The European Union (EU) recently launched a series of significant reforms aimed at enhancing economic competitiveness and reducing geopolitical dependencies. In a report titled The Future of European Competitiveness, former European Central Bank President Mario Draghi highlighted that the EU faces long-term economic decline risks that could threaten its prosperity, independence, and social welfare.

Strengthening Supply Chains and Innovation Capabilities

The report recommends that the EU secure its supply chains and close the innovation gap with the U.S. and China to mitigate geopolitical risks. Draghi proposes developing key sectors, including energy, artificial intelligence, transport, and pharmaceuticals, to achieve this. Additionally, he advocates for broad measures to improve innovation, skills, and governance across the bloc.

Investment Needs and Financial Support

According to Draghi’s report, achieving these ambitions will require substantial investments—around €750-800 billion in combined public and private funds annually, or approximately 5% of the EU’s GDP. This level of investment is unprecedented, akin to the prosperity seen in the 1960s and 1970s. The report also calls for cutting red tape to streamline regulations and support market consolidation, particularly in sectors like telecommunications and IT.

EU Commission’s Support and Reform Directions

European Commission President Ursula von der Leyen echoed the report’s emphasis on competitiveness, asserting that the EU needs to advance the clean and digital transition to remain competitive. She outlined plans to reduce administrative burdens on businesses, making it easier and faster to operate within the EU. Von der Leyen also pledged that boosting domestic competitiveness would be a top priority in her new term. New EU commissioners will focus on reducing bureaucratic obstacles and engaging with businesses regularly to ensure policies support growth.

Regulatory Burdens and Negative Business Impacts

Despite the EU’s efforts to boost competitiveness, existing regulations continue to challenge businesses. The Corporate Sustainability Due Diligence Directive imposes additional human rights and environmental compliance costs on companies. Other new policies, such as the Carbon Border Adjustment Mechanism and the AI Act, have been viewed as costly and may hinder investment in certain sectors.

Future Outlook

While the EU is making strides toward more competitive policies, balancing reduced administrative burdens with sustainability requirements remains a challenge. For forex market participants, staying informed on these evolving policies will help assess the eurozone’s economic prospects and identify potential investment opportunities.