Can Europe find the political energy to become competitive again?
When former European Central Bank president Mario Draghi presented his landmark report on the continent’s competitiveness, he wasn’t just proposing a new set of regulatory and investment reforms. He also called on EU political leaders to work together and implement a more coordinated industrial policy or risk falling further behind China and the United States.
The EU’s goals are clear: lead a policy of reindustrialisation, remain an open continent trading globally and decarbonise the economy – all of which will lead to new industries that can compete globally.
One year later, the question remains: does Europe have the political energy to act on these recommendations?
In an interview with LuckStéphane Séjourné, the European Commission’s Executive Vice-President for Prosperity and Industrial Strategy, credits Draghi’s report with igniting a spark across the Commission.
“There has been a real change in mindset,” explains Séjourné, who is confident the EU has what it takes to turn it around. “Europe must return to global competition. And it will. There is now a real impetus for political and social acceptance to build a stronger internal market and renewed competitiveness.”
However, consensus is not the same as implementation and the EU needs to address its weaknesses: simplifying its policies, investing more and supporting faster innovation. Europe’s ability to turn technical reforms into reality depends above all on the willingness of its 27 members to act as one – the new agenda requires the removal of national barriers and regulatory differences sector by sector.
The need for reform
The new EU competition strategy was born out of the crisis. “Two big economic shocks shaped this new way of thinking,” explains Séjourné.
The first was COVID, which showed the dependence of some member states on raw materials from non-EU countries. “Whole areas of our economy could collapse if international supply chains were to be disrupted,” he says.
“Europe must return to global competition. And it will. There is now a real impetus for political and social acceptance to build a stronger internal market and renewed competitiveness.”Stéphane Séjourné, Executive Vice-President for Prosperity and Industrial Strategy of the European Commission
The second was the war in Ukraine: “Apart from a few countries like France that had the nuclear mix, much of Europe was vulnerable because of our dependence on Russian gas that suddenly stopped.
But Stayed says that despite this dependency, the EU has adapted quickly. “Since then, we have moved quickly: in less than two years, we have reduced dependence on gas for electricity generation from more than 50% to less than 10% – a record pace,” argues Séjourné. “There is now a shared understanding across Europe that we must not repeat the same mistakes. We cannot allow ourselves to become addicted again.”
The 2020 double shock has fueled the “sovereignty agenda”, a strategic priority to strengthen the EU’s competitiveness and regain control of its economy. The program focuses on critical raw materials and a careful balance between trade protection and openness.
For example, Séjourné sees the decarbonisation of heavy industry as both a step towards climate goals and an economic plan for Europe that will create new jobs, more investment and strength in every sense of the word.
“Our decarbonisation strategy will help steelmakers, chemical plants and steam crackers that produce key molecules modernize their production systems to be more globally competitive,” he says.
In practice, this could take the form of direct financing of early-stage low-carbon technologies or long-term financing mechanisms to stimulate investment. For example, to produce more low-carbon steel, Europe would need the infrastructure to produce and transport more “green hydrogen” from renewable energy.
It’s a bold choice for Europe, especially compared to the United States, where politics still depends heavily on domestic oil and gas production. Séjourné explains that Europe simply does not produce enough oil or gas, so reducing strategic independence is a goal in itself.
But he remains confidential. “Every year we spend €450 billion importing oil and gas, which could instead be invested in Europe’s competitiveness,” says Séjourné. “It’s a medium to long-term bet, but we’re confident we’ll win.”
Precept: Double-Edged Sword
Despite its ambitions, Europe’s large bureaucracy often holds back progress.
Take the EU’s single market, which is supposed to ensure the “four freedoms”: the free movement of goods, services, capital and people within its borders. In fact, companies still face legal, fiscal and regulatory hurdles when moving or doing business within the EU’s 27 countries.
The latest response from the European Commission is the so-called ’28. regime’ which he believes will “allow innovative companies to benefit from a single harmonized set of EU-wide rules to invest and operate in the single market, rather than facing 27 different legal regimes”. Stayed calls it “the most important project for the European economy”.
“Our ambition is to offer companies one unified European framework – one legal representative, one accountant, one company statute across Europe,” he says. “This will greatly facilitate trade, investment and expansion across borders.”
Even with reforms, Europe retains a less glamorous and perhaps counterintuitive competitive advantage: regulatory predictability.
“Everything can change in the US after the election,” notes Séjourn. “In Europe, we may move more slowly at first, but once the system is in place, it is stable. Investors know what to expect five or 10 years ahead. Predictability and reliability are essential.”
According to him, this reliability is Europe’s secret weapon against American speed and Chinese scale. It allows long-term capital to be committed as long as the political will remains to maintain the framework.
Stability can also be a political story. In a decade defined by upheavals – pandemics, conflicts, trade wars – Europe’s promise of consistency matters. But for the EU to become a source of strength rather than stagnation, it needs to prove that it can adapt at the same time.
Séjourné’s broader vision could be called “necessary integration.” Decarbonisation requires new networks and supply chains that require cross-border financing and institutional trust. Each link depends on the last and on leaders willing to spend their political capital to make it happen.
“In the US, everything can change after an election. In Europe, we may move more slowly at first, but once the system is in place, it is stable. Investors know what to expect five or 10 years ahead. Predictability and reliability are essential.”Stéphane Séjourné
“The Commission’s role is to ensure the coherence of this mix by building cross-border infrastructure – networks that allow electricity to flow freely between countries according to production and demand.” Stayed explains. “Price differences between member states still exist, but we are working to stabilize electricity prices across Europe.”
European business leaders echo the urgency. At a June meeting between the European Commission and 60 business leaders, including SAP’s Christian Klein and IKEA’s Jesper Brodin, and brokered by the World Economic Forum, the message was similar: Europe’s competitiveness now depends on speed of implementation, not new rhetoric.
Europe believes it has a spark. The second Von der Leyen Commission, which took office less than a year ago, is pressing ahead with its ambitious policy agenda. But the EU’s system of shared sovereignty requires constant attention, with each reform carefully negotiated and each directive translated into 27 languages.
Still, Stayed remains optimistic. “Europe is not just a beautiful idea; it is a strong and stable economic space,” he says. “And that’s what we want to preserve.”
Interview and further reporting by Peter Vanham.