EU Summit on Competitiveness: the Key lies in Mobilising our Own Strengths

On 12 February – notably the day before the start of the Munich Security Conference –, EU heads of state and government will meet for an informal summit to discuss the EU's competitiveness. Enrico Letta and Mario Draghi will also be there, having already put forward key proposals more than a year ago, in their reports on the internal market and competitiveness , little of which has been implemented since then despite broad political support. Now more than ever, in view of accelerating geopolitical and technological developments, the EU urgently needs a new "whatever it takes" moment. Either the EU is prepared to take significant steps towards greater sovereignty and competitiveness in the coming months, or it risks falling into further and even deeper dependencies at a time of historic upheaval. It is therefore important to act quickly and decisively: better done than perfect. 

Countering external threats with our own strengths

The future of Europe, i.e. the question of how EU citizens will live in the future, is currently being decided largely outside Europe by autocratic states and powerful tech monopolies. Europe’s loss of sovereignty and competitiveness goes hand in hand with the decline in its technological leadership and infrastructural superiority. Canadian Prime Minister Mark Carney summed it up in his highly acclaimed speech at this year's World Economic Forum in Davos: "A country that cannot feed, supply or defend itself has few options. If the rules no longer protect you, you have to protect yourself."  Sovereignty and competitiveness can no longer be thought of separately. Trade policy, industrial policy and security policy must therefore be strategically aligned.

The EU model is being challenged at its core by two historical developments. On the one hand, geopolitical conflicts have led to increasing disregard for multilateral rules, which now needs to be remedied by new forms of geopolitical sovereignty. Today, sovereignty consists of forms of autonomy, in some cases also self-sufficiency, but above all the ability to cooperate, which means remaining influential in terms of regulation and capable of connecting with others in a multipolar world. On the other hand, digitalisation as a new technological paradigm has led to a loss of industrial competitive advantages ( ), which must now be remedied by new forms of technological competitiveness. Today, competitiveness results from forms of resilience, in part also from industrial policy support, but above all from the ability to innovate, which requires giving entrepreneurs more regulatory freedom. Nowhere is this more evident than in artificial intelligence: European companies use American cloud platforms and computing infrastructure, while China openly provides ideologically driven models – Europe is in danger of becoming a mere user of a key technology of the 21st century.

Strategic, political and institutional measures must be interlinked

These two challenges require action on three levels. At the strategic level, the most important elements of European sovereignty and competitiveness must be defined. At the political level, the most important measures that have an immediate and significant impact on sovereignty and competitiveness must be decided upon. At the implementation level, the administrative conditions for rapid and effective implementation must be created. The fact that too little has been done despite the acute threat and political will suggests that there are major institutional blockages in the EU. The institutional capacity for action is less than the political need for action.

Three key areas of action: economic scaling, institutional speed and strategic options   

The EU is operating well below its potential, both economically and geopolitically. It is therefore essential for the EU to consistently build on its strengths, tap into its untapped potential and focus on time-critical priorities. The preference criteria currently under discussion ("Buy European", "Local Content") should only be applied to a very small number of strategically critical industries with high scaling potential. Otherwise, these could quickly backfire on the internationally integrated European economy through adverse supply chain effects and rising procurement prices, with supply risks increasing rather than decreasing. The Centre for European Policy considers the following steps to be essential in order to fundamentally strengthen the sovereignty and competitiveness of the EU: 

• New axes of European integration in the areas of defence, infrastructure, energy and capital markets to enable scaling and to leverage the potential of the single market. These axes run counter to established structures, meaning that new institutions will have to be created, in some cases, in the area of defence, a domain that is outside traditional EU formats and includes the United Kingdom, Norway and Canada, but not necessarily Hungary and Slovakia.   
• Faster market access for innovations and start-ups, brought about by  competition-friendly deregulation, overcoming financing barriers to commercialisation, and expanding the 28th regime to reduce bureaucratic costs will overcome path dependencies and accelerate transformation.
• Strategic trade agreements with emerging economies such as Mercosur, India, Indonesia, etc., to diversify supply risks, reduce dependencies, create options and strengthen geopolitical strategic capabilities.  

Strengthen credibility of the EU's political capacity to act

A key mechanism of a political agenda is to positively influence the expectations of stakeholders. Expectations have an effect even before policies materialise. Credibility that words will be followed by deeds and announcements by implementation is central to this. The measures of a credible agenda for greater sovereignty and competitiveness must be simple, effective and essential. The EU summit on competitiveness should therefore not get bogged down in too many complicated measures, but should address the most important levers for strengthening sovereignty and competitiveness.