A Competitiveness Compass for the EU

The 'Competitiveness Compass for the EU' follows up on the report by Mario Draghi 'The future of European Competitiveness: A competitiveness strategy for Europe'. This report defines three areas for action to reignite growth in Europe: closing the innovation gap, particularly with the U.S. and China; decarbonisation; and increasing security and reducing dependencies. On 27 November 2024, President von der Leyen announced a Competitiveness Compass as the first major initiative of the Commission in this mandate, building on the Draghi report and providing the framework for the Commission's work on competitiveness in this mandate. The Competitiveness Compass is oriented on the Draghi report's three pillars and is supposed to be the "North Star" for the work of the European Commission over the next five years.

The report focuses strongly on an "unprecedented simplification effort", an "inprecedented cutting of red tape", as well as deregulation. Concrete proposals for implementation of these priorities will be included in the European Commission's 'Omnibus package', due to be published in late February 2025.

The Competitiveness Compass also addresses the "28th regime to operate within the Single Market" of Enrico Letta's report 'Much more than a market: Speed, security, solidarity: Empowering the Single Market to deliver a sustainable future and prosperity for all EU citizens'. It also addresses the European Competitiveness Fund, which is said to be part of the new Multiannual Financial Framework, as well as a new "Competitiveness Coordination Tool".

With regard to research and innovation, the following elements of the Competitiveness Compass appear particularly relevant:

• European Competitiveness Fund: according to the Competitiveness Compass, this Fund will replace multiple existing EU financial instruments with similar objectives. It is supposed to fund investments in strategic technologies - ranging from AI to space technologies, and from clean technologies to biotechnology - within the next Multiannual Financial Framework (MFF). The Fund is intended to contribute to mobilising private investment and supporting research and development.
• A new Competitiveness Coordination Tool will be set up in order for the Member States to set joint priorities for competitiveness in selected key areas and projects that are regarded as strategically important and of joint European interest (the Compass refers to the logic of the European Semester and of NextGenerationEU in this context). Some strategic areas are highlighted which require further investment in order to strengthen technological sovereignty and competitiveness (i.a. AI, semiconductors, quantum technologies, advanced materials, biotechnologies, clean energy technologies, robotics, space technologies, interconnected and autonomous mobility).
• Following up on the Draghi Report, the European Innovation Council (EIC) should be inspired by elements of the U.S. DARPA model in future. The EIC and the European Research Council (ERC) should be oriented on the same strategic interests and should collaborate more closely.
• The Compass also mentions the European Research Area Act. Drawing up this Act is part of Commissioner Zaharievas Mission Letter. It should be presented in 2026 and should deal amongst others with strengthening R&I investments, reaching the target of 3% of GDP spent on R&I, a stronger orientation of research funding on strategic priorities, and harmonising the funding priorities of the EU and the Member States.
• A European Innovation Act will also be prepared, building on a Start-up and Scale-up Strategy.
• The topic of Artificial Intelligence will continue to increase in importance. The Commission is planning an 'AI in Science Strategy' as well as an 'Apply AI Strategy', AI Factories and AI Gigafactories.