Europe puts innovation and competitiveness at the heart of growth

The 2026 European Semester Spring Package places competitiveness at the core of the European Union’s response to a rapidly changing global environment. Faced with geopolitical tensions, stronger international competition, energy market volatility and growing technological rivalry, the EU is calling for coordinated reforms and investments to strengthen innovation, productivity and strategic autonomy.

According to the Commission, Europe has shown resilience through multiple crises but continues to face long-standing structural weaknesses. Among the most significant are subdued productivity growth, insufficient innovation performance and difficulties in turning scientific excellence into commercial success.

Closing Europe’s innovation gap

One of the strongest messages in the Spring Package is the need to close Europe’s innovation gap. EU research and development expenditure remained at 2.2% of GDP in 2024, below the levels recorded by major global competitors. The United States and Japan both invested 3.4% of GDP in R&D, South Korea reached 5.0%, while China has surpassed the EU since 2020, reaching 2.6%.

The Commission argues that Europe possesses strong scientific, industrial and technological capabilities but continues to struggle with commercialisation, scale-up and market deployment. Innovation performance also remains uneven across Member States and regions, creating disparities in productivity and competitiveness.

To address these challenges, the Commission calls for higher public and private investment in R&D, stronger innovation ecosystems, better access to finance and greater support for innovation uptake across the economy.

Knowledge transfer becomes a strategic priority

The Communication highlights knowledge transfer as a critical component of Europe’s competitiveness strategy. While research excellence remains a European strength, the Commission stresses that stronger links are needed between universities, research organisations and businesses. Improved cooperation would help transform research results into products, services, technologies and industrial applications.

Examples from several Member States show progress. Germany and Czechia have advanced technology transfer initiatives, while Estonia has strengthened support for applied research. However, the Commission believes much more remains to be done to bridge the gap between science and the market.

The 2026 country-specific recommendations reflect this objective. Several countries, including Spain, France, Poland and Czechia, are encouraged to strengthen knowledge transfer mechanisms, support innovation adoption and create better conditions for innovative businesses.

Financing innovation and helping companies scale

Access to finance remains one of the main barriers to innovation in Europe. The Commission notes that financing gaps continue to affect startups, scaleups and innovative SMEs. At the same time, European capital markets remain fragmented and underdeveloped compared with other major economies, limiting growth opportunities for high-potential firms.

To address this issue, the EU is advancing the Savings and Investments Union, an initiative designed to channel more private savings towards productive investment. The Commission also highlights the role that supplementary pension funds could play in providing long-term capital for European businesses.

Several flagship initiatives are intended to support business growth. These include the Startup and Scaleup Strategy, the €5 billion Scaleup Europe Fund and the future European Competitiveness Fund. Together, these instruments aim to support the entire innovation cycle, from research and development to industrial deployment and manufacturing.

Strategic technologies and technological sovereignty

The Commission sees advanced technologies as central to Europe’s future competitiveness. Artificial intelligence, quantum technologies, cloud computing and high-performance computing are identified as strategic areas where Europe must accelerate deployment and strengthen capabilities. Brussels highlights initiatives such as the Apply AI Strategy, the AI Continent Action Plan, AI Factories, AI Gigafactories, the Industrial Accelerator Act, the forthcoming Chips Act 2 and the Cloud and AI Development Act.

These technologies are viewed not only as innovation drivers but also as foundations of economic security and strategic autonomy. Their applications extend across industry, energy, transport, public administration, defence and healthcare.

The Commission also points to Important Projects of Common European Interest (IPCEIs) as an important instrument for supporting cross-border innovation and strengthening European industrial capabilities.

A more competitive Single Market

The Communication argues that Europe cannot improve competitiveness without making the Single Market work better. Regulatory fragmentation, administrative burdens and compliance costs continue to limit business growth and cross-border activity. The Commission also identifies late payments as a major obstacle, particularly for SMEs, because they restrict access to finance and weaken supply-chain competitiveness.

Several initiatives are intended to address these challenges. The One Europe, One Market roadmap, the future European Product Act, the proposed EU Inc. framework and the Digital Networks Act all aim to reduce fragmentation and create a more integrated business environment.

The Commission’s message is that innovative companies need a larger, simpler and more predictable European market in which to grow and scale.

Talent, skills and competitiveness

The Spring Package also links competitiveness directly to human capital. Europe faces shortages of skilled workers in strategic sectors such as artificial intelligence, cybersecurity, quantum technologies and semiconductors. To address these gaps, the Commission is promoting measures to strengthen STEM education, vocational training, lifelong learning and advanced digital skills.

Initiatives such as the Union of Skills, the future European VET Strategy, the STEM Education Strategic Plan and the Digital Europe Programme are intended to help Member States develop the workforce required for technological transformation.

According to the Commission, talent is becoming as important as capital and infrastructure in determining future competitiveness.

Competitiveness as a systemic challenge

The 2026 European Semester presents competitiveness as a systemic challenge rather than a single policy area. The Commission’s assessment is that Europe must act simultaneously on innovation, knowledge transfer, financing, strategic technologies, regulation, skills, infrastructure and industrial transformation. Competitiveness will depend not only on how much Europe invests in research and innovation, but also on how effectively it converts knowledge into productivity, business growth, technological leadership and resilient value chains.

In that sense, the Spring Package 2026 positions innovation and knowledge transfer not as standalone objectives, but as essential drivers of Europe’s long-term economic resilience and strategic autonomy.