Comments on the leaked "Competitiveness Compass" draft from the Commission

The European Commission's recently leaked "Competitiveness Compass" draft is a significant document outlining a vision for Europe's economic future. While it touches upon many critical aspects, its implications for the European digital ecosystem, particularly in areas concerning AI, software, and cloud technologies, deserve careful consideration.

From our perspective, focused on building a sovereign and open European digital ecosystem, the Compass presents both opportunities and areas where a stronger commitment is needed.

Key Takeaways for the European Digital Ecosystem

A Holistic Approach to Digital Infrastructure and Technologies: The document rightly acknowledges the need for a robust digital infrastructure, mentioning investments in 6G, cloud computing, and a single market for connectivity.

However, it must be understood that digital infrastructure is not merely about physical components like data centers and fiber optic cables; it is primarily defined by the software that powers it. While hardware is foundational, software provides the intelligence, flexibility, and functionality of a modern digital infrastructure. The Commission must place equal, if not greater, emphasis on supporting the development of European software solutions, including operating systems, development tools, cloud platforms, and security software.

Focus on AI and Data: The "AI Continent strategy," "Apply AI Strategy," and "Data Union Strategy" signal a commitment to fostering European AI development and data sharing. These initiatives could be instrumental in building a European AI ecosystem less reliant on external players, if coupled with clear data sovereignty principles.

However, in the current climate where AI dominates headlines, this focus must not overshadow the need for a holistic approach to the entire digital sector. Europe's digital sovereignty requires a thriving ecosystem encompassing cloud computing, cybersecurity, and fundamental software and hardware components. The Commission must ensure its policies and funding support a balanced development of the entire digital landscape, not just the most visible technologies.

Strategic Investment with a Focus on European Solutions and Genuine Innovation: The proposed "European Competitiveness Fund" is a welcome step, particularly its focus on strategic technologies and de-risking private investments. This could provide a much-needed boost to European companies, particularly SMEs, developing cutting-edge solutions.

However, the Commission must ensure that these funds are used efficiently, fuel genuine innovation, and reach the actual innovators, including SMEs and startups, rather than being lost in red tape or supporting established players who don't need them. Successful existing schemes like cascade funding and the NGI initiative must be preserved and expanded.
Moreover, European technologies, whether developed through these programs or not, must be prioritized in public procurement processes across the EU. This "European preference" will create a market for European solutions, stimulate investment, and contribute to digital sovereignty, while ensuring taxpayer money is reinvested in the European economy. The goal is to foster a dynamic ecosystem that delivers concrete, measurable value, and these investments should be evaluated with clear metrics, ensuring they deliver the promised benefits.

Skills Development Focused on European Technologies: The acknowledgment of skills gaps and the intention to build a "Union of Skills" are positive steps.

However, these initiatives must prioritize skills that enhance Europe's digital sovereignty. This means focusing on open technologies, open standards, and European platforms, rather than training a workforce skilled primarily in the use of non-European technologies. Skills development programs should empower European citizens to build, manage, and secure a truly European digital infrastructure, and foster a workforce capable of contributing to a vibrant and independent European digital ecosystem. They should also teach them to be wary of solutions that would contribute to making Europe more dependent, rather than independent.

Simplification and Streamlining: The commitment to simplify regulations, reduce administrative burdens, and accelerate permitting processes is crucial for fostering a dynamic and competitive environment for European businesses, especially start-ups and scale-ups in the digital sector.

About the European Competitiveness Fund

The document proposes the creation of a European Competitiveness Fund within the framework of the next Multi-annual Financial Framework (MFF).

Purpose

The fund's primary purpose is to concentrate funding in support of competitiveness priorities, particularly in the form of EU public goods and multi-country investment projects. These priorities are to be defined through strengthened policy coordination tools, as outlined in Section 1.2 of the document (Competitiveness Coordination Tool).
It aims to finance investments in strategic technologies and manufacturing, spanning areas like AI, space, clean tech, and biotech.
It's designed to help leverage and de-risk private investments and support R&D.

Structure and Functioning

It's envisioned as a more integrated way of responding to funding needs, addressing the current fragmentation of the EU budget across too many programs with limited strategic coordination.
The fund should be coupled with a successor to the European Innovation Council (EIC), which, as suggested by Draghi, should be structured like an ARPA-type agency to allow for increased risk-taking in investments.

Relation to Other Initiatives

It builds upon the experience of the Strategic Technologies for Europe Platform (STEP), which has already started redirecting funding towards industrial projects in critical technologies. The European Competitiveness Fund would expand and institutionalize this approach.
It's part of a broader strategy to refocus the EU budget around shared competitiveness priorities, demonstrating the added value of a coordinated approach.

Yes, we have several specific observations and recommendations for the "European Competitiveness Fund" to ensure it effectively contributes to a sovereign, innovative, and competitive European digital ecosystem:

Observations

Potential for Duplication and Fragmentation: While the Fund is intended to streamline funding, there's a risk of creating another layer of bureaucracy if not carefully integrated with existing initiatives like Horizon Europe, Digital Europe Programme, and the EIC.
Risk of "Picking Winners": The focus on "strategic technologies" could lead to the Commission picking winners and potentially overlooking promising but less-hyped technologies or sectors.
Dependence on Private Investment: The Fund's reliance on leveraging and de-risking private investments could be problematic if private investors prioritize short-term returns over long-term strategic goals aligned with European digital sovereignty.

