Launched on January 29 2025, the European Commission’s Competitiveness Compass outlines its ambitions for a new growth strategy for the EU.
But what does this strategy mean for social Europe?
Like the 2024 Draghi report it is based on, the social dimension of the Competitiveness Compass is equally flawed, with mentions of the EU’s social agenda remaining strikingly limited to arguments for enhancing skills and labour market participation. To help unpack what exactly the Compass points to for the future of social rights, we’ve gathered our analysis into our social rights guide to the Competitiveness Compass below:
Employment
The Compass rightly states that productivity should not be achieved by restraining wages and refers to the importance of quality jobs for all. It mentions needed efforts on fair working conditions, decent wages, work-life balance or access to affordable quality childcare and long-term care and announces a Quality Job Roadmap but does not detail further initiatives on these issues. It is crucial that Quality Job Roadmap addresses these key priorities and entails concrete initiatives to help ensure quality jobs for all. Regrettably, the Compass misses other important aspects contributing to high-quality labour market policies, such as minimum wages, fighting in-work poverty and youth unemployment or quality social security.
Housing
The Compass briefly refers to the upcoming Affordable Housing Plan but does not further address issues around the availability and affordability of housing, and the need to support those most in need, including the homeless. The plan must address the availability and affordability of quality housing from a holistic perspective, including the often overlooked dimension of public, cooperative and social housing.
Social Protection
The Draghi report warns of rising inequalities as a result of technological and industrial transitions. It acknowledges that “the European welfare state will be critical to provide strong public services, social protection, housing, transport and childcare during this transition.”
However, the Compass only briefly refers to the need to encourage Members States to modernise their social protection systems to ensure access to adequate, efficient, and effective protection for all workers. This approach fails to see the role of social protection for everyone, not just for workers but also people in employment transitions as well as people who are not able to work.
Additionally, it makes no mention of the need to ensure the adequacy of social protection systems. In a context where not a single national minimum income scheme is sufficient to lift people out of poverty, significant efforts are needed to increase the adequacy of Member States’ minimum income schemes.
Similarly, pension reforms are exclusively mentioned from a perspective of promoting longer working lives, active and healthy ageing and more inclusive labour markets. The dimension of pension adequacy is entirely absent, in a context where almost 1 in 5 older persons were at risk of poverty and social exclusion (19.7%).
Digitalisation of public services
The Compass states that digitalisation of public services and the integration of AI in the public sector will enhance competitiveness. Digitalisation of public services is an important priority, however it must be ensured that it does not exclude people with no or little digital skills or access to digital devices and that digital tools do not perpetuate bias and discrimination. Therefore, analogue alternatives must continue being provided to those who depend on them.
Energy
The Compass briefly addresses the importance of ensuring affordable energy. It is key that the upcoming Affordable Energy Action Plan indeed addresses this challenge for households and businesses alike, providing particular supports to households experiencing or at risk of energy and transport poverty as well as not-for-profit service providers and social economy stakeholders, who are not mentioned at all by the Compass.
Mobility
It is noticeable that the Compass primarily talks about the automotive sector as well as briefly, about European ports and EU cross-border rail. While national level and local transport is not an EU competence, it nevertheless remains crucial to support Member States in improving availability and affordability of national, regional and local public transport, especially in rural and remote areas, as private transport, especially including through electric vehicles, is not accessible for all.
Circular economy
It is welcome that the Compass aims to tap the potential of circular economy actors and refers to the upcoming Circular Economy Act. However, it crucially does not refer to social economy enterprises. Social economy enterprises are important economic actors that promote an economic model that also pursues circularity, environmental and social goals, including the labour market inclusion of groups furthest away from the labour market. They must be seen as key actors in the EU’s competitiveness agenda, in addition to SMEs and bigger companies.
Public Procurement
The report announces a European preference for public procurement. It is key to include, in the upcoming revision of the public procurement directive, measures that strengthen socially responsible and sustainable public procurement across Europe.
Investments
The report rightly addresses the importance of the existing private and public investment gap, quoting the figures from the Draghi report. However, as the social dimension of the Draghi report is equally lacking, additional social investment will be needed (in 2020, the European Commission’s estimate of the additional investment needs in social infrastructure was €192 billion per year). It also does echo suggestions included in the Draghi report on filling growing investment gaps through joint funding of investment at the EU level to finance European public goods (outside of the Multiannual Financial Framework, including a future European Competitiveness Fund, and several sectoral action plans).
Multiannual Financial Framework
The Compass announces further reprogramming of cohesion funds towards industrial projects via the Strategic Technologies for Europe Platform (STEP). We see a clear danger of efforts to streamline the EU budget leading to redirecting funds away from important priorities like social cohesion or other priorities that are not seen as directly impacting on competitiveness. The Compass talks about the importance of a “modernised cohesion policy”, that must not equate investment cuts.
Similarly, the Compass refers to focusing research more on strategic priorities. This entails a risk that funding, for instance under Horizon Europe, could be redirected from other important priorities – like the EU social or sustainability dimension – not seen as directly contributing to competitiveness.
Finally, the Compass announces an approach linking funding to national plans combining key reforms and investments, inspired by the approach of the Recovery & Resilience Facility (RRF). Such a fundamental change of approach to the EU budget away from a programme-focused approach to a policy-focused one risks leading to a more centralised approach that could reduce the role of regions, local authorities, trade unions and civil society organisations.
European Semester process
The Compass announces that the upcoming coordination tool will work in conjunction with a streamlined European Semester process focused on reforms and investments for competitiveness. With an announced refocus of the European Semester on competitiveness, it is key that it maintains and strengthens its fairness dimension and does not lose progress made on the social dimension of the process.
Involvement of organised civil society
The Compass rightly refers to the important role for social partners. However, there is no mention of civil society and its role in the economy, as well as civil dialogue or consultation of organised civil society in the development of competitiveness policies. Civil society organisations work with and represent the interests of people, including those who are marginalised. For this reason, it is of paramount importance that CSOs are involved in the definition of competitiveness policies, to ensure that the EU competitiveness agenda is designed with a strong social dimension at its core.
