San Francisco Frontiers - Red tape and rare earths: EU 'compass' charts economic future

Coming early in EU chief Ursula von der Leyen's second term, the publication of the "competitiveness compass" aims to mark a change of tack towards a more business-friendly Brussels.

Faced with US President Donald Trump's tariff threats and China's fast ascent in key industrial and digital sectors, as well as the need to make giant investments in artificial intelligence, the 27-nation bloc is under pressure to make life easier for its firms.

It hopes to get back in the race by implementing recommendations made last year by former Italian leaders Enrico Letta and Mario Draghi.

- Simplification shock -

The European Commission's recent focus on climate change and business ethics has left many companies complaining about excessive regulation compounding high energy costs and weak investments.

Commission Vice-President Stephane Sejourne has promised "a simplification shock without affecting environmental targets".

Dozens of laws will be revised, with rules on environmental and human rights supply chain standards, reporting on corporate sustainability and chemical safety all facing a trim.

A new category of mid-sized company will be created to reduce the regulatory burden for around 30,000 firms, according to a draft text seen by AFP.

A European legal regime, distinct from the 27 national jurisdictions, is to be set up to allow innovative companies to benefit from a single, harmonised set of rules on insolvency, labour law, and taxation.

- Reducing energy costs -

Europe is suffering from energy costs that are much higher than those of its international competitors after the war in Ukraine cut off supplies of cheap Russian gas.

Von der Leyen told a gathering of the world's elite in Davos last week the bloc must "continue to diversify our energy supplies" and "expand clean sources of generation" including nuclear power -- once a Brussels taboo.

The compass also recommends facilitating long-term power purchase agreements and boosting investment in the energy grid to improve transmission and storage.

- Green industry push -

"Targeted, simplified aid" will encourage industrial decarbonisation, with Sejourne hoping the priority goes towards greening the "top 100 CO2-emitting sites", which alone account for more than half of Europe's industrial emissions.

The plan also envisages the creation of labels to spur demand for low-carbon products -- such as "green" steel, which Brussels is keen on but is low in demand due to its prohibitive costs.

Specific plans are to be drawn up for troubled sectors such as chemicals, steel and automotive.

- Merger leniency -

The EU would like its competition watchdog to take into account the huge investment needs of technology companies when assessing mergers.

At present, the focus is on the potential impact on prices, which hinders the creation of European behemoths.

"New guidance for assessing mergers so that innovation, resilience and the investment intensity of competition in certain strategic sectors are fully taken into account" is thus in the plans.

- Mine baby, mine -

To reduce its dependency on China and other countries for rare earths and raw materials, Sejourne wants more of the stuff to be mined in Europe.

The commissioner said he has already received 170 mining exploitation or research projects -- which often face local opposition over environmental impacts -- and has vowed to "facilitate" the issuance of permits to diversify supply.

The compass envisages the creation of a platform for the "joint purchase" of critical raw materials and the development of international partnerships to strengthen supply lines for green technologies, like solar and wind power, chips and pharmaceutical ingredients.

A "European preference in public procurement" for critical sectors and technologies is also mentioned.

- Building the savings union -

More than three decades after its launch, the EU's single market is still overly fragmented when it comes to sectors such as telecoms, energy and defence, where different national rules hamper competitiveness.

"Removing remaining barriers" is among the priorities cited in the compass' draft.

Unifying European capital markets -- something that has long been stalled by competing national interests -- is top of the list.

While Europe boasts a single currency, its start-ups remain incapable of matching the giant fundraising drives enjoyed by their US competitors.

To address that, von der Leyen in Davos promised to create a "European savings and investments union".

H.King--SFF