A new European Commission strategy signals a pivot from crisis response to structural reform — but execution risks remain high.
After five years of reacting to back-to-back crises — from the pandemic and war in Ukraine to inflation and supply chain breakdowns — the European Commission is now taking a longer view. And at the centre of this strategic pivot is a single word: competitiveness.
In a sweeping 2023 communication, the Commission laid out a roadmap to restore Europe’s industrial edge and economic resilience. The tone is more sober than triumphant. The message is clear: unless the EU tackles deep-rooted structural barriers — from sluggish innovation to energy price volatility — its global position will continue to erode.
“We are moving from firefighting to future-proofing,” said one senior Commission official involved in the strategy. “That means rethinking not just how we respond to shocks, but how we compete in a transformed world economy.”
The strategic context: Europe’s competitiveness at risk
The European Union’s economic weight is shrinking in relative terms. In 1990, the EU accounted for over 21% of global GDP. By 2023, that figure had dropped to 14%. Meanwhile, productivity growth lags behind that of both the United States and key Asian economies.
The Commission’s diagnosis is blunt: Europe is losing ground not because it lacks talent or capital — but because its systems aren’t delivering at scale or speed.
A lack of scale in digital infrastructure, fragmented capital markets, and chronic underinvestment in innovation are all cited as core weaknesses. Energy costs remain high, red tape slows down investment, and labour shortages — especially in high-tech sectors — are becoming acute.
The strategy doesn’t aim to fix everything at once. Instead, it focuses on nine structural drivers of competitiveness, ranging from open trade and innovation to education and a functioning Single Market.
A renewed role for the single market
One of the most striking themes of the new strategy is the Commission’s renewed emphasis on the Single Market — not just as a legal framework, but as an engine of competitiveness.
There’s a recognition that while rules have been harmonised, fragmentation still exists in services, digital markets, and regulatory implementation. For example, a startup operating across five EU countries often faces five different compliance regimes, payment systems, and tax codes.
The report calls for better enforcement, smarter regulation, and fewer procedural burdens for cross-border business. It also suggests refining state aid rules to allow faster scaling of strategic technologies — without triggering a subsidy race.
Innovation, Investment, and the Productivity puzzle
Europe’s innovation gap isn’t new, but it has become harder to ignore. R&D spending remains stuck
around 2.2% of GDP — well below the 3% target and trailing the US, South Korea, and Japan.
The Commission acknowledges that public investment alone won’t bridge the gap. What’s needed is a deeper pool of private capital, more efficient financial markets, and faster tech transfer between research institutions and industry.
To this end, the strategy backs further progress on the Capital Markets Union, digitalisation of government services, and a modernised competition policy that can support scalable, innovation-intensive firms.
Energy and Skills: the two structural headwinds
Energy costs remain a competitive disadvantage. While renewable deployment has increased, Europe still faces higher electricity prices than the US or China — due in part to legacy infrastructure, fragmented grids, and limited interconnectivity.
Meanwhile, skills shortages are biting hard. From IT specialists and engineers to technical trades, demand continues to outstrip supply. The Commission points to demographic decline, uneven training systems, and low mobility as key factors.
Proposals include:
- Boosting vocational and STEM education
- Creating a skills-first labour market (where qualifications matter less than capability)
- Expanding mutual recognition of professional credentials across Member States
A new way to measure progress
In a subtle but important shift, the Commission proposes nine competitiveness indicators to be tracked annually — covering innovation, productivity, energy prices, trade performance, and education outcomes, among others.
This isn’t just a scoreboard. It’s meant to reframe how policy success is defined. Instead of focusing purely on growth or compliance, the EU wants to measure its ability to stay relevant and competitive in a shifting global economy.
Still, the path from metrics to momentum will be anything but automatic.
Can the strategy deliver?
The ambition is real. But so are the risks.
Many of the reforms outlined in the strategy — especially in capital markets, state aid, and labour mobility — depend heavily on national governments. Political coordination, not just policy design, will be the limiting factor.
There’s also the question of speed. In a world where China and the US can roll out industrial support schemes in months, Europe’s multi-layered governance can feel sluggish by comparison.
“The biggest risk is that we’ve diagnosed the right problems — and then fail to move fast enough to solve them,” said an EU diplomat who reviewed the proposal.
Conclusion: A Race Against Irrelevance
The European Commission’s long-term competitiveness strategy marks a clear shift in tone : away from defensive crisis management and toward structural renewal. But execution will be the real test.
In an era defined by technology, scale, and speed, Europe can’t afford to lag. The continent still has the talent, capital, and political leverage to lead. Whether it has the strategic coherence and institutional agility to do so is a question only the coming years can answer.
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