Competitiveness & Defense: The European Commission’s 2025 Cornerstones

Introduction

While European Commission President Ursula von der Leyen recently rounded out the first 100 days of her second term in office, the recent unprecedented and historic geopolitical upheavals – including Donald Trump’s daily twists and turns regarding the U.S. support for Ukraine in its defensive war against Russia as well as the whirlwind caused by his tariffs rises – have forced the Commission to speed up work on reforms designed to bolster the European Union’s defenses and make it more competitive on the global stage, in line with the EU leaders’ 2024-2029 strategic agenda.

To that end, von der Leyen unveiled the European Commission’s Work Program for 2025, outlining the key priorities that will drive the EU’s agenda in the coming years for a “bolder, simpler and faster Union”, including sustainable prosperity and competitiveness and defense and security. Since then, various initiatives have moved forward in this regard.

Enhancing competitiveness

The European Commission made it a top priority to enhance Europe’s competitiveness. On March 11, von der Leyen stressed the work that has been done since her reelection in July 2024 to make Europe more competitive. She cited eight major related initiatives put forward “in just 100 days”, including the Competitiveness Compass, the Clean Industrial Deal, the Strategic Dialogues on the automotive industry and on steel, the Union of Skills, and the Vision for Agriculture and Food.

In the wake of Economist Mario Draghi’s report on the future of European competitiveness, which lays out clear recommendations on how Europe can boost its economic growth, the Competitiveness Compass prepared by the European Commission was designed to translate three transformational imperatives to boost competitiveness: close the innovation gap, develop a joint roadmap for decarbonization and competitiveness and reduce excessive dependencies. In this regard, and as part of the joint roadmap for decarbonization and competitiveness, the Commission presented a Clean Industrial Deal on February 26, 2025, to respond to the trilemma based on Mario Draghi’s recommendations: revive the industry, maintain the decarbonization trajectory and boost competitiveness. With the goal of reaching Europe’s ambition to become a decarbonized economy by 2050, the Deal includes measures to boost every stage of production, with a focus on energy-intensive industries (steel, metals, chemicals), the clean-tech sector as well as circularity in order to reduce waste and extend the life of materials. Furthermore, it aims at tackling the entire value chain, emphasizing six business drivers: affordable energy, lead markets, financing, circularity and access to materials, global markets and international partnerships and skills.

The simplification of the regulatory environment is also one of the key components of the Competitiveness Compass. In this regard, von der Leyen proposed a fast-track deregulation initiative to reduce bureaucratic burdens on businesses through three “Omnibus packages”. The first of these packages focuses on streamlining reporting obligations, due diligence, and the EU taxonomy (see last month’s article).

To complement and translate the Commission’s initiatives, the latter plans to submit several legislative proposals to the Council and the European Parliament for their consideration and adoption. On top of the first Omnibus package’s amendements, presented on February 26, 2025, we can also point out the presentation of an Industrial Decarbonization Accelerator Act and a targeted revision of the REACH Regulation (chemicals), both scheduled for the fourth quarter of 2025. Most initiatives are subject to the ordinary legislative procedure. Schematically, the stages are as follow:

• 1. The European Commission submits a proposal to the Council and the European Parliament;
  2. The Council and the Parliament adopt a legislative proposal either at the first reading or at the second reading;
  3. If the two institutions do not reach an agreement after the second reading, a conciliation committee is convened (trilogue);
  4. If the text agreed by the conciliation committee is acceptable to both institutions at the third reading, the legislative act is adopted.
  5. Once the text has been adopted at EU level, it must be transposed in the Member States.

In addition to these initiatives, the Commission has to contend with untimely threats of tariff increases from President Donald Trump that jeopardize European competitiveness. Although it deeply regrets the US President’s decision to apply 25% tariffs on imports of steel and aluminum as of March 12, 2025, Brussels was quick to respond with “proportionate” countermeasures to tax 26 billion euros worth of American goods in two stages (a first salvo scheduled for April 1, a second a fortnight later). Indeed, as the third-largest supplier of steel to the US, with 3.8 million tons by 2024, the EU was bound to react. The fear now is that the trade conflict will spread to other sectors, such as the automotive, pharmaceutical and food industries. Ursula von der Leyen reaffirmed her willingness to engage in constructive dialogue, emphasizing that the trade relations between the European Union and the US are the biggest in the world, and has instructed Trade Commissioner Maroš Šefčovič to resume his discussions in order to explore better solutions with the United States.

Strengthening the European defense

In the face of a reshaping of the international order, von der Leyen also placed defense at the forefront of the EU agenda, signaling a commitment to enhancing the EU’s strategic autonomy and ensuring greater security for its Member States, with a growing focus on collective defense capabilities.

The challenging geopolitical shifts – including President Donald Trump’s late abrupt suspension of military aid to Ukraine and access to intelligence, as well as his willingness to negotiate directly with Vladimir Putin – indeed compel Europe to take a more proactive stance on its defense policy. To that end, Ursula von der Leyen unveiled a €800 billion “ReArm Europe” defense plan on March 4 to enhance military production and procurement within the EU and reduce reliance on non-European defense suppliers. She reiterated on that occasion that “We are living in absolutely crucial and highly dangerous times”, adding on March 11, 2025, that “economic strength and Europe’s plan to rearm are two sides of the same coin. “

 While the plan was approved on March 6 by Europe’s heads of state and government, it was deemed “insufficient” by some Member States, including French President Emmanuel Macron, who asked the Commission to look into “additional sources of defense funding at European Union level”. To meet their demands, the Commission unveiled a White Paper on the future of European defense as well as the pillars of the €800 billion “ReArm Europe Plan Readiness 2030”. While the ReArm Europe Plan Readiness 2030 strengthens pan-European defense capabilities with new financial means and flexibility (including a regulation proposal to launch of a €150 billion loan instrument and the possibility for Member States to activate the national escape clause of the Stability and Growth Pact to unleash the use of public funding in defense at national level), the White Paper frames a new approach to defense and identifies investment needs. The goal is to ensure the European defense industry can produce at the requested speed and volume and facilitate rapid deployment of military troops and assets across the European Union. A major priority is to make sure the increase in defense spending will be “Made in Europe”.

Von der Leyen also called to switch to a preparedness mindset and announced that she will convene the first-ever Security College, a new configuration that will ensure that College members receive updates on security developments, including external and internal security, energy, defence, cyber, and trade.

Conclusion

President von der Leyen made it a priority to boost Europe’s competitiveness, increase European defense, and continue supporting Ukraine. In a time of great instability and great expectations for Europeans, this could be a chance for Europe to wake up and rearm itself – in every sense of the word – to reassert its power. It remains to be seen how all these initiatives will be translated into legislation and how debates will ensue in the European Parliament. What is certain is that today’s choices will likely shape Europe for the next decades.