FIU, Alm.del - 2024-25 - Bilag 104: Endeligt program og baggrundsmateriale til European Parliamentary Week 2025 den 17. og 18. februar

Erhvervsudvalget 2024-25, Finansudvalget 2024-25
ERU Alm.del Bilag 132, FIU Alm.del Bilag 104
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A communication from

the

European Parliament

EUROPEAN

PARLIAMENTARY

WEEK 2025

17-18 FEBRUARY 2025

EUROPEAN PARLIAMENT

BRUSSELS

INTERPARLIAMENTARY

CONFERENCE ON EUROPEAN ECONOMIC GOVERNANCE

BACKGROUND NOTES

With the support of the Directorate for Relations with National Parliaments

European Parliament

National Parliaments

FIU, Alm.del - 2024-25 - Bilag 104: Endeligt program og baggrundsmateriale til European Parliamentary Week 2025 den 17. og 18. februar

Committee on Economic and Monetary Affairs (ECON)

Session I: The future of Banking Union and Capital Markets Union

The European Union finds itself in front of vast challenges: innovation, infrastructure and

greening to name the most important. Huge sums of money have to be invested to tackle these

challenges. For years, the EU has been pursuing two initiatives that should help invest people's

savings to this end: Banking Union and Capital Markets Union. Both initiatives taken together

can help channel savings where they find the most productive investments. And through more

efficient intermediation, the two initiatives can help to fund inevitably risky long-term

investments, while mitigating the risks for savers. The two initiatives can reinforce each other:

more efficient cross-border banks can excel as providers of services and liquidity for European

capital markets, and more integrated capital markets can improve funding for banks. That said,

and despite long-standing efforts, neither of these initiatives has yet shown its full potential.

Capital Markets Union (CMU)

Some framing questions for participants:



What are the priority policy areas that need to be addressed for SMEs to have better access

capital markets?



What are the current obstacles to be overcome, and where can we find the necessary

momentum?



What can be done at national level to support capital markets, for instance promoting pension

savings, accelerating collateral enforcement and insolvency, reducing possible tax bias

favouring debt over equity?

Capital Markets Union (CMU), or, as some call it more recently, Savings and Investment Union,

currently receives much attention because of the proposals in three high-profile reports by

Mario Draghi, Enrico Letta and Christian Noyer (see a separate EP

briefing

that analyses their

recommendations). The three reports unanimously suggest policies on pension savings,

securitisation, supervision and market infrastructures. Then there are numerous other policies

that appear in one or two of the reports, but not in all of them. A particular far reaching among

these concerns a harmonised legal regime, covering for instance securities and company law,

possibly as a 28

regime (i.e., a European regime that some firms can be subject to instead of

their local laws).

However, while the reports agree on certain priority

policy areas,

they suggest quite distinct

policy options

or ways forward in each area. So, one challenge will be to pick the most effective

policy options. The second challenge will be to muster the necessary political momentum. We

have already seen two

CMU action plans

with diverse legislative and non-legislative measures

and we have to recognise that in all of the areas that are prominent in the three reports, EU

policies have been tried. Note that the recent “Competitiveness

Compass”

by the European

Commission announces a Package of measures on “Savings and Investment Union” for the first

quarter of 2025, specifically referring to savings, pensions, securitisation, market infrastructures,

“much more unified” supervision, insolvency reform and taxation barriers to investment. On a

related note, a 28th business law regime for “innovative companies” is announced.

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Banking Union

Some framing questions for participants:



What should be the done to speed up the creation of a genuine European single market

for banking services? Where do you see remaining obstacles for banks to go cross

border?



What keeps savers and depositors from making use of banks from other Member

States?



Do you see merits in a general review of bank capital requirements, or in reviewing

specific aspects (e.g. supporting venture capital and securitisation), and if so, how do

you recommend to go about it?

The institutional framework of the Banking Union consists of a Single Supervisory Mechanism

and a Single Resolution Mechanism which take responsibility for banks in the participating

Member States. There is also a Single Resolution Fund to support crisis management, but a

pending proposal for a European Deposit Insurance Scheme has not been implemented and

neither has a backstop facility for the Single Resolution Fund. The institutional framework builds

on an (incomplete) Single Rule Book for banks. The main objective of the Banking Union was

financial stability, nevertheless, the single set of rules and their uniform application facilitate

banks becoming active in other Member States and allowing savers and borrowers to deal with

banks from other Member States with confidence.

Yet, while much can be credited to the Banking Union in terms of banks' stability, the Banking

Union has not delivered much progress in cross-border banking or more generally, market

integration. This is documented in a series of external expertise papers from the ECON

Committee's Banking Union expert panel.

The experts suggest different ways forward to foster

banking market integration, and, in particular, point out the possible merits of:

•

harmonising insolvency and the enforcement of collateral;

creating a dedicated prudential and crisis management regime for cross-border banks;

ensuring a level playing field between banks directly supervised by the ECB and banks

directly supervised by national competent authorities.

Finally, and linking back to the three reports on CMU, Draghi in particular insinuates that capital

and liquidity requirements as reinforced multiple times since the great financial crisis, may have

started to negatively impact banks’ ability to finance the economy. He recommends assessing

whether these requirements are “adequate to have a strong and international competitive

banking system in the EU”.

Please find here a summary of the external papers and links to each of them.

Note that also Letta and Noyer in their reports argue in a more limited way for reassessing certain bank prudential requirements in order to

support financing of the economy.

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Session II: Creating an ecosystem for European investments

Some framing questions for participants:



What are the barriers and obstacles to creating an eco-climate for investment in the EU?



What are the first steps to be undertaken to promote the commercialization of innovations by

European companies?



What should be the involvement and role of the European and national parliaments within the

Competitiveness Coordination Framework, announced by the European Commission?

