The European Commission has unveiled a significant policy package aimed at reducing regulatory burdens and encouraging investment in future technologies, including artificial intelligence and clean technology. President Ursula von der Leyen launched the 'Competitive Compass' roadmap on January 31, warning that the 27 EU member states risk being 'trapped on a low-growth path' with diminished income for workers and fewer opportunities for all.
Von der Leyen noted that the convergence between the EU and the US in innovation has slowed, while China has advanced in specific green technologies. The core message of the blueprint emphasizes that access to capital in the EU should be as easy as the movement of people.
The EU's focus on climate change and ethical business practices has led to complaints from many companies about excessive regulation, high energy costs, and weak investment. Vice President of the European Commission, Stephane Sejournee, referred to the new plan as a 'simplification shock,' with numerous laws set to be revised, including those related to environmental standards and corporate sustainability reporting.
According to the EU, two out of three companies view regulatory burdens as a primary obstacle to long-term investment, particularly smaller firms lacking resources to track supply chains. The policy roadmap also addresses high energy prices in the EU, noting that the green transition must align with industrial competitiveness. The forthcoming 'Clean Industry Agreement' aims to establish a competitiveness-driven approach to decarbonization while maintaining the EU as an attractive manufacturing hub.
Climate activists have criticized the Competitive Compass, arguing that it dangerously frames regulation as a primary barrier to competitiveness. Anna Cavazzini, a Green Party member in the European Parliament, described the proposed simplification of business reporting as politically motivated, pointing out that relevant legislation was only enacted last year and has yet to be implemented.
Peter Chase from the German Marshall Fund acknowledged that EU reporting requirements may be overly complex, particularly for small businesses. He emphasized that larger companies have local presence and workforce to verify supply chains, while smaller firms do not.
In addition to deregulation, Brussels aims to enhance innovation and venture capital schemes as part of a proposed 'Union of Savings and Investments' to be presented in the second quarter of 2025. The European Commission believes that lower growth prospects for EU startups and higher failure costs undermine their attractiveness to investors, leading many to seek funding in the US.
The Commission proposes a single harmonized set of rules to simplify existing regulations, reduce failure costs, and provide access to capital. The Competitive Compass aims to mobilize European savings to drive investment, noting that EU savings in 2022 were 65% higher than those in the US, while global venture capital flows to the EU were only 5% compared to 52% to the US and 40% to China.
Bruegel, a Brussels-based economic think tank, found that much of this savings is not invested but kept in banks, as households prefer cash over market investments. Chase expressed uncertainty about whether all EU member states would agree on investment mechanisms but emphasized the importance of a savings insurance scheme.