Competitiveness on trial: Europe must accelerate the pace for transformation

When Mario Draghi delivered his report on European competitiveness last year, he did not mince words: either Europe reforms radically, or it drifts into decline. That message still resonates today. Twelve months later, the question is unavoidable: have we changed course? Or are we sleepwalking into the very decline Draghi foresaw?

To be fair, the picture is not all bleak. Since taking office, the new Commission has rightly made prosperity and competitiveness its first priority. This is not cosmetic: nearly half of the initiatives in its 2025 work programme fall under this heading. The Competitiveness Compass, unveiled in January, sets a five-year roadmap based on Draghi’s core diagnosis—closing the innovation gap, financing decarbonisation, and reducing dependencies.

We have also seen the outlines of a more ambitious industrial strategy. The Clean Industrial Deal promises to anchor energy-intensive industries in Europe. The Savings and Investment Union aims to mobilise Europe’s vast household savings into productive equity, while the proposed European Competitiveness Fund—at €409 billion—signals that the debate on scale is no longer taboo. On technology, the EU has launched InvestAI to mobilise €200 billion, a new quantum strategy, and an action plan to make Europe a global hub for life sciences.

Even in the area of regulation—long a source of business frustration—Six “omnibus packages” have already been tabled to simplify legislation in areas from sustainability reporting to defence procurement.

These initiatives show that the Union has woken up to the sound of the alarm bell. But not enough to change the trajectory. The steps mentioned remain incremental when Draghi called real transformation.

The central pillars of his blueprint remain untouched. The capital markets union is still a promise rather than a reality; savings continue to leak abroad, while European start-ups struggle to scale. There is no ARPA-style innovation engine to take high-risk technologies from research to market. And perhaps most importantly, there has been no governance reform to make Europe more agile and decisive. Draghi was clear: without stronger common decision-making, Europe would continue to lag. One year on, governance reform remains politely ignored.

The result is that Europe continues to move sideways, while our competitors move forward.

This lack of urgency is particularly dangerous given how much the world has changed since Draghi wrote his report. Global trade rules are being rewritten by power politics. The United States has shifted decisively toward protectionism, weaponising tariffs and subsidies alike. China is doubling down on state-led industrial strategy. Wars and geopolitical rivalries are redrawing alliances, supply chains, and flows of capital.

Europe, meanwhile, finds itself caught in the crosscurrents. Dependent on American support for Ukraine, yet facing tariff skirmishes with Washington. Committed to open markets, yet confronted with competitors who see trade less as a rulebook and more as a battlefield. Draghi was right that size alone no longer translates into power. Europe risks becoming a large but powerless bloc: wealthy in aggregate, but unable to translate its weight into influence.

Employers see the consequences every day. Start-ups with world-class ideas relocate to the United States because financing is faster and deeper. SMEs remain trapped in national silos, deterred from scaling by fragmented rules, duplicative reporting, and complex procedures. Larger firms weigh investment decisions carefully, asking whether Europe’s energy costs, regulatory environment, and access to finance can match what is offered elsewhere.

This is how decline unfolds: not through sudden collapse, but through the steady erosion of competitiveness. Opportunities missed. Investments postponed. Talent and capital leaking abroad.

If Europe continues on this path, it will not be external shocks that topple its economic base. It will be our own inability to act with urgency.

What, then, must change? Employers believe the next year must mark a turning point—from plans to delivery, from incrementalism to acceleration. Four areas stand out.

First, competitiveness must become the organising principle of EU policymaking. Europe should embrace a “do no net harm to competitiveness” principle.

Second, Europe’s savings must be turned into productive equity. The Savings and Investment Union must not remain a discussion document. Retail investors need simple, trustworthy equity products. If Europe wants its champions to grow at home, it must finance them at home.

Third, the Single Market must finally be completed.
The Commission has pledged to eliminate the ten most distortive obstacles. Europe cannot preach openness globally while tolerating fragmentation internally.

Fourth, Europe needs a skills revolution. No competitiveness strategy will succeed without workers equipped for the age of artificial intelligence, quantum technologies, advanced manufacturing and clean industry.

President von der Leyen in her first State of the Union address of the new mandate has a unique chance to set the tone for the years ahead. Employers and entrepreneurs across Europe will be listening for one thing above all: urgency.

We are ready to play our part, but we will judge success by outcomes: are administrative costs falling in measurable terms? Are SMEs finding it easier to scale across borders? Is capital flowing into productive investment within Europe? Are permitting times decreasing? Are entrepreneurs staying and growing here rather than leaving?

If the answer to these questions remains no, then no amount of roadmaps or strategies will convince investors, innovators, or citizens that Europe is serious about competitiveness.

Europe cannot afford another year of hesitation. It must choose acceleration—now.

Stefano Mallia, President of the EESC Employers' Group

This Op-Ed has been published by Agence Europe.