COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Towards a green, digital and resilient economy: our European Growth Model
Date: 2022-03-02
Institutions: European Commission, Secretariat-General
Subjects: EU environmental policy, digital economy, digital transformation, economic growth, economic reform, green economy, investment, single market, structural adjustment

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 2.3.2022  COM(2022) 83 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Towards a green, digital and resilient economy:   our European Growth Model   
 
 
1.  INTRODUCTION 

The  European  economy  is  undergoing  unprecedented  transformations  towards  a  fair 
green  and  digital  future  in  a  context  of  massive  uncertainties  linked  to  the  global  and 
security outlook. Since spring 2021, the economy has seen a strong economic rebound from 
the  COVID-19  pandemic.  The  output  levels  have  fully  recovered,  also  thanks  to  the 
exceptional  support  measures  taken  at  EU  and  national  levels.  The  pandemic  and  the  EU 
policy response have accelerated the twin transition of the EU economy and highlighted the 
need  to  strengthen  the  resilience  of  the  EU  economy.  In  addition,  the  Russian  invasion  of 
Ukraine undermines the European and global security and stability and confronts the EU with 
some immediate challenges. 

The  rapidly  worsening  geopolitical  context  underscores  the  need  to  work  closely  with 
our  international  partners  and  to  reinforce  our  long-term  sustainable  growth  agenda. 
Now more than ever, the Union should leverage its international partnerships to join forces 
on common challenges and promote peace and stability, as well as a rule-based international 
order  and  effective  multilateralism.  The  coordinated  response  by  the  Union  and  its 
international partners to the invasion of Ukraine shows how the Union can work to achieve 
those objectives. At the same time, new sources of risks and uncertainty have emerged and 
need  to  be  addressed.  While  most  companies  and  supply  chains  showed  a  high  degree  of 
resilience  and  adaptability  during  the  pandemic,  the  recovery  and  the  recent  developments 
linked  to  Ukraine’s  invasion  have  revealed  a  number  of  vulnerabilities,  including  in  the 
energy sector,  which must  be tackled to  protect  our European  way of life, maintain growth 
and improve resilience in  the longer run.  The  events  of the past  few  weeks and the rapidly 
worsening geopolitical context should not divert our focus. Instead, they confirm the need to 
accelerate the ongoing economic transformation. 

There is a broad consensus on the priorities for the European economic growth model, 
including  the  green  and  digital  transitions,  and  the  need  to  enhance  the  Union’s 
economic  and  social  resilience.  These  priorities  jointly  contribute  to  the  objective  of 
competitive  sustainability.  Achieving  our  objectives  implies  structural  changes  to  the  EU 
economy, including  at  national  and regional level. The shift  towards a sustainable, resilient 
and inclusive economic model, enabled by a broader diffusion and uptake of digital and green 
technologies and skills, will help address key challenges Europe faces, improve its position as 
a global leader and strengthen its open strategic autonomy. This is all the more important in 
the current context. At the same time, we must ensure the fairness of our economic model and 
protect those that are most affected by the transition, including those who lack the means or 
the  skills  to  fully  benefit  from  it.  The  transformation  of  the  European  economy  will  only 
succeed if it is fair and inclusive and if everybody can gain from the opportunities the twin 
transition brings.  

The transformation of our economy relies on two equally important pillars: investments 
and  reforms.  The  implementation  of  ambitious  and  mutually  reinforcing  investments  and 
reforms  will  be  instrumental  in  delivering  the  transition.  On  the  one  hand,  investment  is 
pivotal for sustained and sustainable growth and a prerequisite for an accelerated green and 
digital transition. On the other hand, our economic structures and the regulatory framework 
should  support  the  economic  transformation  and  be  conducive  to  investment.  Reforms  are 
required  at  all  levels,  to  remove  specific  investment  barriers,  improve  product  and  labour 
market  functioning,  modify  production  and  consumption  patterns  and  strengthen  socio-
economic resilience.  

