The European Commission has initiated a comprehensive drive to enhance EU competitiveness and productivity on various levels, responding to rising concerns regarding the implications of the new Trump administration for Europe’s economy.
The initiative, known as the Competitiveness Compass, aims to elevate the EU’s productivity in the areas of innovation, decarbonisation, and security.
Nonetheless, environmental organizations have criticized the initiative for its inclination towards deregulation as a means to achieve increased productivity.
This initiative outlines a series of “flagship” measures that align with the insights from the recent report by former ECB president Mario Draghi, which indicates significant deficits in EU productivity and competitiveness.
The Draghi Report portrayed the European Union as experiencing economic regression compared to the US and China, particularly regarding growth, the presence of robust and liquid capital markets, and the capacity to innovate and scale businesses.
“Europe possesses all the necessary assets to excel in the race to the top. However, we must simultaneously address our weaknesses to restore competitiveness,” stated European Commission President Ursula von der Leyen.
The Commission noted that the Competitiveness Compass seeks to foster an environment for “young innovative start-ups, encourage industrial leadership in high-growth sectors driven by deep technologies, and facilitate the spread of technologies across established businesses and SMEs.”
Plans will be put forward for AI Gigafactories and “Apply AI” initiatives to enhance the development and industrial integration of AI in critical sectors.
Action plans will focus on advanced materials, quantum, biotech, robotics, and space technologies, alongside a new EU Start-up and Scale-up Strategy aimed at eliminating barriers for new and scaling companies.
A new Affordable Energy Action Plan is set to help reduce energy costs, while an Industrial Decarbonisation Accelerator Act will expedite the permitting process for sectors in transition towards achieving net zero targets.
The promise of regulatory reductions and increased flexibility for energy-intensive industries such as steel, metal, and chemicals has already attracted backlash from environmental groups.
Cristina Pricop, a fossil fuels campaigner at Friends of the Earth Europe, remarked: “With the Competitiveness Compass, the Commission clings to outdated economic models reliant on fossil fuels while taking risks with unproven technologies like hydrogen and carbon capture.”
“Progress on climate action is alarmingly slow, and simply replacing Russian gas without a strategy to phase out all fossil fuels is insufficient for the bold action Europe and the climate require. True leadership involves phasing out fossil fuels entirely and moving away from this perilous dependency,” she stated.
Ester Asin, Director of WWF’s European Policy Office, expressed that the Competitiveness Compass was “fundamentally misguided” as it portrayed the EU’s green transition as conflicting with economic growth.
“Genuine competitiveness is rooted in rapid decarbonisation, habitat restoration, and the scaling of green technologies—not in reckless deregulation that strengthens the market position of polluting industries,” she declared.
However, the initiative has received support from the main European business lobby.
BusinessEurope Director General Markus J Beyrer commented: “Navigating a ship to its destination requires clear instructions, and today’s Competitiveness Compass offers these directions.”
“The Compass must be followed promptly by tangible and impactful actions that bring about meaningful changes for companies in their everyday operations,” he added.
Beyrer emphasized the need for the EU to prioritize the reduction of regulatory burdens to honor its commitment to simplifying business operations in Europe.
“The EU must also implement strong measures to alleviate the energy cost competitiveness gap, hasten the market release of innovations, and ensure swifter permitting processes, allowing all industries to transform rapidly,” he remarked.
Danny McCoy, CEO of Ibec, highlighted the Draghi Report in the group’s recent economic outlook, suggesting that “high energy costs, project delays, regulatory burdens, and an incomplete Single Market” posed challenges for Europe and Ireland.
“It is crucial that key commitments in the new Programme for Government for an Action Plan for Competitiveness and Productivity, as well as measures to enhance the speed and efficiency of infrastructure delivery and reduce redundant or excessive regulatory burdens on businesses, are pursued with a clear sense of purpose and renewed vigor by the new government,” he stated.
