On 29 January 2025, the European Commission published the Competitiveness Compass for the EU, a 27-page communication outlining the Commission's priorities for the next five years. The overarching aim is to restore Europe's competitiveness by building on the conclusions set out in the Draghi report.
The Compass is focused on three main priorities: (i) closing the innovation gap, (ii) creating a roadmap for decarbonisation and competitiveness and (iii) reducing excessive dependencies and increasing security.
These priorities will be supported by five horizontal enablers that will apply across all policies and sectors, as described below.
Simplification
The Compass promises an "unprecedented simplification effort" to reduce the regulatory burden, led by the new Commissioner for Implementation and Simplification, Valdis Dombrovskis.
In February 2025, the first Simplification Omnibus package will be introduced. This package will address three key pieces of EU sustainability legislation: the Corporate Sustainability Reporting Directive (CSRD), the Corporate Sustainability Due Diligence Directive (CS3D) and the Taxonomy Regulation. These new laws, which have been adopted but are yet to be implemented at Member State level, have been criticised for creating excessive regulatory burdens. The Commission's goals here are clear: to better align the requirements set out in legislation with the needs of investors, set reasonable deadlines for compliance and ensure that financial metrics do not discourage investment in SMEs. The ultimate target is to reduce EU reporting obligations by 25% for all companies and by 35% for SMEs.
The Compass confirms that more Omnibus (i.e. simplification) packages will follow, though it does not specify which sectors, or which sets of legislation, will be affected.
Lowering barriers to the single market
For the past 30 years, the single market has been essential to Europe's economic competitiveness. Yet there are still obstacles, both persistent and new, that prevent full integration.
To enhance its competitiveness, the EU is developing a Horizontal Single Market Strategy. This will modernise the governance framework, eliminate intra-EU barriers and prevent new obstacles, while fostering cooperation with Member States. The Single Market Enforcement Taskforce will be strengthened to ensure timely implementation of EU laws and reduce legislative burdens.
Notably, the Commission proposes the creation of a new EU framework for companies: on top of the 27 existing regimes, companies will have the option to opt into a 28th regime. The 28th regime will enable EU-established companies to benefit from harmonised legislation in corporate law, insolvency law, labour law and tax law.
Financing competitiveness
The Commission will present a Savings and Investments Union (SIU) this year, followed by specific policy proposals. The goal is to promote new low-cost saving and investment products for retail investors, encourage pension savings and remove barriers to financial market consolidation. Furthermore, the Commission aims to enhance the EU's securitisation market, unify far more financial supervision, reform insolvency laws and remove tax barriers to cross-border investment.
Promoting skills and quality jobs
The Commission will introduce a Union of Skills that focuses on investment, lifelong learning, skill creation and retention, fair mobility and attracting talent from third countries. It will also promote various types of training to facilitate and support cross-border work within the EU.
Ensuring effective coordination policiesbetween EU and Member States
The Commission will introduce a Competitiveness Coordination Tool to align EU and national policies, investments and initiatives. In the initial phase, it will focus on key sectors like energy, transport, digital infrastructure, biotechnology and critical manufacturing in an attempt to promote cross-border cooperation and long-term productivity.
We note that while the Compass is not legally binding, it is expected to guide the Commission's work from 2025 to 2029. We expect the Commission will provide further clarification on 11 February 2025, when it publishes its work programme for 2025.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
