Europe’s future competitiveness will be electric, resource-secure and alliance-based.
President von der Leyen’s State of the Union speech this week set out a clear economic proposition: Europe has to build industrial resilience through strategic alliances to reduce structural exposure to energy imports and critical-mineral supply chains.
Two years after the Draghi report formulated recommendations for restoring EU competitiveness, implementation remains limited. Although European Commission President Ursula von der Leyen has positioned it as the policy blueprint for her second term, only 15-30% of Draghi’s 383 recommendations had been fully implemented by July, depending on the source and definitions applied. Since structural challenges will take years to resolve, it is essential to sustain reform momentum, build on progress and accelerate implementation.
Electrification is now an industrial competitiveness strategy.
Doubling electricity’s share in Europe’s energy mix by 2040 is about reducing dependence on fossil-fuel imports, lowering long-term energy costs and building the infrastructure base for advanced manufacturing, clean tech, mobility and digital industries.
The main challenge lies in local and regional delivery: grid capacity, connection times, storage, permitting, workforce and investment-ready industrial sites. Industrial transformation and the energy transition are inseparable and will ultimately be decided by speed of delivery to compete for global innovation and investments.
Critical raw materials policy is becoming industrial policy.
Europe’s dependence on critical raw materials and rare earths, with more than 80% of imports from China, has escalated from a supply-chain concern to an economic-security risk. The proposed European Corporation on Critical Raw Materials, designed to support procurement and stockpiling for batteries, chips, clean tech and defence, is therefore an important step. But it requires institutional enforcement rather than high level non-binding quotas based on voluntary commitments.
Securing supply will take time: building extraction capacity and strategic import partnerships takes decades. That makes materials recycling, processing capacity and targeted investment support essential parts of Europe’s industrial strategy. Recycling, material efficiency and substitution need to be treated as core industrial capabilities and strategically prioritised.
Europe further needs to take targeted measures to unlock downstream investments in processing capacity. This will require significant capital mobilisation and public funding support to de-risk SMEs active in this space.
Forging strategic alliances, with Canada as a blueprint
The proposed “EU associate membership” for Canada is economically promising, but politically highly ambitious. Moving from CETA toward an “Alliance for the Future” could deepen cooperation in advanced manufacturing, energy, critical minerals, batteries, AI, quantum, cyber, defence and the Arctic.
However, “associate membership” is not defined in the EU treaties, and key questions on governance, programme access and institutional rights remain unresolved. Still, the rationale is strong: Canada combines shared democratic values with critical-mineral potential, clean-energy capacity and advanced-technology strengths, helping both sides diversify and secure trade relationships.
For trade and investment attraction, this could create a practical transatlantic pipeline for joint projects, co-investment, technology partnerships and more resilient value chains.
While these economic and security priorities are not new, the urgency to act has grown sharply. The central question is how quickly Europe can implement, which is a concern based on its track record. This will depend on member states accepting deeper economic integration and ceding some control.
Yet in many parts of Europe, nationalist movements and local opposition are pulling in the opposite direction, slowing transformation and making it harder to turn ambitions into bankable projects, faster approvals, connected grids, investment-ready sites and enabling partnerships.
Europe’s future growth will come from regions that are open to investment and build stronger economic ties, both within Europe and with potential “associate members” such as Canada. Building international trade, investment and innovation corridors with complementary innovation ecosystems will be essential to restoring European competitiveness.
