On January 29, 2025, European Commission President Ursula von der Leyen unveiled the Competitiveness Compass—a strategic plan designed to reignite Europe’s innovation engine and bolster the Union’s competitiveness in a rapidly evolving global landscape. The initiative comes at a crucial time, as Europe faces fierce competition from global leaders and strives to close its research and innovation gap. At the heart of the plan is a strong focus on supporting strategic technologies, such as artificial intelligence (AI), space, cleantech, and biotechnology, which are seen as essential for driving economic growth and maintaining Europe’s competitive edge.

A Vision to Reignite Innovation

President von der Leyen emphasized that the primary objective of the Competitiveness Compass is to “reignite Europe’s innovation engine.” The plan aims to address long-standing challenges by recalibrating trade relationships, increasing investments in research and development (R&D), and streamlining regulatory frameworks. European Commission Vice-President Stéphane Séjourné, responsible for industrial policy, reinforced this ambition by stating that “in every euro we spend and in every initiative we propose, increasing competitiveness must be at the forefront.”

The Competitiveness Compass is envisioned as a guiding framework for the next five years. It targets three strategic areas: closing the innovation gap, decarbonizing the economy, and increasing security. These areas are seen as mutually reinforcing; progress in one domain supports advancements in the others. The underlying premise is that innovation is the key driver for economic prosperity and societal well-being.

Strategic Technologies and a Simplified Regulatory Framework

Central to the new strategy is the emphasis on strategic technologies. The European Commission plans to focus its funding on breakthrough technologies that will serve as the backbone of future industries. This includes initiatives that support the development and scaling of advanced digital technologies, quantum computing, next-generation materials, and clean energy solutions. By targeting these areas, the EU intends to create an environment where innovation is not only fostered but also translated into real economic impact.

To achieve this, the Commission plans to simplify the regulatory framework that has long been criticized for its complexity and inefficiency. In von der Leyen’s words, “we have too many different programmes, sometimes overlapping, sometimes even contradicting each other.” The new approach calls for the creation of a European Competitiveness Fund under the EU budget for 2028-2034. This fund will be designed to support projects along the entire investment journey—from initial research through to scale-up, industrial deployment, and manufacturing. The aim is to remove bureaucratic hurdles and create a more agile, targeted funding mechanism that directly supports strategic technological advancement.

Alongside the fund, the Competitiveness Coordination Tool will be introduced. This tool is meant to align industrial and research policies at both the EU and national levels, ensuring that investments are strategically coordinated and that all stakeholders work toward common objectives.

Bridging the Research Gap: Applied and Fundamental Research

While the new competitiveness strategy focuses heavily on applied research and the transition from laboratory breakthroughs to industrial-scale innovations, some in the academic community have expressed concerns about the potential sidelining of basic research. Julien Chicot, head of research and innovation policy at the Guild of European Research-Intensive Universities, noted on social media that the plan lacks a clear reference to the upcoming Framework Programme for research and innovation. The concern is that without a robust emphasis on fundamental research, Europe might struggle to foster the kind of disruptive, bottom-up innovations that have historically driven long-term competitiveness.

This sentiment is echoed by the Young European Research Universities Network, which has called for greater recognition of the role that fundamental research plays in developing disruptive technologies. The network warned that an exclusive focus on applied research could undermine the quality and potential of European innovation over time. Nonetheless, the final version of the Competitiveness Compass does include language intended to preserve the independence of key research bodies. It states that while the European Research Council (ERC) and the European Innovation Council (EIC) should operate in their respective domains, they must also cooperate more closely to achieve shared strategic interests.

Driving Industrial and Digital Transformation

The new strategy is not solely about funding research—it is also about driving the digital and industrial transformation necessary for a modern economy. In December, the EU selected seven consortia to establish the first AI Factories, a project aimed at providing start-ups and researchers with access to AI-optimized supercomputers. Building on this momentum, the Commission plans to propose an EU Cloud and AI Development Act, intended to mobilize both public and private investment to establish AI gigafactories that specialize in training very large AI models.

These initiatives are part of a broader effort to make it easier for companies to grow across the EU. The Commission is exploring the creation of a voluntary “28th regime” that would harmonize corporate, labor, and tax laws across member states. Such a measure is expected to simplify the business environment, reducing red tape and fostering an integrated Single Market that is conducive to both innovation and competitiveness.

The Role of the European Research Area Act

Another cornerstone of the new competitiveness strategy is the proposed European Research Area Act, scheduled for presentation in 2026. This legislative initiative is designed to increase EU R&D investment to 3% of GDP, a target that has long been championed as essential for driving innovation. The Act aims to better align EU and national funding priorities while fostering the circulation of knowledge and talent across Europe. It represents a commitment to not only invest in the future but also to build an ecosystem where innovation can thrive through collaboration and shared expertise.

Ensuring Long-Term Competitiveness and Security

The Competitiveness Compass was developed in response to pressing global challenges. The document highlights that Europe has fallen behind the United States in advanced technologies and that China is making significant strides in many new growth sectors. According to the plan, the root cause of these disparities is a lack of innovation. The new strategy is designed to address this by ensuring that every investment and initiative is geared toward fostering breakthrough technologies and strengthening Europe’s industrial base.

A secure and competitive Europe is viewed as essential not only for economic growth but also for national security. By reducing its dependence on external sources for key technologies and by bolstering its own industrial capacities, the EU aims to enhance its strategic autonomy. This, in turn, will enable Europe to better navigate the uncertainties of an increasingly competitive global landscape.

Fostering Cooperation and Collective Progress

While the Competitiveness Compass lays out an ambitious roadmap for the future, it also opens the door for renewed dialogue and cooperation among EU member states. The success of the strategy will depend on the willingness of national governments to align their policies and investments with the broader objectives of the EU. The Competitiveness Coordination Tool is expected to play a crucial role in this regard by ensuring that both EU and national initiatives are mutually reinforcing.

In fostering a culture of collaboration, the new strategy emphasizes that competitiveness is a shared responsibility. By pooling resources, harmonizing regulatory frameworks, and aligning research priorities, Europe can build a more resilient and dynamic innovation ecosystem. This collaborative approach is seen as the key to overcoming systemic challenges and ensuring long-term prosperity.

Conclusion: Charting a Path to a Competitive Future

The unveiling of the Competitiveness Compass marks a significant milestone in the European Union’s quest to boost its global competitiveness. With a strategic focus on breakthrough technologies, streamlined regulatory frameworks, and enhanced cooperation among member states, the initiative is poised to transform the European innovation landscape. While concerns remain about the potential sidelining of fundamental research, efforts are being made to balance applied and basic research, ensuring that Europe continues to be a hub of groundbreaking discoveries.

As the EU embarks on this ambitious journey, it reaffirms its commitment to fostering a secure, competitive, and innovative economy. By strategically investing in technologies that will define the future, Europe is laying the groundwork for a dynamic and resilient economic model—one that is well-equipped to meet the challenges of the 21st century.