Competitiveness compass
The competitiveness compass provides a plan to allow Europe to regain its economic growth and prosperity.
Why a competitiveness compass?
Europe's productivity has been lagging behind other major economies over the last 20 years. Action is urgently needed to revive Europe's competitiveness.
That is why, in the November 2024 Budapest declaration, EU leaders stressed the urgency of implementing a new European competitiveness deal, anchored in a fully integrated single market.
Business as usual is no longer an option.
The Budapest declaration
Following up on the leaders' request, in January 2025 the European Commission presented the competitiveness compass.
The compass is based on the recommendations made by Mario Draghi in his report on the future of European competitiveness.
Objectives
The aim of the compass is to make business easier and faster and ensure Europe's prosperity.
The compass guides the Commission's work for the 2024-2029 period on the basis of three pillars:
- closing the innovation gap with the EU's main competitors
- linking decarbonisation and competitiveness
- reducing dependencies and increasing security
Innovation
The first pillar focuses on driving growth through innovation.
EU leaders have stressed the need to foster a more innovation-friendly environment based on excellent science in order to get innovative products to the market faster and at scale.
Only one out of three EU-registered patents are commercially exploited. To close the innovation gap with the EU's competitors and put Europe at the forefront of research and innovation globally, the competitiveness compass mentions proposals that aim to:
- help startups get started and scale up
- encourage the development and industrial adoption of artificial intelligence (AI)
- simplify and harmonise EU-wide legal rules
- boost new financing products (for instance, venture capital)
- facilitate the mobility of talent and increase research and development spending
- develop computing, cloud, network, satellite and data infrastructures
Furthermore, new measures aimed at taking the lead in strategic tech sectors – such as AI, semiconductor and quantum technologies, advanced materials, biotech, clean energy technologies, robotics, space, connected and autonomous mobility – should enable Europe to strengthen both its technological sovereignty and its competitiveness.
Decarbonisation
EU countries are committed to making the EU climate-neutral by 2050.
Decarbonisation policies are a strong driver of growth if well integrated with industrial, competition, economic and trade policies.
At the same time, to be more competitive, the EU needs to address structural problems behind the high energy prices in Europe and its dependence on fossil fuel imports.
In order to decarbonise the economy efficiently, the second pillar of the competitiveness compass features the following Commission initiatives:
- a clean industrial deal and an industrial decarbonisation accelerator act, to help manufacturers switch to clean production and technologies and promote new circular business models
- an affordable energy action plan to facilitate access to low-cost energy
- a roadmap to phase out Russian fossil fuels imports in order to reduce the EU's energy dependencies
- an electrification action plan and a European grids package to modernise and expand the EU's energy network and infrastructure
- amendments to the EU climate law to set the 2040 target of 90% emissions reduction
- a circular economy act to encourage better use and reuse of resources
Security
The compass underlines both trade as a key driver of EU prosperity and the need for the EU to diversify, strengthen and ensure the resilience of its supply chains.
Trade
The Commission aims to sign and implement additional trade agreements as well as clean trade and investment partnerships to help secure the supply of critical raw materials, clean energy, sustainable transport fuels and clean technologies from across the world.
The Commission also launched a platform that empowers EU companies in effectively procuring energy related products and raw materials.
The planned review of public procurement rules, including a European preference in public procurement, will aim to reinforce technological security and domestic supply chains.
Defence
The compass emphasises the need for further cooperation between member states in defence by increasingly resorting to joint procurement and joint research and development, as well as by pooling resources.
Preparedness
The compass also underlines the necessity of concrete actions to improve the EU's preparedness for existing and potential threats.
Competitiveness enablers
The compass identifies five ways to make sure the EU is competitive in all sectors.
Simplification
The Commission has presented a series of proposals to simplify rules, reduce the regulatory burden and accelerate administrative procedures to make Europe a more attractive place for investment.
One of the objectives is to reduce the administrative burden for SMEs by at least 35%.
Simplification of EU rules
Completion and expansion of the single market
The Commission wants to work on removing existing barriers for all businesses to be able to fully exploit the benefits of scale offered by the single market, thanks to a horizontal single market strategy.
Particular attention will be given to SMEs and start-ups.
Single market
Financing
As a more competitive, innovative and decarbonised Europe will have major financing needs, the EU needs to better mobilise private investments and use public funding in a more targeted way. This is why the Commission has presented a strategy for a savings and investments union.
The compass also foresees proposals to:
- deepen the integration of the EU's capital markets
- help mobilise capital for European projects
- channel savings into the economy
- create additional financing capacities for banks by promoting the EU's securitisation market
Savings and investments union
The Commission has also proposed restructuring the next long-term budget (multi-annual financial framework 2028-2034) to support the EU’s competitiveness.
The new European competitiveness fund (ECF) will bring together 14 existing individual programmes under one rulebook, with one application gateway. It covers four areas:
- health, biotech, agriculture and bioeconomy
- resilience, security, defence and space
- digital leadership
- the clean transition and industrial decarbonisation
The EU's long-term budget for 2028–2034
Skills
To ensure a better match between the availability of skills and labour market demands, the Commission aims to build, through various plans and initiatives, a Union of Skills.
In order to remove barriers limiting access to the labour market, especially for women, young people, older citizens who want to remain economically active, low-skilled people and people with disabilities, the Commission also intends to present a quality jobs roadmap.
Coordination of policies
The Commission will propose a new competitiveness coordination tool whose objective will be to better align common strategic interests at EU and national levels.
It should help the EU and member states to:
- act on common competitiveness priorities in selected key areas
- cooperate on projects of common European interest
The role of the Council in the competitiveness compass
The European Council is responsible for setting the overall political strategy and guidance for the EU.
'A prosperous and competitive Europe' has been identified by EU leaders as one of the key elements of the strategic agenda for 2024-2029, which sets the priorities for the EU's policy work.
The Council of the EU acts as co-legislator, together with the European Parliament, in accordance with the ordinary legislative procedure.
This means that once the Commission submits the proposals for new legislation announced in the competitiveness compass, EU ministers meeting in various Council configurations will discuss the proposed measures. The next step will be negotiations with the European Parliament on the final shape of the laws before the new rules are adopted by both institutions and become EU law.
See also
Industry
Climate change: what the EU is doing
The EU's role in global trade
Last review: 16 June 2026