EU Leaders Endorse New European Competitiveness Deal
The 27 leaders of the European Union have officially backed a much-anticipated initiative known as the “New European Competitiveness Deal.” This deal aims to invigorate the bloc’s stagnant economy and address the growing disparity with global powerhouses like the United States and China. The agreement was finalized during an informal summit held in Budapest, where concerns about de-industrialization and the possibility of irreversible economic decline were fervently discussed. These fears have intensified in light of recent crises and the looming threat of punitive tariffs from former President Donald Trump.
The solutions outlined in the deal focus on several key areas, including:
- Deepening the single market
- Unlocking new funding for small and medium-sized enterprises (SMEs) and start-ups
- Reducing bureaucratic obstacles
- Promoting domestic high-tech innovations
- Negotiating “sustainable” trade agreements
- Committing to invest at least 3% of GDP in research and development (R&D) by the end of the decade
While these overarching goals are ambitious and will take years to translate into concrete policies, leaders have emphasized that they should not come at the expense of the Green Deal, despite suggestions from some right-wing factions. In their joint declaration, the leaders reaffirmed their commitment to achieving climate neutrality by 2050 and eliminating fossil fuels from the bloc’s energy mix.
“It is imperative that we urgently close the innovation and productivity gap, both with our global competitors and within the EU. We will work in unity and solidarity for the benefit of all EU citizens, businesses, and member states,” they stated.
This deal is a direct response to the significant report authored by Mario Draghi, the former Italian prime minister. Draghi warns that the EU could face a “slow agony” if it fails to take decisive and ambitious measures to enhance productivity and modernize its industrial base.
However, one notable recommendation from Draghi’s report was conspicuously absent from the final agreement: the proposal for joint debt issuance. Draghi estimated that the EU would need to invest up to €800 billion in additional annual investments to remain competitive in an increasingly aggressive global environment. He argued that such a massive sum would necessitate the issuance of joint debt, similar to the measures taken during the COVID-19 pandemic.
Draghi, present at Friday’s summit, acknowledged that while joint borrowing might not be the immediate priority, it remains “indispensable.” He urged member states to stop delaying necessary actions, stating, “Over all these years, many important decisions have been postponed because we expected consensus. Consensus did not come, leading to lower development, lower growth, and now stagnation.”
“I hope that we will find a united spirit with which we can navigate these significant changes. If we proceed randomly, we risk becoming too small and going nowhere,” he added.
No Joint Debt, for Now
Despite Draghi’s passionate appeal, the leaders remained unmoved. The strong opposition from countries like Germany and the Netherlands, who rejected Draghi’s proposal mere hours after its publication, made it impossible to explicitly include joint debt in the “New Competitiveness Deal.”
Instead, the leaders included a brief section on financing, committing to maximizing the use of existing tools, such as the EU’s multiannual budget, the European Investment Bank (EIB), and a long-stalled initiative to establish a Capital Markets Union. They also expressed a desire to explore the “development of new instruments,” though the specifics of what these instruments might entail remain vague and open to interpretation.
At a press conference following the summit, European Council President Charles Michel acknowledged that discussions surrounding “financial solidarity” are always challenging among EU member states. However, he pointed out that reaching agreements on contentious issues is still possible, as demonstrated by the heated negotiations that led to the €750 billion recovery fund in 2020.
This financial solidarity, Michel emphasized, must be accompanied by “structural reforms” to foster “more trust” among member states and ensure success.
Ursula von der Leyen, who is poised to begin a new five-year term as President of the European Commission, will be responsible for translating the “New Competitiveness Deal” into actionable policies. She stated that both public and private investments should work in tandem. “If there are areas where it is much more effective to pool resources on an EU-wide scale, then we can discuss how to finance that,” she remarked, without referencing joint debt.
“The use of innovative tools to enhance productivity in the European Union leads to greater fiscal space for our member states,” she concluded. “This results in a gain, not a loss.”
