President of the European Commission (EC), Ursula von der Leyen recently introduced the EU Competitiveness Compass, intended as the EU’s response to the challenges outlined in the Draghi Report. “It is a strategy to make growth faster, cleaner, and more equitable, ensuring that all Europeans can benefit from technological change,” said von der Leyen, as she presented this vision, which one can only hope isn’t an overly utopian view of the future.
The Competitiveness Compass envisions an EU where:
- Innovators can quickly bring products to market while companies can access funding easily through a streamlined, EU-wide capital market. Start-ups can grow anywhere within the Single Market, and a fair share of global deep-tech leaders are European.
- Manufacturers and farmers combine competitiveness with a transition to sustainable, low-carbon production while workers can thrive in quality jobs, supported by durable social protection and safety nets.
- All customers have access to affordable, clean energy.
- The EU Member States use their collective weight to act together.
The Competitiveness Compass identifies the necessary actions to enhance and achieve the abovementioned vision. As von der Leyen stated, “now we have a plan.”
The Three Imperatives for Competitiveness
The Draghi Report identified three key imperatives for boosting competitiveness, and the Competitiveness Compass outlines an approach and key measures to make each imperative a reality:
Closing the Innovation Gap
To improve the overall environment generating innovation, the EC will present a European Research Area Act to boost R&D investment, aiming for a 3% GDP target.
We, at Martel Innovate, a company that has been at the forefront of European digital research and development welcome this as well as the fact that digitalisation is set to play a crucial role in achieving Europe’s competitiveness.
For this, the EU is betting on advanced technologies, mainly AI. Building on Europe’s existing network of EuroHPC supercomputers, the initiative establishes ‘AI factories’ to boost Europe’s computing power and makes it accessible for start-ups, researchers, and industry to train, develop, and improve their AI models. In parallel, through an EU Cloud and AI Development Act, the EC will mobilise public and private initiative to establish new AI Gigafactories specialised in training very large AI models.
A Quantum Strategy and a Quantum Act will build on the existing Chips Act to address regulatory fragmentation, align EU and national programmes, and support investment in pan-European quantum computing, communication, and sensing infrastructure. Additionally, an EU Start-up and Scale-up Strategy will be introduced to foster the growth of new companies.
Decarbonisation and Competitiveness
As the Draghi Report shows, decarbonisation policies are a powerful driver of growth when they are well integrated with industrial, competition, economic and trade policies. This conviction will inspire the Clean Industrial Deal initiative, aimed at securing the EU as an attractive location for manufacturing, also in energy intensive industries, and promoting clean tech and new circular business models to meet its agreed decarbonisation objectives. A special attention is given to energy-intensive sectors like steel, metals, chemicals, and automotive, which are critical to Europe’s economy but vulnerable during the energy transition. Another key goa lis to return to low and stable energy prices. Thus, the EC is introducing the Affordable Energy Action Plan, which prioritizes competitiveness-driven decarbonisation.
Increased Security and Resilience
The EU aims to focus on enhancing trade and reducing its dependencies. The Competitiveness Compass highlights efforts to build new global trade partnerships, securing the supply of raw materials, clean energy, sustainable transport fuels, and clean technologies. The EU will also introduce a number of crisis preparation plans to be ready for any potential threat, be it in the realm of economic,cyber security or natural disaster.
Additionally, the Compass proposes a review of Public Procurement rules to introduce a European preference for critical sectors and technologies, where the critical role of the public sector is acknowledged.
We are yet to see whether this will involve the required use of Open Source Software and the building of EuroStack.
Missing Elements: Clear KPIs and Timelines
The Compass will frame the EC’s work throughout its mandate. Boosting competitiveness, however, is not a quick fix. Some of its measures can deliver immediate results, while others will take time. According to the EC, progress will be annually monitored and reported through the Annual Single Market and Competitiveness Report.
While the goals and intention to monitor progress outlined in the Competitiveness Compass are undeniably noble, what is missing are specific Key Performance Indicators (KPIs) and measurable outcomes. While long-term success may ultimately be reflected in GDP growth, it should not be the only measure of success.
Furthermore, from our extensive experience managing EU projects, we know that concrete benchmarks and timelines are crucial for tracking progress. That is currently missing. The only timeline currently available is the one stating when the respective specific plans will be published.
Horizontal Enablers of Competitiveness
Below, we discuss the introduced action on horizontal enablers, which are necessary to underpin competitiveness across all sectors to complement the abovementioned transformational imperatives. While we can mostly just applaud the Horizontal enablers of competitiveness, we know that the devil lies in the details and we are still left to see them. As you can read below, there are ambitious plans on the table, but their specifics will be introduced later.
Simplifying EU Regulation
The push for simplified EU regulation is commendable, but we must proceed with caution. While reducing regulatory burdens is essential for improving competitiveness, we must also acknowledge that most regulations serve important purposes, and even the strictest ones have valid justifications. The most immediate reason is the so-called EU ‘disguised trade protectionism,’ which partially stems from the strict EU regulations. While considered a serious violation under World Trade Organization (WTO) principles, such practices are relatively common beyond the WTO’s ideal of ‘total market integration’, i.e. in real-life economy, both global and regional, and, importantly, at times offer protection to European producers, and in certain cases, even to consumers.