Polycrisis, aging population and changes in the global world order pose a challenge to Europe’s

economy and accentuate Europe’s vulnerabilities such a persistent low growth and external

dependency. The reports by

Enrico Letta (The

much more than a market report),

Mario

Draghi

(Future

of European Competitiveness) by

Christian

Noyer

(Developing European capital

markets to finance the future) are topical.

While the preceding section of this background note

looked at private sources of finance - Capital Markets Union and Banking Union - this section

turn to

the role of the public sector and the wider ecosystem to help Europe to muster the

investment needed to tackle the challenges before it.

The European savings and financial architecture could be reinforced by a

centralized Platform

for Institutional Investors, a blended finance approach,

combining public funds with private

investments for de-risking strategic projects, and

transparent metrics

for tracking investment

impact in particular in the green and digital fields.

Public finance can play an important role in

addressing market failures, bridging investment

gaps

(as proved by the InvestEU programme) and

boosting investments,

for instance by

supporting strategic projects through guarantees (EU, EIB and national promotional banks). In

addition,

streamlining access for project holders

might help SMEs and innovative Start-ups

thanks to simplified application processes and dedicated innovation funds, such as Horizon

Europe.

Reforming State Aid policies

to better support

cross-border strategic European investments

while ensuring fair competition and compliance with EU rules might also support the creation of

an eco-system. It may

ensure flexibility for strategic investments and a proportional

mechanism to avoid any distortion or fragmentation of the Single

Market (for example, through

a State aid contribution mechanism). In addition, EU governments could take innovative public

support mechanism such as

equity stakes and revenues guarantees, and to improve an

efficient distribution of AI

through data-driven allocation and centralized monitoring.

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Emerging sectors may need

tailored support,

for instance, through a

European

Competitiveness Fund,

as proposed by the European Commission

and through enhancing EU-

supported incubators and accelerators for start-ups.

Funding barriers could be tackled

through

risk-sharing instruments and knowledge sharing, by overcoming challenges in

commercializing research and innovation

by strengthening University-Industry linkages

(Horizon Europe initiatives in biotech or AI), European Innovation Ecosystems (EIE) Programme,

Venture Capital for start-ups and tax breaks for R&D investments.

Last but not least, given

the urgency of implementing the necessary governance reforms,

Draghi recommended to establish a new “Competitiveness

Coordination Framework”

to foster

EU-wide coordination in priority areas,

replacing other overlapping coordination instruments.

The coordination of all economic policies relevant to the EU’s agreed strategic priorities would

be merged into the new coordination framework.

In this spirit, the recent “Competitiveness

Compass”

by the European Commission entails a

number of elements that concern public investment or public support for private investment:

•

Emphasis on the

role of national budgets

making up 50% of EU GDP and thus much larger

than the EU budget: it is argued that the EU’s revised Economic Governance Framework

supports this goal by reinforcing the integration of sustainable fiscal and growth-

enhancing policies;

New

Competitiveness Coordination Tool (together with Member States)to

align

industrial and research policies and investments at the EU and the national levels;

New

European Competitiveness Fund

in the EU’s next Multiannual Financial Framework

to support strategic technologies and manufacturing - to invest directly or to “de-risk”

private investment;

“Fully

leveraging” the EIB groups’

potential to support private investments, envisaging

better capital utilisation and making its mandate “broader, simpler, faster”.

•

According to the Draghi report support for breakthrough disruptive innovation remains limited in the EU. The ‘Innovative

Europe’ pillar (EUR 13.6 billion) under Horizon Europe aims to make Europe a frontrunner in market-creating innovation

under the European Innovation Council (EUR 10.1 billion) by supporting breakthrough disruptive innovation with potential

for scale-up. The three main EIC instruments – the EIC Pathfinder, EIC Transition and the EIC Accelerator – are based on

the concept of providing a ‘one-stop-shop’ for breakthrough innovators at all stages of their development. A key feature

has been the creation of the EIC Fund – a dedicated equity investment fund for start-ups and SMEs selected by the EIC.

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Committee on Employment and Social Affairs (EMPL)

Session I: AI and the labour market with a focus on changing working conditions

Some framing questions for participants:



Which standards and benchmarks should be established at European level to ensure that the

introduction of AI in the workplace maintains or improves working conditions?



What best practices at national, regional, or company levels have proven effective in ensuring

that the use of AI in workplaces positively impacts job quality, the respect of workers' rights and

well-being, including through transparency and fairness in algorithmic management?



How can social dialogue and consultation with trade unions and other stakeholders contribute

to those ends? How has collective bargaining on the use of AI or algorithmic management in the

workplace been promoted or regulated, if so, in the Member States?

Artificial intelligence (AI)

is increasingly shaping workplaces through two primary applications:

the

automation

of tasks traditionally performed by workers and the automation of managerial

functions, often referred to as

algorithmic management

. The latter is a defining feature of

digital labour platforms, but also widespread in sectors such as customer service, transport,

logistics, banking, and healthcare

. A 2020 survey revealed that 42% of EU enterprises use at

least one form of AI

, and globally, more than 75% of companies plan to adopt AI-powered

applications between 2023 and 2027

Impacts of artificial intelligence on the labour market and working conditions

AI’s impact on jobs is twofold, influencing both their

quantity and quality,

and offers numerous

economic benefits, as well potential for workers to

increase their flexibility, autonomy and

enjoyment

of work, including by automating routine tasks, and ultimately to

improve work-life

balance

. AI tools can, through automation,

enhance workplace safety and reduce injuries

and

improve fraud detection and risk assessment,

helping to address poor working conditions and

undeclared work

. Further, global research suggests that AI is likely to create more jobs than it

displaces

At the same time, the digital transformation, notably algorithmic management, has given rise to

a number of specific challenges linked to the hierarchical nature of the employment relation,

such as

intensifying work and extending working hours

with repercussions on occupational

health and safety

, increasing

monitoring and surveillance

in the workplace, including on work

performance

, or accentuating risks of

discrimination

at the workplace

International Labour Organisation,

Artificial intelligence

International Labour Organisation,

Algorithmic management in the workplace

IPSOS, 2020,

European enterprise survey on the use of technologies based on artificial intelligence

World Economic Forum,

Future of Jobs Report 2023

Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, 2021,

Improving working

conditions using Artificial Intelligence

Ibid.

