Brussels, 29 January 2025. The European Commission has released its Competitiveness Compass, outlining the EU’s strategic economic direction. While referencing the Draghi and Letta reports, the plan primarily focuses on deregulation and does not include certain financial proposals, such as a joint borrowing mechanism suggested by Mario Draghi or Enrico Letta’s State Aid contribution mechanism, which would allocate national funding toward pan-European investments.
In a report for the European Commission, former ECB President Mario Draghi highlighted the need for €800 billion in additional annual investment to address economic stagnation, enhance productivity, and meet green transition targets. The announced measures for the current and upcoming EU budget involve reallocating existing funds, including from cohesion funds. According to the Fiscal Matters coalition, this approach could affect funding for other EU priorities, including climate initiatives, energy transition, social policies, biodiversity, and the circular economy.
Sebastian Mang, Senior Policy Advisor at the New Economics Foundation said: “With this communication, the Commission has overlooked the need for increasing public investments, opting instead to focus on repurposing existing resources and deregulation. This approach fails to address critical green and social investment gaps. Without a broader public investment strategy, Europe faces the risk of continued stagnation and is likely to exacerbate inequality and environmental harm. Moreover, if public funds are used to incentivise private investment, they should be tied to clear performance targets and conditions to maximise economic, social, and environmental benefits.”
Olivier Vardakoulias, Economist at Climate Action Network said: “Europe faces mounting challenges, from climate risks and geopolitical instability to economic consequences of potential tariffs. Now, more than ever, it is in our interest to invest in our socio-economic resilience. With the implementation of strict fiscal rules and the looming end of NextGenerationEU, the EU faces a gaping hole of available public finance for a just transformation. Repurposing existing funds only exacerbates this shortfall. The EU must urgently prioritise creating sufficient fiscal space through joint borrowing or a larger EU budget to close the EU’s massive investment gaps and to guarantee EU’s socio-economic and climate resilience in a challenging global context.”
Katy Wiese, Policy Manager at the European Environmental Bureau said: “The narrative that environmental regulation is anti-competitive overlooks its critical role in fostering a resilient, future-proof economy. Effective regulation creates the conditions for innovation, guiding the growth of both new and established industries. Moreover, derisking alone will not deliver a stronger and more resilient EU. As Enrico Letta argues, investing in foundational elements like education, healthcare, and sustainable transport is an essential building block for long-term competitiveness. The Compass misses the mark.”
Fiscal Matters is a coalition of trade unions, social and environmental civil society groups, economic think tanks, and youth organisations. The coalition recently sent a letter to Members of the European Parliament making a case for a NextGenerationEU 2.0 instrument. Additionally, Fiscal Matters published a statement calling for simplified and harmonised conditions across industrial policy, public procurement, and state aid.