Competitiveness Compass: Aiming for a Stronger EU in Global Competition

The European Commission introduced the Competitiveness Compass on January 29, 2025. This marks the first major initiative of the new Commission's term. The Compass provides a strategic framework and guides the Commission’s actions to enhance competitiveness in the EU for the years 2024–2029, focusing on strengthening innovation, decarbonization and security.

Europe’s economic growth and productivity have lagged behind its competitors. The measures outlined in the Compass aim to bridge this gap and ensure that Europe remains a hub for the invention, production, and marketing of future technologies, services, and clean products while considering climate neutrality goals. The EU's strengths lie in its skilled workforce, capital, savings, internal market, and unique social infrastructure. These resources will be leveraged to urgently remove long-standing obstacles and address structural challenges.

The content of the Competitiveness Compass is based on Mario Draghi’s report, The Future of European Competitiveness, published in September 2024, and the internal market report proposals by Enrico Letta.

Three Core Pillars of the Competitiveness Compass

The three core pillars of the Competitiveness Compass are based on Draghi’s report recommendations but introduce concrete actions, including upcoming legislative initiatives to improve competitiveness. These pillars aim to strengthen the EU economy, attract investment, and maintain Europe as a production hub:

1. Bridging the Innovation Gap. The Commission supports young startups and promotes industrial innovation in key sectors such as artificial intelligence, biotechnology, and quantum technology.
2. A Common Roadmap for Decarbonization and Competitiveness. The Compass includes measures to promote clean energy, advance the circular economy, and maintain industrial competitiveness.
3. Enhancing Security and Reducing Excessive Dependencies. The EU focuses on diversifying supply chains and securing access to critical raw materials and clean energy from global markets.

Five Horizontal Factors to Support Competitiveness

In addition to the core pillars, the Compass defines five horizontal factors that are crucial for supporting competitiveness across all sectors:

1. Simplifying Regulation. The goal is to reduce regulatory and administrative burdens, particularly by simplifying sustainability reporting and classification systems, and to facilitate business operations for smaller companies.
2. Removing Internal Market Barriers. The internal market has been the foundation of EU competitiveness. A horizontal strategy aims to enhance its functionality, remove obstacles, and accelerate standardization processes, especially for SMEs and startups.
3. Financing Competitiveness. The Commission proposes establishing a European savings and investment union to create new investment products and incentives, ensure capital mobility within the EU, and improve fund availability by reallocating budget resources.
4. Promoting Skills and High-Quality Jobs. The Commission plans to propose a skills union focused on investments in adult education, lifelong learning, and fair mobility to align skills supply with labor market demands in the EU.
5. Better Policy Coordination at EU and National Levels. The Commission aims to develop a competitiveness coordination tool in cooperation with member states to support EU policy implementation, cross-border projects, and finance reforms and investments through the Competitiveness Fund.

The Competitiveness Compass provides the EU with a clear direction for the coming years, aiming to strengthen Europe’s economy and enhance its global competitiveness.