World Economic Forum,

Future of Jobs Report 2023

World Economic Forum,

Future of Jobs Report 2025

Nguyen, A., 2021,

The constant boss: Work under digital surveillance

Policy Department for Economic, Scientific and Quality of Life Policies, European Parliament, 2023,

Minimum health and

safety requirements for the protection of mental health in the workplace

Ponce del Castillo, ETUI, 2024,

Artificial intelligence, labour and society

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It bears, therefore, significant risks for workers’ rights, such as the right to information and

consultation, the right to collective bargaining and action, or to fair and just working conditions,

and occupational health and safety. Regarding the effect of AI, it is projected at global level that

one hundred million workers will be affected in some way

, with clerical support workers being

especially vulnerable to automation.

Artificial intelligence in the European Semester

As set out within the

European Pillar of Social Rights Action Plan,

fostering quality jobs is key

to promoting social inclusion and active participation. As part of the European Semester, the

Joint Employment Report (JER)

by the European Commission and the Council monitors the

employment situation in the Union and the implementation of the

Employment Guidelines.

Within this framework, the JER highlights the importance of monitoring

the impact of AI on

labour markets, working conditions, and the role of social partners

in shaping these

transformations (Guideline

No.7).

According to the

2025 JER proposal,

AI adoption, estimated

to impact up to 60% of employees in advanced economies - half of whom may face adverse

effects - poses multiple challenges

. Indeed, the JER proposal identifies issues such as routine

job displacement and skill mismatches

as advanced technologies reshape production and

service delivery. Moreover, it points out that, unlike previous waves of automation, generative

AI could significantly impact high-skilled workers, while challenges persist around ensuring

workers’ rights in cases of use of algorithmic management. The relatively limited

involvement

of social partners

exacerbates these challenges, with the JER proposal finding that only around

20% of policies related to digital transformation are based on co-determination or meaningful

consultation.

Addressing

skill gaps

is critical, as 37% of Europeans in the workforce lack basic digital skills

and only 22.8% of EU enterprises provided ICT-related training in 2024

. The latest JER proposal

highlights that 3 out of 4 companies report difficulties in finding workers with the required skills.

This skills gap presents a challenge for businesses as for workers who must adapt to new

technological demands to secure sustainable employment. To ensure a fair digital transition

aligned with

Employment Guideline No. 6,

Member States must prioritise

high-quality digital

education and training,

adapting systems to technological advancements like AI.

Policy responses

Legislative measures, including the

AI Act

(in force since August 2024) aim to ensure that AI

systems are trustworthy, safe, and aligned with EU fundamental rights, putting in place risk

management procedures for high-risk AI systems, including those used in the workplace. The

Platform Work Directive

provides platform workers and other persons performing platform

work with new individual rights, with view to enhancing transparency, fairness, and

accountability in algorithmic management, as well as rights destined to the organisations

representing them, while promoting social dialogue and collective bargaining. The

General Data

Protection Regulation

(GDPR)

provides the more general framework for the protection of

personal data, including those of workers, while the proposed

AI Liability Directive

aims to hold

employers accountable for AI-related consequences.

ETUC,

For a Sustainable Economy and Social Progress - Trade Union Inputs for the European Semester 2025

European Commission, 2024,

Proposal for a Joint Employment Report from the Commission and the Council

Draghi. M.,, 2024,

The future of European competitiveness

Eurostat,

Enterprises that provided training to develop/upgrade ICT skills of their personnel

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The rapid advancement of AI and related digital technologies is driving profound

transformations in the labour market, and impacting working conditions for EU workers,

requiring

vigilant monitoring and policy responses.

Some Member States are beginning to

address these challenges by introducing legislation to

improve working conditions in platform

work

and tackle issues arising from algorithmic management, with all required to comply with

the Platform Work Directive by the transposition deadline of December 2026

. Effective

implementation of these measures relies on

fostering social dialogue at sectoral and workplace

level

regarding the use of AI at work. Countries with strong consultation frameworks, such as

those in the Nordic Member States and Germany, demonstrate how participatory approaches

can increase worker acceptance of new technologies

. The

Council’s December 2024

employment policy guidelines

urge Member States to

foster job creation through new forms

of work while ensuring compliance with social rights.

This includes supporting social partners

in representing workers in atypical roles, such as platform work and telework, and strengthening

enforcement through labour inspectorate training and guidelines. Key measures also contain the

promotion of ethical AI tools, up- and reskilling workers, the respect of mental health at work

and work-life balance, algorithm transparency and accountability, and effective enforcement of

consultation rights and collective bargaining.

Session II: The role of social and employment policies in the EU's reviewed

economic governance

Some framing questions for participants:



Does the EU economic governance framework allow for sufficient room for investment in the

social and employment field? How could investments and reforms be further promoted in the

framework?



How could the involvement of the European Parliament, national parliaments, social partners

and civil society be improved in the European Semester process?

