EU Competitiveness Compass to reignite European industry

The Watcher Post has seen the draft of the EU legislative plan to revitalise industry, finance and the single market. Here is what the EU Competitiveness Compass, to be presented tomorrow by the European Commission, contains.

In continuity with the reports drafted first by Enrico Letta and then by Mario Draghi

The warnings first by Enrico Letta and then by Mario Draghi were clear. The productivity and competitiveness gap with the United States for European companies has widened, and the gap between income levels on both sides of the Atlantic Ocean has widened. Not only that. EU-US convergence on innovation has slowed down, while China has caught up and is leading the way in some green technologies. The high price of energy also continues to weigh on European industry. Letta had warned that Europe must leverage the single market much more, Draghi had gone further, describing a European economic future without either strong external demand, access to cheap fossil fuels, or the same level of security guarantee (hence less defence spending) NATO. Massive investments are needed to modernise the European economy, funding for green and digital transitions.

Relaunching productivity and competitiveness

The draft EU Competitiveness Compass states: ‘The way to revive EU growth is to reignite innovation-based productivity. Europe’s productivity gains must be driven by a shift towards the innovation frontier rather than by wage restraint or labour expansion, given demographic trends‘. Then on competitiveness: ‘Europe must address other broader factors affecting its competitiveness. The transition to a decarbonised economy must be competitiveness-friendly and technology-neutral, while the shift to cleaner energy sources must reduce energy costs and price volatility. The EU must ensure its industrial presence in key technology sectors and mitigate risks to its security and economic resilience. The Compass goal is a Europe where tomorrow’s technologies and clean products are invented, produced and marketed, while we stay the course towards carbon neutrality’.

What to do in terms of policy

The Competitiveness Compass starts from two basic requirements for policies that are better geared to support competitiveness: simplify and speed up the regulatory environment, reducing burdens and excessive complexity and favouring speed and flexibility; better coordinate policies at European and national level, rather than pursuing objectives separately. The Draghi Report has identified three transformational imperatives to boost competitiveness, and the Compass sets out an approach and a selection of flagship measures to make each of these imperatives a reality in the coming years: ‘Bridging the innovation gap with a roadmap to decarbonisation and competitiveness, reducing dependencies and increasing security’. The Compass transforms these imperatives into objectives: ‘Make the most of the benefits of scale offered by the single market by removing barriers, finance the economy through the Investment and Savings Union and a refocused EU budget, and promote skills for competitiveness and quality jobs, while ensuring social equity’.

How simplification and coordination will be improved

The Compass states that ‘all EU, national and local institutions must make an unprecedented effort to produce simpler rules and speed up administrative procedures’. It will start with a first Omnibus simplification proposal next month, which will include far-reaching simplification in the areas of sustainable finance reporting, sustainability due diligence and taxonomy. The Commission will take the necessary steps to achieve the target of reducing reporting requirements for companies by 25 per cent and for SMEs by 35 per cent, including by defining a baseline for assessing burden reduction, as outlined in the Draghi report.

Boosting the competitiveness of companies

A specific EU Start-up and Scalability Strategy will address bottlenecks to market entry and scalability, including university-business relations, cross-border mobility of talent and skilled workers, access to venture finance, barriers within the single market, infrastructure constraints, and insufficiently targeted innovation support. A European research and technology infrastructure strategy will also promote state-of-the-art facilities to be opened to start-ups and SMEs.

The drive for innovation

To improve the overall environment that generates innovation, the Commission will present a European Research Area Act to boost R&D investment and bring it to the 3% of GDP target. Objectives Focus research support more on strategic priorities, strengthen alignment between EU and Member States’ funding priorities and foster the circulation of knowledge and talent across Europe.