Fabian Bohnenberger

With Commission President von der Leyen now officially in the running for a second term, she wasted no time to build support for her re-nomination. Her first campaign stop, if you will, was an industry gathering in Antwerp on 20 February to launch an “European Industrial Deal”.

The signal is clear: European industry in concert with the conservative end of the political spectrum, including von der Leyen’s CDU/CSU, have long railed against the burden that the European Green Deal – the Commission’s flagship policy to achieve climate neutrality by 2050 – imposes on them. With the end of her mandate in sight and discontent still rising, von der Leyen is shifting gears to ease the impact of the transition.

“Competitiveness” has become the rallying cry of this new agenda. The term has the advantage that it means very different things to different audiences, which makes it ideal for campaigning. At its core is a call to action to secure jobs, market share and Europe’s leading edge in key technologies.

In the eyes of its proponents, a strategic shift towards competitiveness is warranted not only to ease the EU regulatory burden but also to address rising costs for European businesses due to high energy prices, inflation, tight labour markets, etc. Global pressure is increasing as well because the US and China are similarly vying to produce the (green) technologies of the future, offering huge subsidies.

Promises already made

The course correction is not as sudden as it might appear at first glance. Key stepping stones have been laid over the last year in an effort to test the political waters and build support for the next mandate.

For example, the Commission used the 30th anniversary of the Single Market last year to refocus on the long-term competitiveness of the EU. It committed to working towards a “growth enhancing regulatory framework”. This includes the introduction of a new competitiveness check for all new EU legislation to assess the expected impact on EU businesses – although it’s not clear how this will work in practice.

The external dimension of competitiveness also appeared as a core theme in the 2023 State of the Union Address, where President von der Leyen pledged that “Europe will do ‘whatever it takes’ to keep its competitive edge.” Fitting with this combative tone, she announced the launch of an anti-subsidy investigation into electric vehicles from China.

The Commission is quick to highlight initial progress, but much of the work still needs to be done. Take last year’s pledge to reduce the cumulative cost of different policy measures, specifically by cutting corporate reporting requirements by 25 percent. The 2024 Commission Work Programme includes a special annex listing initiatives to achieve this reduction. However, with the German liberals now blocking approval of the new Corporate Sustainability Due Diligence Directive, this promise has clearly not impressed everyone.

Upcoming reports by two former Italian Prime Ministers will further shape the competitiveness agenda. President von der Leyen tasked Mario Draghi with a report on EU competitiveness. Concurrently, the European Council asked Enrico Letta to prepare a report on the future of the Single Market by March 2024, which is likely to examine how relaxing subsidy rules has put EU cohesion under strain.

Delays and dilution

In addition to the work to bolster competitiveness, the Commission has increasingly delayed, diluted and sometimes even dropped legislative proposals linked to the European Green Deal.

A prime example is the Farm-to-Fork strategy, which is about building sustainable EU food systems. Key initiatives have not materialised and, in light of recent farmer protests, President von der Leyen herself sounded the retreat on a core plank of the strategy, which aimed at cutting the use of pesticides in half by 2030.

The same is true for other areas linked to the green transition like chemicals regulation – it is no coincidence that the European Industrial Deal was launched at BASF’s chemical plant in Antwerp.

Given vocal opposition from industry, the revision of a core pillar of the regulatory regime for chemicals, the so-called REACH regulation, has been delayed. Other contested proposals, like one banning the export of hazardous chemicals, are also missing in action.

What’s next?

For now, the ambiguous meaning of competitiveness allows a broad coalition to coalesce around the idea. However, once it comes to defining the policies to deliver it, the political debate is bound to heat up.

Fault lines exist between those favouring more state intervention via industrial policy (subsidies) and others arguing for a more liberal (i.e., less EU regulation) approach.

Overlapping with these camps is the debate about protecting the cohesion of the Single Market. There are worries about deep-pocketed Germany and France doling out subsidies to attract businesses, while others are losing out – and so far there’s little EU money to level the playing field.

Balancing the external (global) and internal (Single Market) dimensions of competitiveness as well as the ideological rifts within a more polarised EU system will thus be a key challenge for the next mandate – and whoever will be at the helm.