Introduction

The EU’s economic governance framework refers to a system of institutions and procedures

to coordinate Member States’ (MS) economic policies and to achieve the EU's economic

objectives. It comprises an elaborate system of policy coordination and surveillance. The EU

economic governance tools are integrated in the European Semester, including the EU-level

multilateral and bilateral surveillance of MS' fiscal policies under the Stability and Growth Pact,

economic and structural policies under the Macroeconomic Imbalances Procedure (MIP), and

employment policies under the employment guidelines. In previous years, the focus of the

Semester has widened to better take into account the employment and social aspects, i.a.

through the integration of the

European Pillar of Social Rights

(EPSR) and the

Social Scoreboard,

the inclusion of employment headline indicators in the scoreboard for the surveillance of

macroeconomic imbalances

, however, without triggering effects on in-depth reviews as well

as through increasing emphasis on social objectives in its priorities, key messages, country-

specific recommendations (CSR). While progress was made towards a stronger social dimension

already before last year’s reform of the economic governance framework, concerns about the

Ibid.

International Labour Organisation,

Mind the AI Divide

Following revisions to the MIP scoreboard in 2024, the number of employment headline indicators in the MIP scoreboard

decreased however from four to two; the current ones being unemployment and labour force participation rate.

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imbalance of the framework as well as calls for strengthening the role of the social and

employment policies persisted.

Reviewed economic governance framework

The revised rules of the EU’s economic governance framework with the medium-term fiscal-

structural plans at their centre entered into force on 30 April 2024 (Regulation

(EU) 2024/1263,

amended Regulation (EC) 1467/97

and

amended Council Directive 2011/85/EU).

The new rules

reply to the calls for a stronger social dimension mainly by encouraging MS to implement

reforms and investments that contribute to the EU’s common priorities, i.a. fair green and digital

transition, social and economic resilience, including the EPSR, by integrating the social

convergence framework and improving national ownership.

This year’s

Autumn package

launches the first implementation cycle of the revised economic

governance framework. As part of the package, the Commission

assessed

MS’ medium-term

fiscal-structural plans

that according to the new rules should bring together the fiscal policy,

structural reforms and investments including in the common EU priorities. The Commission took

the view that MS have included in their plans a broad reform and investments agenda covering

the policy areas related to the EU’s common priorities and the challenges identified in CSRs.

Examples of measures taken in the plans include reforms of social protection and pension

system, measures to improve the effectiveness and efficiency of healthcare, to support skills

development and life-long learning and improve the availability of childcare. MS’ implementation

of the medium-term plans will be assessed as part of the Semester Spring Package 2025

following the submission of the first Annual Progress Reports by MS. A further element of the

Autumn package, the

draft Council euro area recommendation on economic policy

includes

several calls to MS in the social and employment fields related e.g. to upskilling and reskilling,

quality jobs, labour market participation and integration of underrepresented groups, active

labour market policies, vocational education and training, early childhood education and care,

long-term care, incentives to work by shifting the tax burden away from labour, fighting poverty

and access to affordable and sustainable housing.

A major social element of the revised economic governance framework is the integration of the

social convergence framework.

While earlier initiatives to introduce a Social Imbalance

Procedure similar to the MIP were not adopted, a new

Social Convergence Framework (SCF)

was included for the first time in the

draft 2024 Joint Employment Report (JER).

Following this

pilot, in the revised economic governance framework,

Regulation (EU) 2024/1263, confirmed

this approach

laying down that the surveillance of the employment guidelines and of the related

CSRs within the Semester shall include the progress in implementing the principles of the EPSR

and its headline targets, ‘via the social scoreboard and a framework to identify risks to social

convergence’.

The SCF comprises a two-stage analysis in order to assess challenges to upward social

convergence in MS. The first stage is predominantly based on the

Social Scoreboard

headline

indicators and identifies potential risks to upward social convergence using a traffic-light

system. Each of the headline indicators is assessed and in a second stage, further analysis

follows for MS where six or more headline indicators are flagging red (‘critical situation’) or

The Autumn package marks the launch of a new cycle of the European Semester. It includes several Commission

documents offering an overall overview of the socio-economic landscape, highlighting key priorities and risks and

providing.

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orange (‘to watch’)

. This second-stage analysis relies on a wider set of quantitative and

qualitative evidence in order to determine the existence of actual challenges and the key driving

factors. It also describes measures to be taken by MS.

Accordingly, the

2025 draft Joint Employment Report

(part of the Autumn package)

incorporates a country-specific first-stage analysis of labour market, skills and social

developments. This year’s edition highlights continued upward convergence in the labour

market in 2023, while the skills and social policy areas showed more limited improvements and

risks to upward convergence. It identifies

ten Member States

(including seven identified already

in 2024)

showing potential risks to upward social convergence

and thus requiring a deeper

second-stage analysis.

Proposals for improvement

Several concerns were raised about the insufficient

level of reforms and investments.

The

European Parliament

(EP)

noted

that the reform of the economic governance framework does

not provide EU financial incentive mechanisms to support and promote national policy reforms

and investments. It expressed concerns that some MS will not have the financial capacity to

finance the just green and digital transitions on their own.

ETUC

Confederal Secretary, Ludovic

Voet

criticised

the national spending plans showing no sign of the investment needed. ETUC

also

called for the

introduction of ‘an EU-financed instrument for investments and stabilisation

of social expenditure’.

Employers’ organisations

took the view

that the possibility of extending the fiscal adjustment

period under the new rules shall not result in growing national deficits but should be used

responsibly and contribute to implementing reforms and investment commitments stemming

from CSRs.

Further requests were raised regarding

participation in the Semester process.

The

advocated

for its increased engagement in the Semester, including ‘instruments that allow it to

apply consequences based on its assessment of the performance of the European Semester’.

The

European social partners

in their

joint statement

called for their meaningful and appropriate

involvement in the Semester process, with requirements to be set in a European rulebook.

