in high growth sectors based on deep technologies and promoting the diffusion of technologies across established companies and SMEs. The Commission’s proposals include ‘AI Gigafactories’ to drive development and adoption of AI, action plans for advanced materials, quantum, biotech, robotics and space technologies, and a dedicated EU Start-up and Scale-up Strategy.

The plan includes a roadmap for decarbonisation and competitiveness identifying high and volatile energy prices as a key challenge. A Clean Industrial Deal will promote clean tech and new circular business models. An Affordable Energy Action Plan will help bring down energy prices and costs, and an Industrial Decarbonisation Accelerator Act will extend accelerated permitting to sectors in transition. There will be tailor-made action plans for energy intensive sectors, such as steel, metals, and chemicals.

To reduce excessive dependencies and increase security, there will be Clean Trade and Investment Partnerships, and Public Procurement rules will be reviewed to allow introduction of a European preference for critical sectors and technologies.

To underpin competitiveness across all sectors, ‘enablers’ will include simplification, aimed at drastically reducing the regulatory and administrative burden. There will be a target of cutting by at least 25% the administrative burden for firms and by at least 35% for SMEs.

A ‘Horizontal Single Market Strategy’ will modernise the governance framework, removing intra-EU barriers and preventing the creation of A European Savings and Investments Union will create new savings and investment products, provide incentives for risk capital, and ensure seamless investments flow across the EU.

An initiative will build a ‘Union of Skills’ focusing on investment, adult and lifelong learning, future-proof skills creation, skill retention, fair mobility, attracting and integrating qualified talent from abroad.

Finally, a ‘Competitiveness Coordination Tool’ will ensure better coordination of policies at both EU and national level.

A Competitiveness Compass for the EU

Factsheet on the Competitiveness Compass

EU competitiveness – European Commission