Secondly, EU and non-EU businesses alike must globally comply with the EU’s strict (very often, the world’s strictest) standards set by its regulation, leading to the adoption of EU standards beyond its borders. Le dicton seems quite clear: ‘follow our standards, or you will not access our markets’. This is known as the”California effect,” which laid the ground for the famous “Brussels effect”. Coined by Professor Anu Bradford in 2012, the term “Brussels effect” refers to the EU’s ability to set global standards through its large internal market, without needing explicit consent from non-EU partners. This occurs as the EU, with its large and influential internal market, establishes stringent regulations in areas such as, AI, data privacy, environmental standards, and consumer protection. Corporations adopt EU standards globally, influencing laws at home and in third countries. The General Data Protection Regulation (GDPR), for example, has impacted privacy laws in over 100 countries across the world.
Hence, in the digital sector, the EU is a global leader with regulations like the AI Act, which has set international standard for value-based human-centric regulation, something very much appreciated by our Indo-Pacific partners, which we have learnt in our project INPACE that turns digital partnerships between the EU and the Indo-Pacific into action. Losing this regulatory influence because of the ‘plan to make a plan’ would undermine not only the EU’s global reputation, but also, and, indeed, especially, the ‘effect of the Brussels effect’. That is, the protection of consumers, privacy, the environment, and our planet.
On the other hand, the Multiannual Financial Framework (MFF) proposal offers an opportunity to streamline EU funding, which is currently scattered across multiple programs. This approach, along with the Simplification Omnibus package, is a positive step. The first Omnibus will simplify areas such as sustainable finance reporting, sustainability due diligence, and taxonomy, which is great news for companies like Martel that focus on sustainability.
Furthermore, as a company deeply involved in EU digital innovation, we also welcome the combination of digitalisation and simplification to ease reporting. According to the Compass, digital tools and AI should be leveraged to simplify government processes, ensuring cross-border interoperability for public sector solutions like e-invoicing, e-signatures, e-submissions, and digital product passports. Reporting should move to digital formats with standardised data where possible. Building on the EU e-IDAS framework, the European business wallet is expected to play a key role in enabling seamless interactions between companies and public administrations.
The EC promises that change will begin with its own efforts. The first-ever Commissioner for Implementation and Simplification will oversee the EC’s work in this area and lead a review of the EU acquis to identify opportunities for simplifying, consolidating, and codifying legislation where needed.
Maximizing the Single Market
While we agree that the Single Market is essential for creating continental scale in a world of giants, there may be reasons why market integration has lost momentum. Efforts to remove existing barriers and “enforce” these rules could push integration forward, but this may be something EU member states are not fully prepared for at this time.
We appreciate the commitment to systematically engage in global standard-setting processes, as this is crucial for shaping outcomes that align with EU interests. It will help industries maintain their competitive edge in key technology sectors, such as 5G and 6G telecommunications, AI, renewable energy technologies, electric vehicle charging infrastructure, accessibility, and the Internet of Things—areas that are highly relevant to several of our projects, such as 6G-NTN, ETHER, and UNITY-6G, among others.
Financing Competitiveness
As von der Leyen noted, “We do not lack capital,” referencing the $312 billion of European families’ savings invested abroad annually. The problem is an inefficient capital market, which prevents these savings from fueling early-stage technologies. To address this, she announced the European Savings and Investments Union, which aims to create a true single market for financing in the EU. We are excited to learn more about the 2025 Strategy for a Savings and Investments Union, along with the specific proposals that aim to foster wealth creation for EU citizens and mobilise capital for European projects. We anticipate this could positively impact the financing and support of Digital Commons, an area in which we are working to enhance EU support as part of our efforts in the NGI Commons project. Additionally, we are eager to hear more about the European Competitiveness Fund.
Promoting Skills and Quality Jobs
We strongly agree that the foundation of Europe’s competitiveness is rooted in its people. Thus we were very pleased to learn about the planned Union of Skills initiative, focusing on investment in adult education, lifelong learning, and future-proof skills, which will be critical in ensuring a competitive workforce. This initiative is also crucial for attracting and integrating qualified talent from third countries. A topic, which we are addressing in the INPACE project, as the world’s most developed economies aim to cooperate in the development of digital skills, while being mindful of the fact that they compete for the same talent, without the willingness to share it.
Furthermore, the EC is also very much aware that the world of work is changing and while new fast-growing economic sectors develop, workers require pathways to adapt to retain and find jobs, while also having a safety net during transitions. While AI is not specifically mentioned in this respect, we believe that it will play a major role. We will be exploring its expected impact on the manufacturing industry and its workers as a part of our new project, SkillAIbility.
Competitiveness Coordination Tool
The Competitiveness Coordination Tool should help align EU and national policies.
While we agree that deepening the Single Market is crucial for industrial policies and investments to reach their full potential, the EU cannot achieve these goals without the cooperation of member states. However, the real question is whether this tool will be effective, or if it will simply become another platform for discussions without producing real results.
Conclusion
The EU Competitiveness Compass is an ambitious framework. Especially when competitiveness should not be the sole measure of success. The EU’s pursuit of greater competitiveness, while remaining true to its values, may make things more challenging but undoubtedly more meaningful. This is something we have learnt through our long-term work in establishing a human-centric internet through the NGI initiative.
Nevertheless, the success of the Competitiveness Compass depends on transforming these high-level goals into actionable, measurable plans, and then, concrete actions. While the EC has promised streamlined processes and greater efficiency, the Compass currently lacks a detailed timeline and specific KPIs.
The EC is set to present its overall approach next month, but the only currently available timeline in the Compass outlines the presentation of new legal acts. As we move forward, we hope the EU can shift from a vision-based approach to one focused on tangible results. As Monique Calisti, CEO of Martel Innovate, said: “For the sake of the EU and Martel, we hope that what is coming is less of a marketing pitch and more of a strategic plan filled with concrete actions.”