For the methodology, see

2025 draft Joint Employment Report,

page 40

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Committee on Budgets (BUDG)

Session I: Bridging the competitiveness gap: how to increase synergies between

the national budgets and the post-2027 Multiannual Financial Framework

Some framing questions for the participants:

The role of the next MFF



How could the architecture of the next MFF contribute to improve the synergies between the

funding at national and EU levels?



What about the intention of the President of the Commission to introduce in the next MFF “a

plan for each country linking key reforms with investment, and focusing on our joint priorities”?

Are there any lessons learned from the RRF in this regard?



How can co-financing arrangements be optimized to ensure that both the EU and Member

States maintain political ownership and share the financial burden equitably in strategic areas

of mutual interest?



How can the EU and national governments create joint investment mechanisms to fund strategic

projects in areas like infrastructure, R&D, and green technologies?

The role of the coordination frameworks



What role can the European Semester play in ensuring greater policy coherence between

national budgets and EU strategic objectives? How can the European Semester process be

better integrated with the EU budget cycle?



Looking ahead, which structural reforms could be introduced alongside the MFF or national

budgetary frameworks to ensure more effective and flexible coordination between national

governments and the EU? In particular what about the proposal of Professor Draghi and EVP

Séjourné to establish coordination frameworks for competitiveness?



Beyond competitiveness, which specific policy areas present the greatest opportunities for

synergies between national budgets and the MFF? In this context, how can a smart design of the

system of own resources finance the EU budget create fiscal or policy co-benefits?

Governance aspects



What improvements could be made to the current mechanisms for dialogue between national

parliaments, national governments, and the European Parliament to better coordinate

budgetary planning?



What role should the European and national parliaments play in existing and potential EU

coordination frameworks?

The European Union’s Multiannual Financial Framework (MFF) is the EU’s long-term budget

aligning the financial resources of the EU with its strategic priorities and objectives. National

budgets, on the other hand, reflect each Member State's fiscal policies and priorities. In some

areas such as research and innovation, a lack of coordination between the two levels may result

in some inefficiencies, misalignments, or missed opportunities for greater impact.

In his report on the future of European competitiveness, Mario Draghi criticises that we spend a

similar amount on research and innovation as a share of GDP in the EU and in the US, but only

one tenth of spending takes place at the EU level. As a consequence, EU public spending is

fragmented and lacks scale to spur innovation.

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In this context, the Draghi report calls to focus EU spending on strategic priorities and for

increased coordination between the EU and the national level including through a new

Competitiveness Coordination Framework. Under such a Framework, the European Council

would adopt EU competitiveness priorities. These priorities would be further broken down into

‘EU Competitiveness Action Plans’ by areas which would provide the means of action for each

area: governance, financial incentives, and measurable objectives. In this content, the report

recommends establishing a “Competitiveness Pillar” under the next EU budget to direct EU

funding towards priority projects identified under the Framework and calls to leverage better

the large spending power of the Member States by incentivising and co-financing multi-country

industrial projects. Executive Vice-President Séjourné also calls for more coordination to

support the competitiveness of the EU and suggests the establishment of a Competitiveness

Coordination Tool translating EU-wide competitiveness objectives into coordinated national

policies, ensuring public and private financing for each strategic priority.

As the EU faces pressing challenges, such as competitiveness, climate change, digitalization,

and geopolitical shifts, it becomes increasingly important to find the right framework to better

focus and align the MFF and national budgets in order to optimise the use of public spending.

The aim of the session would be to explore what frameworks would be best suited to better

coordinate competitiveness related economic and social spending at EU and national levels and

how to proceed in order to translate common strategic priorities and economic rationale into an

effective EU budgetary architecture post-2027. Additionally, the session could look into the

possibility to extend the approach to other strategic and underfunded priorities such as

Defence.

Session II: European Public Goods: how to identify and finance them?

Some framing questions for participants:

Defining and identifying European Public Goods (EPGs)



What criteria should be used to define a European Public Good (EPG), and how do these differ

from national or local public goods?



How can we ensure that EPGs are identified in a way that reflects both the needs and

preferences of individual member states as well as the collective interests of the EU as a whole?



Given the diversity of EU member states, how can the EU ensure that the identification of EPGs

does not disproportionately benefit wealthier countries at the expense of poorer ones?



What are the key lessons learned from past EU initiatives in financing European Public Goods,

and how can these be applied to future projects?



What role do national parliaments play in identifying potential European Public Goods, and how

can they be involved in this process?

Governance aspects



What institutional mechanisms should be put in place to ensure that EPGs are delivered

efficiently and that their benefits are equitably shared across the Union?



What are the political challenges in financing and managing EPGs, and how can these be

addressed? In particular, how can the EU balance the demands for greater integration and

common action on EPGs with the subsidiarity principle?

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

How can the governance of EPGs be effectively organized at the EU level, ensuring that EU

institutions such as the European Parliament, but also national parliaments, have clear roles in

the decision-making process?



How can the EU ensure that citizens and stakeholders are actively engaged in the process of

identifying and financing EPGs and that

the added value of EPGs is communicated to

citizens and businesses?

Financing European Public Goods



Given the increasing pressure on public finances, how can we ensure the long-term sustainability

of financing for European Public Goods, particularly those with high upfront costs such as

climate change mitigation or defence infrastructure?



Which types of European Public Goods best lend themselves to being financed or co-financed

by the EU budget? Are there good examples of EPGs that are already financed under the present

MFF and which ones could or should be included in a post-2027 perspective?



Can the EU’s NextGenerationEU recovery fund serve as a model for financing future European

Public Goods, in areas such as green transition or defence?



In light of the negotiations of the upcoming EU’s long-term budget (, how can the EU prioritize

the financing of European Public Goods?



