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Since the fundamental report on European competitiveness appeared in mid-2024 (Draghi report), the issue has become a priority in numerous EU institutions and in the member states’ governance. The European Business Intelligence has attracted attention to competitiveness in view of preparing for a special EU “competitiveness deal” devoted to resolving some hot contemporary issues and suggested some recommendations to be included into the “deal”.
Background
The expected “declaration on competitiveness” has had already a short but turbulent history: thus, for example, the Versailles Declaration in March 2022 and the Granada Declaration in October 2023 made significant steps towards analysing most vital issues in the member states and the EU-wide competitiveness.
The draft declaration for the informal meeting of European leaders (Budapest, 8 November 2024, as Hungary holds the rotating Council Presidency) sets out the main elements of a new “European Competitiveness Deal”. However, the first draft of the “Budapest Declaration” on the EU competitiveness has “divided the member states”.
Then, at the European Competitiveness Summit in April 2024, the EU-27 leaders agreed on how to complete the Capital Markets Union, CMU; although it was a “difficult” meeting, according to the President of the European Council, Charles Michel, who nonetheless welcomed “substantial decisions” and “a step forward”.
In October 2024, the ambassadors of the member states to the European Union (so-celled Coreper) held an initial exchange of views on the draft declaration on EU competitiveness that the EU-27 were expected to adopt in November in Budapest.
The “deal’s” stumbling blocks
According to a European source, the proposed text of the “deal” did not satisfy a large number of delegations, due to its length and the inclusion of several controversial points.
Thus, for many, references to the Multiannual Financial Framework (MFF) were considered premature: they included, for example, a commitment by EU leaders to work on the introduction of new own resources to the EU budget and to continue work on those already proposed.
Among other “complicated issues’ were those on energy: the EU member states’ leaders and Coreper delegations reportedly called for greater emphasis to be placed on the need for interconnections among the states, as well as on needs to speed up authorization procedures for energy projects and resolving the high energy prices.
The Coreper ambassadors’ preliminary discussions also focused on how to complete the Capital Markets Union, CMU according to the guidelines outlined in the conclusions of the April-24 European Council and in line with the Letta report’s proposal to rename the CMU as the “savings and investment Union”; this term is therefore included in the draft Budapest declaration this November.
Concerns were then raised about possible compromises regarding the use of the cohesion fund. Besides, the Coreper-ambassadors also highlighted the lack of depth on certain economic subjects compared to others’ e.g. a number of ambassadors called for the social aspects of the text to be examined in greater depth.
A new version of the draft declaration will be presented to Coreper at the end of October and in the beginning of November.
Note. Info on draft declaration is on the Agence Europe’s site on: https://agenceurope.eu/en/bulletin/article/13511/1?utm_source=flexmail&utm_medium=e-mail&utm_campaign=ebi29102024&utm_content=135111/ Doc. SN 2544/24.
Some vital suggestions
According to the draft declaration, as it concerns the single market issues, the EU leaders will call on the European Commission to present (for example, possibly by June 2025) a new and comprehensive horizontal strategy on the deepening of the Single Market, based on the recommendations of the ‘Letta’ report on the internal market and the ‘Draghi’ report on European competitiveness. The single market strategy shall include: a) elimination of remaining barriers, while ensuring a level playing field; b) improving current rules and ensuring their implementation and enforcement; and c) putting forward a stronger and more efficient Single Market governance framework.
More on these reports in: https://www.integrin.dk/2024/09/27/challenging-european-priorities-alternative-commissions-features/
On “savings and investments Union”, the EU leaders will call on the EU institutions to pursue the “ambitious programme” to achieve a “European Savings and Investments Union” (ESIU) with results expected by 2026 on both the Banking Union and Capital Markets Union. In addition, the leaders are considering the creation of an EU sovereign wealth fund for equity investments, which could be developed within the European Investment Bank Group, together with the national economic development banks (though on a voluntary basis). Swift progress in ESIU will need: a) harmonizing relevant aspects of national corporate insolvency frameworks; b) “re-launching” the securitisation market; c) improving the convergence and efficiency of the supervision of the EU-wide capital markets.
