Competitiveness Compass for the EU
On 29 January 2025, the European Commission (EC) presented the Competitiveness Compass for the EU (“EU Compass”), which aims to make the EU more competitive and ensure sustainable prosperity. This strategy paper defines the EU’s economic policy priorities and is intended to set the direction for future coordination between the EU member states. We show which opportunities and risks undertakings can already derive from this.
The EU Compass is based on the so-called Letta Report from April 2024 and the Draghi Report from September 2024 and aims to overcome structural weaknesses and close the productivity gap that has caused Europe to fall behind other major economies (such as China or the USA) in recent decades.
It is clear that Europe can no longer rely on previous growth factors: strong external demand through an open global trading system, access to cheap fossil fuel and relative geopolitical stability.
In future, Europe should once again be a place where ” tomorrow’s technologies, services, and clean products are invented, manufactured and marketed”
A. New opportunities for companies?
It seems that Brussels is now reacting to the tense economic situation. Even if the EU Compass is kept relatively general, it could result in significant opportunities and advantages for EU companies. The EU Compass could therefore be good news for Austrian companies.
- The bureaucracy and administrative burden are to be reduced overall – in particular, the harmonisation of EU-wide regulations is to be driven forward in order to facilitate economic activity in the EU internal market.
- Investments in R&D as well as digital technologies are to be strengthened. A new framework for public funding could have a positive impact on future financing. Synergy effects through new regulations for technology transfer are to be expected.
- The establishment of start-up and scale-up undertakings will be made easier, particularly in the areas of company, insolvency, labour and tax law.
- High and volatile energy prices are to be countered by investing in grids and renewable energies. Customised action plans are to be developed for energy-intensive sectors.
Here is an overview of the EU Compass:
The three pillars of the EU Compass
The EC relies on three pillars to achieve its goals: innovation, decarbonisation and security:
1. Closing the innovation gap.
The EC wants to create a new dynamic for the European industrial structure by
- creating a favourable environment for young innovative undertakings (start-ups and scale-ups). In particular, this involves removing obstacles that stand in the way of the establishment and expansion of new undertakings;
- strengthening industrial leadership in high-growth sectors based on deep tech;
- the dissemination of technologies in established companies and SMEs.
To this end, “AI Gigafactories” and initiatives such as “Apply AI” are to be implemented to promote the development and utilisation of artificial intelligence in key industrial sectors. In addition, the EC has announced that it will develop action plans for advanced materials, quantum and biotechnologies, robotics and space technologies.
2. Decarbonisation and competitiveness
In order to counter high and volatile energy prices, the EC wants to make it easier for EU undertakings to access clean and affordable energy. To this end, initiatives such as the Clean Industrial Deal, the Affordable Energy Action Plan and other customised action plans for energy-intensive sectors (steel, metal and chemical industries) were presented.
Reducing dependencies and increasing security
The EU wants to strengthen its economic and technological security. Here are the most important points:
- Reducing dependencies: The EU wants to reduce its dependence on external supply chains, particularly in strategically important areas such as semiconductors, batteries and critical raw materials.
- Strengthening resilience: The EU plans to increase its resilience to global crises. This includes measures to ensure security of supply and to prepare for future shocks.
- Critical infrastructure protection: The protection of critical infrastructure, such as energy and communication networks, is another priority. The EU wants to ensure that these infrastructures are robust and protected against threats.
- Promoting cyber security: The EU is focusing on strengthening cyber security in order to arm itself against growing threats in the digital space. This includes investments in technologies and measures to defend against cyber-attacks.
C. Horizontal enablers for competitiveness
The three pillars are complemented by five horizontal enablers that are crucial for strengthening competitiveness in all sectors:
- Simplification: The EU Compass sets the goal of reducing the administrative burden for companies by at least 25% and for SMEs by at least 35% in various areas. In particular, procedures for accessing EU funds and EU administrative decisions are to be made “simpler, faster and leaner”. The omnibus proposal (we reported on this in December 2024), which aims to standardise reporting obligations, was recently published.
- Removing obstacles to the single market: A horizontal single market strategy is intended to modernise “economic governance” and remove obstacles within the EU.
- Competitive financing: A (new) European Savings and Investment Union will create new savings and investment products as well as incentives for venture capital. In addition, access to EU funds is to be streamlined in line with the EU’s priorities.
- Promoting skills and high-quality jobs: The EC wants to present an initiative to implement a “Union of Skills“. The focus here is on “investment, adult education and lifelong learning, the development and maintenance of future-proof skills, fair mobility, the recruitment and integration of skilled workers from abroad and the recognition of different types of training“.
- Better coordination of political measures: The EC announces a “Competitiveness Coordination Instrument” to ensure common EU policy objectives at EU and national level and to identify cross-border projects of European interest.
D. Conclusion
Changes are likely to be coming soon. However, it is currently difficult to predict what the EU regulatory landscape will look like in the coming months and years – although there are certain indications. It is therefore important to keep an eye on this dynamic process in order to benefit from new opportunities for companies in good time – please feel free to contact us to find out more!
Please note: This blog is for general information purposes only and in no way constitutes legal advice from Binder Grösswang Rechtsanwälte GmbH. The blog cannot replace individual legal advice. Binder Grösswang Rechtsanwälte GmbH accepts no liability of any kind for the content and accuracy of the blog.
Written by Anian Gruber (Attorney at law) and Armin Nimmrichter (Associate)