What role should EU financial instruments like the European Investment Bank (EIB), the InvestEU

programme, and the European Stability Mechanism (ESM) play in financing large-scale

European Public Goods?



How can the EU incentivize private sector investment in European Public Goods, particularly in

areas like green technologies and digital infrastructure, without compromising the public interest

or creating market distortions?

The identification and financing of European Public Goods (EPGs) represent one of the key

challenges facing the European Union (EU) as it strives to fulfil its strategic objectives in a

context of budgetary constraints.

EPGs are commonly defined as goods that benefit all EU member states and their citizens, being

non-excludable and non-rivalries, meaning that they are available to all EU citizens and one

person's use does not diminish the availability for others. Examples of EPGs spans from Galileo

- the Europe's Global Navigation Satellite System to infrastructure - to transport and energy

infrastructures or border management.

EPGs have gained increasing prominence in EU policymaking, especially in light of global

challenges such as competitiveness, climate change, migration or defence. Due to the cross-

border nature of many of those challenges, the EU’s collective action can be the most effective

way of providing such goods. However, while the EU’s ability to provide public goods is

significant, it also faces challenges, particularly related to political preferences, financial

resources and uneven access between wealthier and less prosperous regions.

The aim of the session would be to exchange on the nature and practical definition of European

public goods, what is the right decision making process to identify them, what would be the

strengths and potential weaknesses of an approach based on EPG and what are the different

options to finance them.

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Plenary session I: Improvement of EU’s competitiveness through the single

market, innovation policy, better regulation and quality jobs

Some framing questions for participants:



Given that only 4 of the world's top 50 tech companies are European, what specific reforms to

the Single Market and innovation policy would enable more European startups to scale up within

the EU rather than relocating to the US?



How can we ensure that reducing regulatory burdens to boost competitiveness does not

compromise EU's high social and environmental standards? What role should "smart regulation"

play?



The Draghi report estimates annual investment needs of €750-800 billion. How can we best

promote private and public funding to meet these needs while ensuring fiscal sustainability?

What role should common EU investments and funding play?



How can national parliaments and the European Parliament work together to accelerate

decision-making on reforms and investments while ensuring democratic oversight? What

institutional changes might be needed?



With the EU workforce projected to shrink by 2 million workers annually by 2040, how can

education and skills policies be reformed to boost both productivity and labor market

participation? What role should immigration play?

How can the European Semester and the Competitiveness Compass efficiently interact to

deliver on the priorities outlined in the Draghi report?



The European Union has strong foundations to be a highly competitive economy, combining an

open market economy, robust market competition and active policies to fight poverty and

redistribute wealth. This model has enabled the EU to achieve high levels of economic

integration and human development while maintaining lower levels of inequality than the United

States and China. However, as highlighted in Mario Draghi's report on European competitiveness

presented to the European Commission in September 2024, Europe is now facing

unprecedented challenges to maintain and improve its living standards. To address these treats

urgent actions would be needed on many policies and fronts.

As outlined in

his address to the European Parliament,

Mario Draghi identified three main areas

where the EU needs to act to remain competitive in an increasingly challenging global

environment. First,

Europe must profoundly refocus its collective efforts on closing the

innovation gap with the US and China,

especially in advanced technologies. Second,

the EU

needs a joint plan for decarbonisation and competitiveness to lower energy costs while

capturing industrial opportunities.

Third,

Europe must increase its security and reduce

dependencies in critical areas such as raw materials and advanced technologies.

As also highlighted in Draghi's address to the European Parliament, Europe's social market

economy model remains a key strength, and improving competitiveness should reinforce, not

weaken, this model. High-quality jobs, particularly in innovative sectors and green technologies,

The EU's GDP gap with the US has gradually widened from slightly more than 15% in 2002 to 30% in 2023, driven mainly

by slower productivity growth. This has translated into slower income growth, with real disposable income growing almost

twice as much in the US as in the EU since 2000. The situation is particularly concerning as Europe is entering the first

period in its modern history where GDP growth will no longer be supported by sustained net growth of the labour force. By

2040, the EU's workforce is projected to shrink by close to 2 million workers each year.

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will be crucial for maintaining Europe's skilled workforce and ensuring that increased

competitiveness translates into shared prosperity.

Analysis of the Draghi report

underline that, despite the annual investment of €800 billion that

will be needed, 53% of the proposed measures do not require additional public investment. Many

proposals involve regulatory changes, coordination between stakeholders and redesigning

programmes already underway. However, the implementation of these reforms will require

significant changes to EU governance, increasing the depth of coordination while reducing the

regulatory burden on companies.

The report emphasises that unless action is taken, Europe will have to compromise either its

welfare, its environment or its freedom - outcomes that would fundamentally undermine the

EU's reason for being.

Main Areas for Action Identified in the Draghi Report

The first priority identified in the report is closing the innovation gap with the US and China.

EU companies spent around €270 billion less on R&D than their US counterparts in 2021, largely

due to a static industrial structure. As highlighted in Mario Draghi's address to the European

Parliament, there is no EU company with a market capitalisation over €100 billion that has been

set up from scratch in the last fifty years, while all six US companies with valuations above €1

trillion have been created during this period. This lack of dynamism is particularly evident in

digital technology, where only four of the world's top 50 tech companies are European.

The second key area for action is implementing a joint plan for decarbonisation and

competitiveness.

While EU companies face electricity prices that are 2-3 times higher than

those in the US and natural gas prices that are 4-5 times higher, decarbonisation presents an

opportunity for Europe to lower energy costs and take the lead in clean technologies. The EU is

already a world leader in clean technologies like wind turbines and electrolysers, with more than

one-fifth of clean and sustainable technologies worldwide developed in Europe. However,

Chinese competition is becoming acute, driven by subsidies, rapid innovation, and the ability to

produce at continent-wide scale.