On EU financial issue in: https://www.integrin.dk/2024/10/16/european-financial-market-and-investment-facing-competitiveness-challenges/
On capital market in: https://www.integrin.dk/2024/08/05/european-capital-markets-union-investment-perspectives/
With regard to industrial development, the leaders would ask the European Commission to present, as a matter of priority, a comprehensive industrial strategy for competitive industries and quality jobs. They also want to strengthen the European defence technological and industrial base, in particular by asking the EIB to evaluate and adapt its lending policy to the European defence industry.
In the research and innovation spheres (R&I), the EU leaders suggest focusing on cutting-edge research, research transfer and its economic valorization among the member states with the expressed commitment of meeting the target of 4% of GDP devoted to research and innovation, possibly by 2030.
More on R&I in: https://www.integrin.dk/2024/10/21/enhancing-european-research-and-innovation-boosting-eus-competitiveness/
In energy sector, the draft declaration states the European leaders’ proposed the year 2027 of a “completed genuine EU energy Union” as key to ensuring the EU-wide competitiveness and resilience” coped with the security of abundant, affordable and clean EU’s energy sector.
More on energy issues in: https://www.integrin.dk/2024/09/13/european-energy-union-managing-modern-challenges/; as well as: https://www.integrin.dk/2024/04/15/repowering-europe-energy-policys-strategy-in-action/
As to the digital agenda, the draft declaration calls on the European Commission to present a European technology strategy by mid-2025 to strengthen the EU’s technological capacities and to accelerate digitalisation in all sectors.
More on EU digital policy in: https://www.integrin.dk/2024/07/05/european-digital-decade-strengthening-the-eu-wide-digital-transformation/
In trade, the European leaders suggest to renew a EU-wide call for an “ambitious, robust, open and sustainable” EU trade policy, that allows fair free trade agreements with third countries. They also called for the economic security strategy to be strengthened with the goal of “protecting European economy and supply chains, while promoting an open economy”.
In the sphere of circular economy, the ambassadors recommended to that the EU must continue to be a world leader in progressing towards a more circular and resource-efficient economy. This direction will concentrate on: a) developing an integrated market for secondary materials; b) taking swiftly measures to ensure that the states change the paradigm of present manufacturing to incorporate sustainable practices and innovation into political-economy’s framework; c) to urge the EU institutions to finalize work on pending proposals under the Circular Economy Action Plan and call on the Commission to present its Circular Economy Act as a priority.
As to the regulatory framework, the EU institutions must adopt more efficient administrative and legal means in order to make the most of creative forces in business, civil society and particularly in SMEs. The regulations shall be aimed at creating and enabling mindset fostering a climate of trust (rather than distrust) in business, allowing it to flourish without the burden of excessive regulation; however, the EU regulatory framework must be more simple, predictable and stable. However, the Commission has to prepare an ambitious plan to dramatically reduce administrative, legal and reporting burdens.
Besides, the ambassadors called on the Commission to systematically include “red tape impact assessments” in its proposals, reduce reporting by at least 25%, deploy regulatory sandboxes, work on more efficient and accelerated procedures and optimize the potential of IPCEIs.
Since 2018, the Commission regularly approved “state aid” for at least one integrated Important Project of Common European Interest (IPCEI) each year. Nine of these IPCEIs concern predominantly research and development as well as projects of first industrial deployment; one IPCEI was dedicated to infrastructure. The increasing number of participating states and companies shows a positive trend. It reflects the broad and deep research and development capabilities of the European economy and the growing attractiveness of the IPCEI instrument among the EU states. The increasing number of participating states supports the creation of European economic systems; the mandatory dissemination of know-how as spillovers will facilitate further research and development and is expected to initiate additional economic activities in the EU’s strategic value chains.
More on IPCES in: https://competition-policy.ec.europa.eu/state-aid/ipcei/approved-ipceis_en