19 February 2024

In this spotlight piece, we explore the EU’s competitiveness strategy, what it means for Europe, how policymakers are attempting to foster it, and how European industry can best prepare for the challenges ahead.

Read last month’s Spotlight piece on the Rise of the Right

A brief look at European competitiveness in 2024

European competitiveness has become increasingly more important in the wake of recent global crises impacting Europe’s supply chains and energy costs that have exacerbated the EU’s reliance on other superpowers in critical sectors such as healthcare, energy and defence. Going forward, Europe is poised to carefully weigh its strategic options: to safeguard European autonomy or to strengthen its transatlantic alliance, with the latter option likely to prove more challenging in the event of a second Trump mandate.

With this in mind, the European Union has already started taking action, publishing plans in its “Single Market at 30” report and announcing the much-anticipated Draghi report:

• Communication on the Single Market at 30: The Commission put this forward last year celebrating 30 years of the EU Single Market. In it, it announced plans to solidify European competitiveness and growth by performing a fitness check on existing EU legislation in the next mandate. Sectors with high integration potential directly referenced by the Commission include energy, construction and retail amongst others. This provides a key indicator to industry in such sectors that they should be prepared to work with the institutions to identify remaining single market barriers and potential solutions.

• The Draghi Report: Former President of the European Central Bank and Prime Minister of Italy, Mario Draghi has also since been tasked by the Commission to deliver a report on European competitiveness expected to be published by the end of June. The report will closely assess the strengths and weaknesses of the European economy, which EU policies have actually helped companies, and what else needs to be achieved. Draghi already held meetings with leaders from the European Round Table for Industry (ERTI) in January whilst preparing for this report and is meeting with EU finance leaders this week. Key recommendations passed on to Draghi include coherent regulatory implementation and a stronger focus on innovation. Businesses can expect calls for single supervision at the European level (as has already been announced in the AI space) as well as a continued shift away from Directives towards Regulations.

How will EU election results impact competitiveness?

The next legislature’s actions in the competitiveness space will be heavily impacted by the election results. The election period will bring a change of senior staff at the European Commission, with the political direction expected to lead to the replacement of multilateralist figures such as Sean Berrigan (Director General in DG FISMA) in the high ranks of the Commission. A strengthening of the current French Internal Market Commissioner Thierry Breton’s standing in the next Commission is expected to bring more hardline European autonomy believers to senior positions. Domestic European competitiveness alongside strategic autonomy will take the front seat, with pressure rising for direct European support in sectors of high strategic importance such as energy, defence, and technology. This was already seen in this legislature with the debacle surrounding the appointment and subsequent withdrawal of Fiona Scott Morton (a former Obama administration official) as Chief Economist at DG COMP.

The impact of national interests on competitiveness

In France the competitiveness debate had started already during the COVID-19 pandemic with the French national recovery plan (France Relance) devoting a whole section to competitiveness and the government launching the French Tech programme to boost start-ups in the country.

Many countries are having this debate domestically, with Germany an ideal example – rising energy prices caused by the ongoing war in Ukraine and the hard push for a green transformation are factors that have plunged the country into a small recession. This has raised voices on boosting innovation policy among other things to ensure the country is not labelled as the “sick man of Europe”.

National debates will be affected by the European elections profoundly, as the composition of the European Parliament will influence what new regulations are created. With a potentially dwindling number of Green MEPs in the Parliament and a growing far-right presence, new green legislation will be tough to implement as the far-right highlights the impact these rules will have on businesses.

How industry should respond

Both before and after the elections, industry leaders should create long-lasting relationships with EU policymakers and educate them on the challenges they face in real terms – jobs/availability of products/consumer protection, what innovation means in their sector – and continue pushing for measures along the lines of those coming from the Single Market at 30 and the Draghi reports, including:

• Streamlining regulations and creating one-stop shops where possible, especially for reporting obligations;
• Ensuring every new piece of legislation has a competitiveness check;
• Implementation of existing regulatory frameworks and harmonisation across the Single Market; and
• Supporting European champions and providing a clear policy agenda around state aid.

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