The third priority area involves increasing security and reducing dependencies.

According to

the Draghi report, around 40% of Europe's imports are sourced from a small number of suppliers

and difficult to substitute, with around half of these imports originating from countries with

which the EU is not strategically aligned. The EU defence industry also suffers from

fragmentation - European collaborative procurement accounted for less than a fifth of spending

on defence equipment procurement in 2022. As emphasised in both the report and Draghi's

parliamentary address, these dependencies are becoming vulnerabilities in an increasingly

unstable geopolitical environment.

“The

EU innovation model should ensure: (i) that workers are supported through social insurance policies, as well as

active upskilling and reskilling programmes (ii) the creation of high-quality jobs (in terms of pay, flexibility, and worker

security); and (iii) that social and geographic cohesion remains an integral component of the model. The example of

Sweden – which has a tech sector that is more than twice as productive as the EU average – shows that a strong social

model and a thriving technological environment are not only compatible, but even self-reinforcing when combined with

programmes targeted at creating high-quality jobs for well-skilled workers living in affordable cities. Combining the

creation of high-quality jobs with high levels of social protection and redistribution is a fundamental value of the EU

model, which should be preserved to successfully transform the EU into a more technologically advanced society”

(Draghi

report).

See in particular the

analysis

by the Elcano Royal Institute

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To address these challenges, the report proposes a comprehensive reform agenda combining

different policy tools and approaches.

The

analysis from the Elcano Royal Institute

shows that

16% of the measures can be viewed as "Quick Wins," being both highly viable politically and

classified as most urgent. This includes measures across key sectors such as digitalisation,

energy, and competition policy. However, implementation will require significant investment -

estimated at €750 to 800 billion in additional annual investment - as well as substantial reforms

to EU governance and decision-making processes.

Implementation Challenges and Governance Reform

The Draghi report emphasises that successful implementation of the proposed reforms faces

three main barriers that must be addressed.

First, Europe currently lacks focus - while common

objectives are articulated, they are not backed by clear priorities or joined-up policy actions. For

instance, while claiming to favour innovation, the EU continues to add regulatory burdens onto

European companies, with more than half of SMEs flagging regulatory obstacles and

administrative burden as their greatest challenge.

Second, Europe is not efficiently using its common resources.

While the EU has large collective

spending power, it is diluted across multiple national and EU instruments. For example, the

public sector in the EU spends about as much on R&I as the US as a share of GDP, but just one-

tenth of this spending takes place at the EU level, despite the large spillovers from public R&I

investment to the private sector. Similarly, European collaborative procurement in defense

accounted for only 18% of expenditure on defense equipment procurement in 2022.

A fundamental governance reform is therefore needed.

As Draghi outlined in his parliamentary

address, Europe's decision-making rules have not substantially evolved as the EU has enlarged

and as the global environment has become more hostile and complex. The result is a legislative

process with an average time of 19 months to agree new laws. The report recommends

establishing a new "Competitiveness Coordination Framework" to foster EU-wide coordination

in priority areas, replacing other overlapping coordination instruments. This would be divided

into Competitiveness Action Plans for each strategic priority, with well-defined objectives,

governance, and financing.

The report also emphasises that financing these reforms will require significant changes.

meet the objectives laid out in the report, a minimum annual additional investment of €750 to

800 billion is needed. While historically around 80% of investment has been undertaken by the

private sector, delivering private investment of around 4% of GDP through market financing

alone would require substantial support from public funding. However, as highlighted in the

Elcano analysis, if the strategy outlined in the report is implemented and productivity rises, it

will be much easier for the public sector to finance its share.

Key Policy Recommendations

Based on the comprehensive analysis in the Draghi report, several concrete priority actions

emerge as essential for improving EU competitiveness.

In the innovation domain, the report

recommends doubling the EU's Framework Programme for R&I to €200 billion per 7 years, with

a larger allocation towards financing disruptive innovation.

To facilitate scaling up of successful

ventures, it proposes creating a new EU-wide legal statute - the "Innovative European Company"

- which would provide companies with a single digital identity valid throughout the EU and

access to harmonised legislation.

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For decarbonisation and competitiveness, the report advocates a differentiated approach

according to sectors and technologies.

This includes leveraging Europe's strength in clean

technologies while taking a pragmatic approach to sectors where foreign producers have gained

a significant lead. The report recommends decouple the remuneration of renewable energy and

nuclear from fossil-fuel generation and accelerating permitting for clean energy projects, while

ensuring effective protection for strategic industries.

To reduce dependencies, the report calls for developing a genuine EU "foreign economic

policy", coordinating preferential trade agreements and direct investment with resource-rich

nations.

For defence, it recommends increasing substantially the aggregation of demand

between groups of Member States and raising the share of joint defense procurement. As

highlighted in Draghi's parliamentary address, these measures are not about protectionism but

about ensuring Europe's strategic autonomy while maintaining its commitment to open markets.

The successful implementation of these recommendations requires strengthening EU

governance by establishing a new Competitiveness Coordination Framework. This would ensure

better alignment of policies and resources behind common goals, while reducing regulatory

burdens that currently hinder European companies' competitiveness. The framework should be

supported by sufficient financing, combining private investment with public support, potentially

including some joint funding through common debt instruments for key strategic projects.

On 29 January 2025, the Commission proposed a

Competitiveness Compass

in order to

establish a coherent EU framework to make progress on these various policy actions.

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Plenary session II: The first national plans under the revised Economic

Governance Framework - lessons learned

Some framing questions for participants:



How to ensure appropriate involvement of national parliaments and independent fiscal

institutions in the preparation and monitoring of national fiscal-structural plans?



