When former European Central Bank President Mario Draghi unveiled his landmark report into the continent’s competitiveness, he wasn’t just suggesting a new set of regulatory and investment reforms. He was also urging the EU’s political leaders to work together and implement a more coordinated industrial policy, or risk falling even further behind China and the United States.
TL;DR
- Europe aims for reindustrialization, global trade openness, and economic decarbonization to foster competitive industries.
- The EU faces challenges in policy simplification, investment, and faster innovation, requiring member states to act as one.
- Recent crises like COVID and the Ukraine war highlighted dependencies, spurring a "sovereignty agenda" for economic control.
- The "28th Regime" aims to harmonize EU-wide rules for innovative companies, simplifying operations across member states.
The European Union has defined its objectives: to spearhead a reindustrialization policy, maintain its status as a continent open to global trade, and achieve economic decarbonization, all aimed at fostering new, globally competitive industries.
A year on, the query persists: does Europe possess the political will to implement these suggestions?
During a conversation with Coins2Day, Stéphane Séjourné, the European Commission's Executive Vice-President for Prosperity and Industrial Strategy, stated that the Draghi report was instrumental in stimulating new ideas within the Commission.
“There has been a real change of mindset,” explains Séjourné, who is positive the EU has what it takes to turn around. “Europe must return to global competition. And it will. There’s now a real momentum of political and social acceptance to build a stronger internal market and regain competitiveness.”
Consensus, however, is not the same as execution, and the EU must tackle its weaknesses: simplification of its policies, more investment and support for faster innovation. Above all, Europe’s ability to turn technical reform into reality depends on the willingness of its 27 members to act as one unit—the new agenda calls for removing national barriers and regulatory differences sector by sector.
The need to reform
The EU’s new competitive strategy was born of crisis. “There were two major economic shocks that shaped this new way of thinking,” Séjourné explains.
The first was COVID, which showed some member states’ dependence on raw materials from outside the EU. “If international supply chains were interrupted, entire areas of our economy could collapse,” he says.
“Europe must return to global competition. And it will. There’s now a real momentum of political and social acceptance to build a stronger internal market and regain competitiveness.”Stéphane Séjourné, who serves as the European Commission's Executive Vice-President for Prosperity and Industrial Strategy
The second was the war in Ukraine: “Except for a few countries like France, which had a nuclear mix, much of Europe was vulnerable because of our dependence on Russian gas, which suddenly stopped.”
But Séjourné says that despite this dependence, the EU quickly adapted. “We’ve since moved fast: in less than two years, we reduced dependence on gas for electricity generation from over 50% to under 10%—a record pace,” Séjourné argues. “Now there’s a shared realization across Europe that we must not repeat those same mistakes. We can’t allow ourselves to become dependent again.”
The double shock of the 2020s sparked the “sovereignty agenda,” a strategic priority to bolster the EU’s competitiveness and regain control of its economy. The agenda focuses on critical raw materials, and a careful balance between trade protection and openness.
For example, Séjourné sees decarbonizing heavy industries as both a step towards climate goals and an economic plan for Europe that will create new jobs, more investment, and power in every sense of the word.
“Our decarbonization strategy will help steelmakers, chemical plants and vapor-crackers that produce key molecules modernize their production systems to be more competitive worldwide,” he says.
Practically speaking, this might involve direct financial backing for nascent, low-carbon innovations or sustained funding structures designed to encourage investment. To produce more low-carbon steel, for example, Europe would require the necessary infrastructure to manufacture and distribute increased quantities of ‘green hydrogen’ derived from renewable power sources.
This is a daring decision for Europe, particularly when contrasted with The United States, where policy continues to depend significantly on domestic oil and gas output. Séjourné clarifies that Europe lacks sufficient oil or gas production, making a reduction in strategic independence a goal in itself.
But he remains confident. “We spend €450 billion each year importing oil and gas, which can be invested in Europe’s competitiveness instead,” Séjourné says. “It’s a medium to long-term bet, but one we’re convinced we’ll win.”
Regulation: A double-edged sword
Despite its ambitions, Europe’s voluminous red tape often delays progress.
Take the EU’s single market, which is meant to ensure ‘four freedoms’: free movement of goods, services, capital and persons within its borders. In reality, companies still face legal, fiscal and regulatory barriers when they move or trade across the EU’s 27 nations.
The European Commission’s latest answer is the so-called ‘28th Regime’, which it believes will “make it possible for innovative companies to benefit from a single, harmonized set of EU-wide rules wherever they invest and operate in the Single Market, instead of facing 27 distinct legal regimes.” Séjourné calls it “the most important project for Europe’s economy.”
“Our ambition is to offer companies one single European framework—one legal representative, one accountant, one company status throughout Europe,” he says. “That will make it much easier to trade, invest, and expand beyond borders.”
Even as it reforms, Europe retains a less glamorous and perhaps counterintuitive competitive edge: regulatory predictability.
“In the U.S., everything can change after an election,” Séjourné notes. “In Europe, we may move slower at first, but once the system is in place, it’s stable. Investors know what to expect five or 10 years ahead. Predictability and reliability are crucial.”
He contends that this dependability serves as Europe's hidden advantage over American swiftness and Chinese immensity. It enables long-term investment commitments, provided the political resolve persists to uphold the established structure.
Consistency can also serve as a political narrative. In a decade marked by disruptions like pandemics, conflicts, and trade wars, Europe's commitment to stability holds significance. However, to transform this into a source of strength rather than inertia, the EU needs to demonstrate its capacity for simultaneous adaptation.
Séjourné's overarching goal might be termed 'essential integration.' The shift to decarbonization necessitates updated grids and supply networks, which in turn depend on international funding and established trust between institutions. Every component is reliant on the preceding one, and on political figures prepared to invest their influence to achieve these objectives.
“In the U.S., everything can change after an election. In Europe, we may move slower at first, but once the system is in place, it’s stable. Investors know what to expect five or 10 years ahead. Predictability and reliability are crucial.”Stéphane Séjourné
“The Commission’s role is to give coherence to this mix by building cross-border infrastructure—grids that allow electricity to flow freely between countries according to production and demand.” Séjourné explains. “Price differences still exist between member states, but we’re working to stabilize electricity prices across Europe.”
European business leaders echo the urgency. At a June meeting between the European Commission and 60 corporate 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 execution, not new rhetoric.
Europe feels it possesses the necessary drive. The second Von der Leyen Commission, established less than a year ago, is vigorously pursuing its ambitious policy agenda. However, the EU's framework of collective sovereignty requires continuous focus, as each reform undergoes meticulous negotiation and every directive is rendered in 27 distinct languages.
Despite this, Séjourné maintains a positive outlook. “Europe is not just a beautiful idea; it’s a powerful and stable economic space,” he states. “And that’s what we want to preserve.”
Interview and additional reporting by Peter Vanham.