Competitiveness - Front and Center of Commission’s Agenda

We share the European Commission’s analysis that Europe must address the need for boosting productivity growth. However, in the same way that the Compass highlights Europe’s innate strengths, we firmly believe there are reasons to be optimistic about Europe’s economic prospects, provided the right policies are pursued.

While the Compass identifies Europe’s competitiveness challenge as being about improving productivity, the Compass lacks an extensive analysis of key drivers of productivity to underpin the policy actions. This is unfortunate, as developing measures to raise productivity growth requires insights, based on evidence, of what factors have a positive impact on productivity.

From what we know, what holds promise? The ambition to enable a business case for clean production chimes with our message that we need a green transition that delivers sustainable outcomes enabled by productive and market-driven investments and innovation. Another area that could act as a real driver for innovation-led productivity is if the ambition of this Commission to deliver an unprecedented simplification effort is realised.

Beyond simplification, EU legislators may also need to be prepared to favour a greater level of risk taking, and for this approach to be reflected in policy content, if the EU is to accelerate its rate of innovation. If anything, the ability to achieve world-class regulation is probably what will constitute the real litmus test on whether this Compass is able to deliver on its promise to boost competitiveness. The ambition of the Compass to pay greater attention also to enacting growth-enhancing reforms at national level is welcome, as reflected in the proposed Competitiveness Coordination Tool.

From what we know, where are the risks? Although we share much of the analysis, the general thrust and ambitions, the Compass also brings to the fore issues where we see potential risks.

One such area are the potential trade-offs inherent in the twin ambition to reduce dependencies through an increased level of self-sufficiency on the one hand, while increasing economic efficiency on the other hand. In its quest to increase its level of self-sufficiency, the EU must make the removal of barriers its main objective and remain very careful in selecting which areas are to be subject to state intervention as the risks are considerable in terms of market distortions, ultimately stifling innovation, and reducing economic dynamism, and thereby exacerbating historic issues hindering European productivity. We believe there is much truth in that there is no competitiveness without competition, and that this should be a guiding principle for developing the flagship actions throughout the Compass.

Flagships waiting to load their cargo. It should be said that most of the content of the flagship actions outlined in the Compass are yet to be defined. In developing this content, we encourage the EU institutions to engage with business throughout the policy process, and to live up to the Compass’ stated goal to develop new ways of working together to achieve better outcomes.