What lessons can be drawn from the technical dialogue between Member States and the

Commission in this first implementation cycle? What measures could be taken to increase the

transparency of this exercise?



How to ensure effective implementation and monitoring of the agreed fiscal paths at both

national and EU level?



What are the main challenges identified in translating the agreed net expenditure paths into

annual budgetary decisions?



What improvements could be considered for the next round of plans to strengthen democratic

accountability of the process?



To what extent has the new framework delivered on its promise of greater country-specificity

and ownership in fiscal planning?



How can national parliaments encourage their governments to discuss progress reports with

them to ensure effective monitoring and maintain democratic accountability?

The

reform of the EU economic governance framework,

which entered into force in April 2024,

marks a significant shift in the European Union's approach to fiscal surveillance.

This reform

introduces a new framework centred on country-specific medium-term fiscal-structural plans

and a single operational indicator for the budgetary surveillance framework - the net

expenditure path.

The first implementation cycle of this revised framework was launched in June 2024 with the

Commission's transmission of

fiscal guidance to Member States,

followed by the

submission of

national plans in September-October 2024.

By end-November 2024, the Commission had

assessed 21 Member State plans, marking a crucial first test of the new framework's

effectiveness.

This plenary session aims to discuss early experience with implementing the reformed

framework, drawing lessons from the preparation and assessment of the first national plans,

and discussing the challenges and opportunities identified in this initial phase.

The discussion is particularly timely as it can inform the implementation of the framework in the

coming years, including for those Member States that have yet to submit their plans.

Key features of the new framework

The reformed framework represents a fundamental change in the EU's approach to fiscal

surveillance, moving from a complex set of rules to a more tailored system based on country-

specific analysis. At its core is the requirement for Member States to submit medium-term

fiscal-structural plans covering a four-to-seven year horizon. These plans must detail fiscal

strategies, structural reforms, and investments, with particular focus on EU priorities such as

green and digital transitions, social resilience, and defence capabilities.

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A central innovation is the introduction of a single operational indicator - the net expenditure

path - which replaces the previous multiple fiscal targets.

This path, which excludes interest

expenditure, discretionary revenue measures, and EU-funded spending among other items,

serves as the primary metric for monitoring fiscal policy implementation. The path is established

to ensure that government debt is put on a plausibly downward trajectory or stays at prudent

levels, while maintaining budget deficits below 3% of GDP.

The framework introduces several safeguards to ensure fiscal sustainability. These include a

debt sustainability safeguard requiring minimum annual debt reduction for countries with debt

above 60% of GDP, a deficit resilience safeguard targeting structural deficits, and a no-

backloading requirement to prevent delay in fiscal adjustments. Member States can request a

three-year extension of their adjustment period if they propose substantial reforms and

investments that support growth and fiscal sustainability.

First implementation cycle - State of play

As of January 2025, the Commission has assessed the medium-term fiscal-structural plans of

22 Member States, while five countries (Austria, Belgium, Bulgaria, Germany and Lithuania)

have yet to submit their plans, mainly due to national elections and government formation

processes.

The Commission's assessment has been largely positive, with 21 out of 22 plans

deemed to set out credible fiscal paths to ensure fiscal sustainability. Only in the case of the

Netherlands did the Commission find that the proposed net expenditure growth would lead to

a breach of Treaty reference values in the medium term. On 21 January 2025, the Council

adopted the recommendations endorsing the medium-term fiscal-structural plans and setting

the related net expenditure path for 21 Member States. The endorsement for Hungary is still

pending given the later submission and Commission assessment of the plan.

Five Member States (Finland, France, Italy, Romania and Spain) have requested a longer

adjustment period of seven years instead of four,

based on their commitment to implement

substantial reforms and investments. The Commission has assessed these requests positively,

finding that the proposed reforms and investments credibly contribute to sustainable growth

and resilience, effectively address country-specific recommendations, and maintain required

levels of public investment. The Council has also endorsed the extension of the adjustment

period for these five Member States.

The fiscal adjustment requirements emerging from the assessed plans are substantial for

several high-debt countries

. However, these requirements are generally less demanding than

would have been the case under the previous framework. The assessment has also shown that

numerical safeguards are not significantly constraining fiscal paths in this first implementation,

except for Finland where the debt sustainability safeguard is binding.

Main challenges and lessons learned

The first implementation cycle of the new framework has provided important insights into its

practical operation.

Technical dialogue between Member States and the Commission has played a significant role

in establishing agreement on net expenditure figures, highlighting the importance of this aspect

of the process.

See analysis by

Bruegel, “The

implications of the European Union’s new fiscal rules”

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This exercise however poses a number of challenges to the transparency of the framework,

notably when it comes to parliamentary involvement. Notably, some

revisions of the net

expenditure paths already presented in publicly available medium-term fiscal-structural plans

have taken place behind closed doors,

with official communication between national authorities

and the European Commission being released only after the publication of the Commission’s

assessment or, in the French case, after the endorsement in Council

For the first-cycle of plans, the regulation provided an exemption from the obligation to consult

national parliaments in the preparation of the plans, thus limiting their engagement in the

preliminary phases. Regarding national procedures, thirteen out of twenty-two Member States

have presented their plans to their national parliaments. Seven Member States have received

formal opinions from their independent fiscal institutions on the submitted plans, suggesting

potential for broader involvement of these bodies in future cycles.

The implementation experience has also identified areas requiring further consideration.

These include ensuring coherence between the medium-term fiscal-structural plans and the

excessive deficit procedure, and clarifying how proposed reforms and investments are

integrated into debt sustainability assessments.

Additionally, while the framework includes provisions to support public investment,

careful

consideration needs to be given to how Member States can maintain or increase such

investment while meeting their fiscal adjustment requirements.

These aspects will be

important to monitor as the framework continues to be implemented.

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