On 29 January 2025, the European Commission published its Competition Compass. In it, the Commission analyses Europe’s strong starting position to remain a successful economic power in the world. However, it also notes that productivity—and especially Europe’s innovativeness—lags behind competitors such as the United States and China.
With Europe’s population projected to remain stable or decline in the coming years, and its population aging rapidly, the solution must lie in innovation. This innovation, however, must go hand in hand with sustainability.
To enable these developments, the strength of the internal market must be better leveraged, and a more favorable investment climate is needed. Although Europe is setting up an investment fund under the new budget, private investment also plays a crucial role.
The industrial policies of Member States and the Commission should create a framework for more focused action. The input of research is indispensable in this regard.
Europe also needs further reductions in regulatory burdens. A review of the CBAM and REACH are highlighted as examples, as well as the simplification of anti-avoidance rules (such as CSRD and CSDD). On 26 February, a clearer document on this (called the Omnibus) will be published. The Compass places particular emphasis on SMEs, which are the most affected by high administrative burdens.
In international trade, the conclusion of trade agreements will focus on sustainability, and a joint purchasing platform for critical raw materials will be established. Trade is considered a key driver of sustainable prosperity, with agreements with Mercosur countries and Mexico cited as examples. However, the Commission warns against becoming overly dependent on a small number of foreign suppliers, with diversification (or “strategic autonomy”) seen as a key solution to this issue.
Increasing competitiveness cannot be achieved by the Commission alone. Intensive cooperation with other stakeholders will be essential in the coming years.
The Compass highlights key challenges around innovation, resilience, and digitalisation. For ESC, it is crucial to engage in discussions with the European Commission on these issues in the coming period.
For more information, please see the EC communication outlining “A Competitiveness Compass for the EU“.