Recommendations

Open Source and Open Standards as a Core Criterion:
- Prioritize projects that utilize and contribute to Open Source software and adhere to open standards. This will foster interoperability, avoid vendor lock-in, enhance security, and promote a more competitive and innovative ecosystem.
- Mandate "Public Money, Public Code" for software developed with funding from the European Competitiveness Fund. This ensures that publicly funded software is open and accessible, maximizing the return on investment for European taxpayers.
- Structure a part of the fund as contracts for maintenance and development of essential open source libraries and tools. Prioritize security-related features and updates. The goal is to prevent a situation similar to the Log4J or Heartbleed vulnerabilities, where critical but underfunded open source projects pose a security risk.
Focus on Long-Term Strategic Goals:
- Prioritize projects that contribute to long-term European digital sovereignty and reduce reliance on non-European technologies, even if they don't offer immediate commercial returns.
- Develop clear metrics and milestones for funded projects, focusing on their contribution to strategic goals, such as reducing dependencies, enhancing security, and fostering a vibrant European tech ecosystem.
- Establish a long-term vision for the fund, extending beyond the current MFF cycle, to provide stability and predictability for investors and researchers.
Support for SMEs and Startups:
- Allocate a significant portion of the fund specifically for SMEs and startups developing innovative digital solutions based on open standards and open source.
- Simplify application procedures and reduce administrative burdens to make the fund accessible to smaller players.
- Provide mentoring and support services to help SMEs and startups navigate the funding process and scale their solutions.
Transparency and Accountability:
- Establish a transparent and public process for selecting projects and allocating funds.
- Publish regular reports on the fund's performance, including metrics on its impact on innovation, competitiveness, and digital sovereignty.
- Create an independent oversight body to monitor the fund's activities and ensure accountability.
Integration with Existing Programs:
- Clearly define the relationship between the European Competitiveness Fund and existing funding programs like Horizon Europe and Digital Europe Programme to avoid duplication and ensure complementarity (assuming the European Competitiveness Fund is not intended to replace these programs).
- Leverage the expertise and experience of existing programs in managing and evaluating. Programmes like NGI have established a strong brand and a community of innovators that could be leveraged to ensure the success of the European Competitiveness Fund. It would be a shame to lose this momentum by starting from scratch.

Potential Impact on the European Digital Ecosystem

The Compass, if implemented effectively, could significantly impact the development of a more sovereign and competitive European digital ecosystem.

However, the document's success hinges on a crucial element: a clear commitment to leveraging open standards and, whenever relevant, Open Source software as the foundation for Europe's digital future. Without this, we risk creating new dependencies, hindering interoperability, and limiting the potential for genuine European digital sovereignty.

Recommendations to the Commission

To truly empower a sovereign and thriving European digital ecosystem, we urge the Commission to consider the following:

Prioritize Open Source and Interoperability: Explicitly endorse "Open Source whenever relevant" as a guiding principle for all digital initiatives, including those funded by the European Competitiveness Fund. Mandate interoperability based on open standards to foster a competitive and innovative market. This would ensure long-term sustainability and avoid vendor lock-in. It would also foster innovation through a larger market.
Strengthen Data Sovereignty: Ensure that all initiatives, particularly the "Data Union Strategy" and cloud-related policies, prioritize European data sovereignty. This includes clear rules on data localization, control, and access, ensuring that European data remains under European jurisdiction. This would also bring stronger guarantees regarding privacy for European citizens.
Support European SMEs and Start-ups: Structure the European Competitiveness Fund and public procurement policies to favor European SMEs and start-ups developing open digital solutions. This will foster a diverse and resilient digital ecosystem. Also, by supporting smaller actors that are more agile and more likely to innovate, this would lead to a more dynamic ecosystem.
Foster an Open Source Ecosystem: Provide dedicated, long-term funding for the development and maintenance of critical Open Source projects that underpin European digital infrastructure.
Promote Digital Skills with an Open Source Focus: Ensure that skills development initiatives, including the "Union of Skills," prioritize training on open technologies and standards. This will build a workforce ready to contribute to a truly sovereign digital future.
European Public Procurement as a Strategic Tool: When procuring digital goods and services, European public institutions should prioritize European providers even if it means a slightly higher cost or a less feature-rich solution, initially. This approach will de facto strengthen the European digital economy and ensure that taxpayers money is reinvested locally.

The "Competitiveness Compass" presents a valuable opportunity to shape a more independent, innovative, and competitive digital future for Europe. By embracing open source, open standards, and a strong commitment to digital sovereignty, the EU can build a digital ecosystem that empowers European businesses, protects its citizens' data, and positions Europe as a global leader in ethical and responsible technology. We urge the Commission to seize this opportunity and chart a course towards true digital independence.