Competitiveness, Digital Transformation and EU Policies

Innovation: the heart of Europe’s competitiveness challenge

Europe’s competitiveness challenge is fundamentally an innovation and productivity one. But Europe lags in the development and productive uptake of more advanced infrastructures and services (e.g., 5G standalone, cloud and AI). Indeed, Europe’s labour productivity lags against other major jurisdictions most acutely in sectors ICT is produced and where it is intensively used. The reasons include shallow capital markets and small firm sizes, which result in weaker returns on R&D. Addressing this challenge requires policy changes – including rebalancing public R&D towards high-impact, high-tech missions; strengthening the research-to-deployment pipeline; and ensuring measures to enhance strategic autonomy are risk-based and proportional.

Summary and Key Findings

This CERRE Issue Paper by Antonio Manganelli identifies the root causes of the EU’s competitiveness problem. It finds that today’s general-purpose technologies (GPTs) — notably advanced connectivity, cloud, and AI — are key levers for competitiveness. It assesses how the EU performs on these levers, how the EU’s current policies are shaping outcomes, and where recalibration may be necessary.

Read the full book, “Charting a European Path to Competitiveness,” which brings together three papers offering a detailed analysis of progress made, persistent challenges, and the policy pathways needed to achieve these closely interconnected objectives.

The paper was presented and discussed at the CERRE Event “Charting a European Path to Competitiveness” (27 November 2025).