The European Commission (Commission) has published its Competitiveness Compass (Compass). The Compass is a policy document that describes the overall Commission policy on increasing the EU’s competitiveness over the coming five-year term. The Compass comes as a response to the reports published by Enrico Letta and Mario Draghi, which both warned for the decreasing competitiveness of the EU vis-à-vis other large economies, such as the United States and China.

In the policy document, the Commission writes that productivity dynamics play a central role in explaining Europe’s divergent economic trajectory compared to other major economies. It lists three main relevant factors:

  • Closing the innovation gap.
  • A joint roadmap for decarbonisation and competitiveness.
  • Reducing excessive dependencies and increasing security.

The aim of the Compass is to ensure that future technologies and clean products are invented, manufactured in Europe, while staying on course to carbon neutrality. It would provide a common framework to guide EU action to ensure that all EU policies contribute to this goal. The horizontal enablers for policies to better link them to competitiveness are:

  • Simplifying the regulatory environment, reducing burden and favouring speed and flexibility.
  • Fully exploiting benefits of scale offered by the Single Market by removing barriers.
  • Financing through a Savings and Investments Union and a refocused EU budget.
  • Promoting skills and quality jobs while ensuring social fairness.
  • Better coordinating policies at EU and national level.

The remainder of the Compass discusses the main future initiatives under each of the three main factors for increasing the EU’s competitiveness. The end of each section contains an indicative timeline for when the Commission expects to publish each of the mentioned initiatives. The final part of the Compass discusses initiatives related to the horizontal enablers.

With regard to financial services, the Compass mentions the Savings and Investments Union (SIU) as one of the horizontal enablers for competitiveness. The Commission intends to present an SIU action plan on 19 April 2025, followed by specific policy proposals. Overall, the execution of the SIU action plan should integrate and provide for deeper and more liquid capital markets that would mobilise more private sector resources, such as household savings, and direct them towards future-oriented growth sectors. The specific proposals that would be announced in the SIU action plan are expected to include a framework for low-cost saving and investment products at EU level. In addition, the Compass states that the Commission will act to remove barriers to market-driven consolidation of financial markets infrastructure and present measures to promote the EU’s securitisation market. This last initiative is expected in Spring 2025.

More generally, the Commission discusses the forthcoming Omnibus simplification package, which is expected on 26 February 2025. According to the compass, the Omnibus simplification package will be the first of a series of packages intended to simplify the Corporate Sustainability Due Diligence Directive, the Taxonomy Regulation and the Corporate Sustainability Reporting Directive. The first Omnibus package would seek to better alignment the legislative requirements with the needs of investors, proportionate timelines, and less administrative burdens for companies. It would also address the unintended trickle-down effect to prevent smaller companies along the supply chain from being subjected in practice to excessive reporting requests. These announcements seem to reflect increasing pressure by Member States, including France and Germany, to delay the application of these legislative measures and limit the amount of businesses that would be in-scope. Related to the Omnibus package, the Commission intends to propose a new definition of small mid-cap companies to alleviate the regulatory burden for a group of companies that currently fall in between the definition of small enterprise and the definition of a large enterprise. A simplification of the Carbon Border Adjustment mechanism for smaller market players is also on the table.

As already mentioned, the Compass must be considered as an overarching policy document that will guide the Commission in its work during the 2024 – 2029 legislative term. The announcements made in the document will become more concrete closer to their respective intended announcement dates. The Commission expects to publish its work programme for 2025, which provides a more concrete overview of which initiatives to expect in 2025, and when, on 9 February 2025.