Design principles for a European Competitiveness Fund

Executive summary

The next Multi-annual Financial Framework (MFF) needs to be simpler, faster and more flexible to strengthen Europe’s prosperity and security.

As the Draghi report highlights, every year the EU faces a €800 billion investment gap that must be urgently addressed to avoid falling further behind in the global innovation and competitiveness race.

Europe invests 24 times less than the US in disruptive innovation, captures just 5 per cent of global venture capital and allocates only 7 per cent of its budget to digital priorities – even though the digital transformation drives the greatest gains in growth and resilience.

DIGITALEUROPE recommends that a minimum 25 per cent of the EU budget is invested into the digital transformation.

DIGITALEUROPE calls for the next MFF and new European Competitiveness Fund to be structured according to six fundamental design principles:

• Agility: EU funding mechanisms must be flexible to allow European actors to quickly adapt and respond to new risks and seize emerging opportunities, ensuring that entrepreneurs and critical technologies receive the timely support they need to scale and succeed. Funding should be approved within three months from receiving the application.
• Access for all: EU funding offers must be simpler and more accessible to incentivise innovation and boost impact.
• Focus on commercialisation of innovation: EU funding must boost digital capabilities and resilience over the next 1-3 years. We need to move beyond measuring success through R&I; real impact lies in scaling innovation commercially and the growth of new businesses.
• Strategic focus on boosting digital resilience: Europe needs to invest in dual-use and critical technologies to boost long-term competitiveness and the resilience of critical infrastructure (e.g. energy, water, harbours, airports and hospitals). This would give a boost to Europe’s tech companies in energy, drones, AI, 5G, and more, while also turning promises into action by implementing the NIS2 Directive and ensuring real protection for our citizens.
• Security before price: Strategic pan-European public investment and procurement of large-scale infrastructure and technologies for the protection of critical infrastructure should prioritise European security, not only price. National procurement limited by national-sized budgets cannot deliver the scale that companies need to compete globally, nor can it ensure interoperability and resilience across the single market.
• Catalyst for other funding: EU programmes must incentivise, not try to replace, private investment. In a liberal democracy, prosperity and technological innovation are driven by the private sector. Yet, Europe has focused more on regulation than on enabling business success. It is time to actively support our digital frontrunners across the EU – in energy technology, connectivity, drones, AI, quantum, semiconductors, cybersecurity, and beyond.

We propose a 5-5-3 framework for EU funding – a streamlined, impact-driven approach to accelerate Europe’s technological leadership:

• Five core programmes targeting Europe’s critical innovation needs.
• Five clear and consistent eligibility criteria for funding focused on outcomes and alignment with EU strategic priorities.
• Three-month turnaround from application to funding award decision to ensure speed, availability and predictability to maximise the impact of EU public investments.

The next MFF must focus on creating demand for innovative solutions and mobilise private capital to fully unlock Europe’s innovation potential. Innovation thrives where there is a market for new ideas. Strategic public procurement and investment – particularly at the EU level – will create commercial opportunities that allow Europeans to reap the benefits of their ideas.

At the same time, private capital remains essential to fill the €800-billion investment gap. Public funding must be designed to leverage, not replace, private investment. Only by crowding in private capital and coordinating with national funding offers can Europe achieve the scale and speed needed to stay globally competitive.