The New Competitiveness Deal to relaunch the European economy

Translated by Alessandra Fumagalli 

On November, 8th 2024, during an informal summit in Budapest, European Union leaders approved the New European Competitiveness Deal, a program aiming at filling the competitive gap with the United States and China and relaunching the European economy, which is in difficulty. The pact reflects the Draghi’s Report on competitiveness and the Much more than a market document by Enrico Letta, giving 12 directives to reinforce the resilience and the innovation of the Union. 

“In front of new geopolitical realities and economic and demographic challenges, we, European Union leaders, are determined to ensure our economic prosperity and reinforce our competitiveness […]. Based on works started in Versailles, continued in Granada, and Bruxelles, in the strategic agenda issues, we will make the Union more competitive, productive, innovative, and sustainable, basing on our economic, social and territorial cohesion, ensuring convergence and same conditions both in the European Union and at a global level”. 

This is the introduction of the Budapest Declaration about the new pact on European competitiveness. Deindustrialization’s fears and economic decline forced the leaders to sign together the agreement, being aware of these risks to worsen in case of punitive rates by the new US President, Donald Trump. 

The 12 directives 

The agreement underlines the need to exploit coherently all the ways and politics, both at European and national levels. The directives aim at constructing a unique efficient market, with a strategy defined by 2025, and to realize by 2026 a capitals’ union which supports small and medium enterprises and start-ups, together with the bank union. The plan promotes decarbonization and reinforcement of the industrial competitiveness of the EU, making the normatives simpler to reduce the bureaucratic efforts of the enterprises. 

As far as defense and space are concerned, the aim is to strengthen the technological abilities with public and private investments; speaking of research and innovation, the agreement aims at giving 3% of the GDP to these sectors by 2030 and introducing a “fifth freedom” to foster academic and scientific mobility. 

As far as the environment is concerned, the agreement establishes climate neutrality by 2050 and supports the creation of a circular economy, paying attention to the critical raw materials. The industry’s digitalization is a priority, as is the enhancement of the human capital and an open commercial and sustainable policy. To conclude, the agreement aims at guaranteeing stability and competitiveness in the agricultural sector, reinforcing the power of farmers in the food chain. 

Any public debt on the new agreement 

Despite the general consensus, a key proposal of the Draghi Report wasn’t included in the Budapest Declaration: the public debt. Draghi highlighted the need to invest 800 millions euros to maintain European competitiveness, which would include a big public debt. Draghi, taking part in the summit, stated that, even though it wasn’t his first option, the public loan is “essential” to reach the fixed objectives, underlining the need to adopt rapid decisions, due to the “big changes”. 

Germany and Netherlands’ opposition, which had already declined the idea in September, made it impossible to include the common debt in the agreement. However, leaders stated: “We are determined to explore and exploit any ways to reach our objectives: the long-time financial plan is an essential way to produce results in our strategic priorities, the capital’s union market to mobilitate private financings and a bigger involvement of the European Bank for the investments. We will explore the development of new ways. We will continue to work to introduce new resources”. 

The EU towards a new global competitiveness 

The New European Competitiveness Deal makes tracks a significant step to face economic and geopolitical global challenges, with a strategic vision aiming at reinforcing EU competitiveness and promoting a resilient and sustainable economy. The agreement is an answer to the stagnation and deinsustrialization’s fears, but its success will depend on the engagement of the Member States to apply the directives and find shared solutions to sustain the financings. If the EU will be able to transform this agreement into concrete actions, it will be able to consolidate its competitive and innovative role, showing that unity is the key to face future challenges. 

Mondo Internazionale APS - Riproduzione Riservata ® 2024