It has been a year since Mario Draghi, former President of the European Central Bank, published his report commissioned by the European Commission, outlining recommendations to strengthen the EU’s competitiveness. At a recent conference, Draghi emphasized that progress has been too slow and that the gap between the EU and both China and the United States is widening. Competitiveness was also a central theme in Ursula von der Leyen’s State of the Union address.
Competitiveness back at the center of EU debate
“The address was delivered to a very different European Parliament and in a different geopolitical reality than when José Manuel Barroso gave the first such speech in 2010. Yet the issue of Europe’s competitiveness, which was crucial back then, has returned with new force,” said Janusz Lewandowski, Member of the European Parliament from the Civic Platform. “Beyond the war in Ukraine – where Europe must strengthen security and military capacity – the reports by Enrico Letta and Mario Draghi highlight that the competitiveness gap is widening.”
In September 2024, Draghi published his vision for the future of European competitiveness. He identified major problems: excessive regulatory and administrative burdens, low levels of innovation compared with China and the US (especially in technology), challenges of decarbonizing the economy while maintaining industrial competitiveness, and high energy prices. His report estimated that the EU needs €750–800 billion in additional annual investments. The report launched a major deregulatory and simplification project for EU legislation.
“This cannot just be political declarations. There must be meaningful deregulation, because so far the EU has stifled European business with sometimes nightmarish regulations, often linked to the Green Deal,” Lewandowski stressed. “That was not strong enough in von der Leyen’s speech, because unfortunately, she tends to prefer regulation over deregulation. Fortunately, in the European Parliament we are working on deregulation and will keep pushing in that direction.”
Von der Leyen: Competitiveness as independence
In her September 10 speech at the European Parliament, von der Leyen underlined that competitiveness is essential for Europe’s independence. She noted that the EU has the foundations for growth – the single market and the social market economy – but faces “unfavorable economic and geopolitical headwinds.”
“For this reason, we will invest heavily in digital and clean technologies. Further growth will be supported by the upcoming Competitiveness Fund and by doubling funding for Horizon Europe, our research and innovation program,” von der Leyen said.
Mixed progress one year on
One year after Draghi’s report, more than half of the initiatives under the Competitiveness Compass have been implemented. Over €1 trillion has been mobilized for innovation, clean technologies, and security. This includes €200 billion for AI investment, €20 billion for AI gigafactories, and €150 billion for the SAFE loan program for defense and security. In just eight months, the Commission adopted 33 flagship initiatives and 14 legislative proposals in areas including innovation, defense, decarbonization, finance, business, and trade.
Still, Draghi warned that Europe is in a weaker position today than a year ago. The EU growth model is faltering, vulnerabilities are rising, and the gap with the US and China is widening. Since December 2023, China’s trade surplus with the EU has grown by nearly 20%. The ECB now estimates that annual investment needs for 2025–2031 will reach €1.2 trillion, compared with the €800 billion estimate just a year earlier. “Continuing with business as usual means accepting decline. A new path requires faster and more intensive change,” Draghi said.
Cutting red tape and boosting investment
Von der Leyen pledged to keep addressing key bottlenecks identified in Draghi’s report – from energy and capital to simplification.
“The collective legislative packages already presented will bring real change: less paperwork, fewer overlapping and complicated rules. Our cost-cutting proposals will save European businesses €8 billion annually. For example, the digital euro will make life easier for businesses and consumers,” she said.
She also announced that further packages are nearing completion, such as those on military mobility and digitalization, and promised to accelerate work on a savings and investment union.
Lewandowski argues that tax incentives will be key:
“Besides talk of a banking union and capital markets union, what we really need are meaningful incentives so that some of the €10 trillion in household savings lying idle in bank deposits in Poland and across Europe are finally channeled into financial instruments funding innovation. Tax incentives are crucial.”
He contrasted Europe with the US:
“Americans are more willing to invest in innovation because they have a different attitude toward risk and failure. Banks here prefer buying safe government bonds over financing risky innovative investments. Sweden provides a good model: its capital market draws more money from households than the banking system, but only thanks to strong tax incentives.”
He insisted such incentives should remain the domain of national parliaments, not EU-level regulation.
Housing as a competitiveness issue
Von der Leyen also addressed the housing crisis, warning that it threatens Europe’s competitiveness. According to Eurostat, average home prices in the EU rose 48% between 2015 and 2023, while in Poland the increase was nearly 80%. The EU is preparing its first-ever plan for affordable housing.
“Von der Leyen rightly identified housing for young people as both a European and Polish problem. But I’m concerned by the constant search for pan-European solutions, even in areas like housing, which depend entirely on regional, national, and local authorities. Europe can regulate somewhat, but it shouldn’t micromanage such issues,” Lewandowski concluded.
