The European Commission has announced the release of Competitiveness Compass which outlines the new roadmap to boost global competitiveness. The initiative includes a wide range of measures that promote innovation and investment, lower energy costs, and reduce administrative burdens on companies operating in the EU. 

The EC's Competitiveness Compass encourages private market firms, asset managers, and impact investors to focus on key areas like green technology, defense, and digital innovations, highlighting new investment priorities and regulatory changes in EU markets. 

Let’s explore the new EC's Competitiveness Compass in detail. 

About the Competitiveness Compass

The Competitiveness Compass is a strategic initiative launched by the European Commission that aims to enhance the competitive standing of European Unions globally. The compass originates from the recommendation of the Draghi Report, which highlighted the necessity of unified policies across EU member states in order to handle competitiveness issues successfully. The goal of the initiative is to address the challenges faced by the EU in maintaining its competitive edge in a rapidly changing global economy.

“It is a strategy to make growth faster, cleaner and more equitable, by ensuring that all Europeans can benefit from technological change,” said Von der Leyen, President of the European Commission.

Key areas of focus on the Competitiveness Compass

It serves as a roadmap or a framework for EU action over the next five years, focusing on three key areas: innovation, decarbonization, and security. 

• Innovation: By making investments in fields like biotechnology, space technology, and artificial intelligence (AI), the EU hopes to bridge the innovation gap. In particular, it develops an EU Start-up and Scale-up Strategy to promote the emergence and success of new businesses.
• Decarbonization: "Getting back to low and stable energy prices" is Von der Leyen's goal. To achieve this, the Commission is launching an Affordable Energy Action Plan that will use its upcoming Clean Industrial Deal to decarbonize in a way that is driven by competition. The focus will also be on energy-intensive industries like chemicals, steel, and metals.
• Security: In light of recent geopolitical shifts, the EU plans to enhance its resilience by reducing dependencies on external suppliers, particularly for raw materials and energy. This involves forging new trade partnerships and securing a stable supply chain for critical resources.

Actions by the EU for implementation of the Competitiveness Compass

• Red tape reduction: The Commission intends to significantly decrease administrative costs, notably for small and medium-sized firms (SMEs). The proposed measures include reducing red tape by at least 25% for large companies and 35% for SMEs, making it easier for businesses to operate across borders. Addressing this, Von Der Leyen said, “many firms hold back investment in Europe because of unnecessary red tape.”
• Lowering barriers to the single market: The EU will form a new legal framework known as the '28th regime' to streamline regulations in taxation, labor legislation, and corporate governance, allowing for more efficient operations inside the single market.
• Financing competitiveness: The President of EC said, “We do not lack capital. We lack an efficient capital market that turns savings into investments, particularly for early-stage technologies that have game-changing potential ” pointing out the creation of the European Savings and Investments Union. The union is intended to strengthen the capital market by effectively channeling savings into investments. This program is crucial to increasing financing for innovative initiatives and emerging technology.
• Promoting skills: To overcome the skills gap in Europe's labor market, the Commission will establish a Union of Skills, focussing on lifelong learning and attracting talent from abroad while retaining current talent within Europe. Von der Leyen mentioned, “too much of our top talent is leaving the European Union because it is easier to grow their companies elsewhere.”
• Coordinating policies: A Competitiveness Coordination Tool will be established to guarantee that these initiatives are implemented effectively at both the EU and national levels. This platform will help member states collaborate on shared goals.

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