The EU’s Competitiveness Compass: The Good, the Bad, and the Ugly?
The European Commission recently unveiled its Competitiveness Compass—a five-year blueprint to boost innovation and strengthen Europe’s economy—which rightly identifies the EU's economic challenges, such as excessive red tape, lagging innovation, and strategic vulnerabilities to China and Russia.
Yet, as Lilla Nora Kiss writes for Constitutional Discourse, the blueprint proposes misguided solutions that will undermine Europe's competitiveness, such as doubling down on the Digital Markets Act (DMA), embracing protectionism, and deeming U.S. and Chinese tech threats equally problematic. To make clear what the Commission should prioritize and reconsider, Kiss breaks down the good, the bad, and the ugly of the Competitiveness Compass.
The Good:
The Commission acknowledges how overregulation, more than 100 tech-focused policies, stifles innovation and hinders competitiveness. It also recognizes Europe's inability to scale businesses and its economic dependency on foreign actors—Russia for energy, the U.S. for defense, and China for critical supply chains—as problematic.
The Bad:
The Commission wrongly treats all foreign dependencies as equally problematic, lumping the U.S. with authoritarian regimes like China and Russia. This undermines Europe’s strategic interests, as the United States is Europe's largest trading partner, and the EU relies heavily on the U.S. for security and critical technologies. The Compass doubles down on the DMA, which adds red tape and will likely burden future European technology champions. By targeting American firms, the DMA also exemplifies protectionism by shielding domestic players instead of helping them grow globally.
The Ugly:
Europe’s challenge isn’t American tech giants; it’s its failure to build its own. Worse, the Compass lacks a clear strategy to work with the U.S. to counter China’s tech dominance or reduce reliance on Russian energy. Instead, the EU's push for “digital sovereignty" risks alienating the United States—especially with Trump back in the White House, who has already imposed tariffs and warned against overreach in regulating American firms.
