James Carville, the strategist who helped Bill Clinton win the White House in 1992, famously coined the phrase: “It’s the economy, stupid.” The same principle now applies to the new EU Commission under Ursula von der Leyen, which took office on December 1. With Europe’s economy facing severe turbulence, the Commission aims not just to revive it but to make it globally competitive again.
Competitiveness
The issue of competitiveness, which Mario Draghi harshly criticized in his recent report, is set to define this legislative term. Von der Leyen promised the European Parliament that tackling this challenge would be a top priority and announced the launch of a “Competitiveness Compass” as her first major initiative. This initiative is based on three pillars: innovation, decarbonization, and security. The Commission has recognized the urgent need to close the innovation gap with the United States and China, while ensuring that European industry is not only environmentally friendly but also profitable. The Green Deal will gradually evolve into a Green or Clean Industrial Deal. At the same time, the EU must reduce critical dependencies, particularly on raw materials, to strengthen economic resilience.
Reducing bureaucracy
The first step toward improving competitiveness is cutting red tape. Even before taking office, von der Leyen pledged to reduce EU reporting and compliance requirements for businesses by at least 25 percent, and by 35 percent for small and medium-sized enterprises. Accordingly, the new Commission will focus on simplifying regulations and reducing reporting obligations, many of which stem from the sustainability agenda pursued in her previous term. The reasoning is clear: businesses are struggling under excessive administrative burdens, leading many to scale back investments or even face insolvency risks.
To streamline compliance, the Commission plans to introduce an “Omnibus” regulation, which would significantly reduce administrative workload. This would allow for a single legislative proposal to eliminate unnecessary bureaucracy from multiple previously enacted laws.
Corporate Sustainability Due Diligence Directive (CSDDD)
Among the regulations under review are key elements of the EU’s sustainable finance policies, such as the Taxonomy Regulation, which directs capital toward green investments. Also under scrutiny is the new Corporate Sustainability Due Diligence Directive (CSDDD), which requires companies to take measures against environmental and human rights violations in their supply chains. This legislation obliges businesses to examine their value chains to prevent child labor, slavery, environmental damage, and biodiversity loss.
Regulation for deforestation-free supply chains (EUDR)
Another policy under review is the EU Deforestation Regulation (EUDR), which aims to curb deforestation by prohibiting imports of cocoa, coffee, soy, timber, palm oil, rubber, and cattle from land cleared after December 31, 2020. The rules were initially set to take effect on December 30, 2024, for medium and large operators and traders, and on June 30, 2025, for small businesses. However, following protests from affected countries such as Brazil and Indonesia, as well as pressure from European industries and the absence of clear implementation guidelines, Brussels has decided to delay enforcement until 2026.
Even the EU’s Corporate Sustainability Reporting Directive (CSRD), which has yet to be transposed into national law in Germany, unlike in other EU member states, is now up for discussion.
Commercial policy
Competitiveness is also closely linked to trade policy, which remains under pressure due to uncertainty surrounding the Mercosur free trade agreement and the tariff policies of Donald Trump. Von der Leyen is eager to finalize negotiations with the five Mercosur states by the end of December, but France and Poland are blocking the agreement. Paris is concerned about backlash from farmers, while Warsaw opposes the deal in its current form.
Meanwhile, the tariffs proposed by Donald Trump could be implemented immediately upon his potential return to office on January 20. Von der Leyen hopes to mitigate this risk by offering increased imports of liquefied natural gas (LNG) from the United States. As a bargaining chip, the Commission has prepared a list of U.S. products that could face retaliatory tariffs from the EU.
Defence
Beyond resilience and crisis preparedness, defense policy also has a competitiveness component, particularly in arms procurement. The new Commission is advocating a “Buy European” approach, promoting defense acquisitions within a unified European defense market. This initiative will be a central pillar of the European Defense Union, a long-planned project that has gained momentum due to the war in Ukraine. The details of this defense framework will be outlined in a White Paper within the first 100 days of the new Commission by the EU’s first-ever Defense Commissioner, Lithuanian politician Andrius Kubilius.
The new leadership in Brussels faces enormous tasks and challenges, with economic policy playing a pivotal role in shaping Europe’s future.