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In order to deliver on  these objectives, all existing tools will  need to be  mobilised  in a 
coherent  manner.  Our  ambitions  of  achieving  climate  neutrality  by  2050  and  seizing  the 
opportunities  of  the  digital  decade,  while  enhancing  economic,  territorial  and  social 
resilience,  require  immediate  action.  Entire  sectors  and  regions  will  undergo  a  major 
transformation, leading to reallocation of the labour force and changing skills requirements. 
Consumption  patterns  will  change  too.  The  scale  of  the  investment  needs  will  require  the 
involvement of both the public and the private sector, with most of the investments having to 
come from the private sector.  

NextGenerationEU, including the Recovery and Resilience Facility  (RRF), and the EU 
budget, provide a much-needed boost to the recovery. The swift deployment of new EU 
instruments,  including  the  European  instrument  for  temporary  Support  to  mitigate 
Unemployment  Risks  in  an  Emergency  (SURE)  and  the  Coronavirus  Recovery  Investment 
Initiative (CRII), softened the impacts of the crisis. The RRF contributes to the recovery by 
supporting  reforms  and  investments  in  the  Member  States  through  grants  and  loans.  While 
the RRF is a temporary instrument, thanks to its focus on sustainable and growth-enhancing 
reforms and investments, its impacts will be long-lasting. Private and public investments, at 
national and EU level, will need to be sustained over time. As the major share of investments 
to finance the twin transition and enhance resilience will come from the private sector, public 
investments  should be well targeted  and crowd in private investments. There is  an ongoing 
reflection on how to best achieve these objectives while ensuring a growth-friendly reduction 
of high public debt.  

Our  framework  and  rules  should  support  the  EU  objectives  and  create  the  right 
incentives  for  households  and  businesses.  In  this  context,  it  will  be  important  to  make 
progress  on  the  reform  agenda  at  EU  level  and  to  swiftly  adopt  and  implement  the 
Commission’s proposals under the ‘Fit for 55’ package, as well as the proposals underpinning 
the EU’s digital agenda. These are key in achieving the objectives of the Paris Agreement and 
the Sustainable Development Goals.  

The  Single  Market  is  Europe’s  most  valuable  economic  asset  and  its  main  source  of 
resilience. It offers certainty, scale and a global springboard for European companies, and a 
wide availability of quality products for consumers. The pandemic has shown that when the 
Single  Market  does  not  work,  everyone  pays  the  price:  consumers,  industry  and  services, 
large companies but also the many SMEs in the supply chain. That is why the Commission 
continues to work to unlock the full potential of the Single Market, remove existing barriers 
and increase its resilience by reflecting on how to be better equipped in case of future crises, 
also  with  a  view  to  ensure  free  movement  of  goods.  We  need  to  ensure  resilient  supply 
chains,  including  to  safeguard  logistics  and  security  of  supply  for  some  key  sectors  of  the 
economy,  by diversifying supply,  and investing in innovation  and  new capacities.  It  is  also 
important  to  address  labour  and  skills  shortages  and  cyber  threats.  To  mobilise  private 
investments more efficiently, decisive action will be required to complete the Banking Union 
and make swift progress on the Capital Markets Union, including the actions on sustainable 
finance. Furthermore, it is vital to operationalise the European Skills Agenda. Other policies 

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will  also  contribute  to  the  broader  objectives,  including  taxation,  trade  policy,  and  the 
economic governance framework. 

This  Communication  aims  to  contribute  to  the  leaders’  informal  discussions  on  the 
European economic growth model.  It underlines the importance of full implementation of 
measures  agreed  at  EU  level,  coordinated  action  by  all  relevant  actors,  including  the  EU, 
Member  States  and  the  private  sector,  as  well  as  of  promoting  the  key  investments  and 
reforms  required for long-term sustainable  growth and wellbeing for all EU citizens. Given 
the  global  nature  of  the  challenges  ahead,  action  at  EU  and  international  level  will  be 
essential. It will also be important that not only Member States but also private actors pull in 
the same direction.  

2.  INVESTING IN EUROPE’S FUTURE 

Investment  spending  in  the  EU  suffered  in  the  aftermath  of  the  financial  crisis. 
Following the financial crisis, real investment in the EU dropped by 15% compared with the 
2007 level  and stayed well below its historical  trend for several  years.  As a share of  GDP, 
private  investment  started  to  recover  gradually  as  of  2014.  Public  investment  started  to 
recover  only  slowly  as  of  2016  and  could  scarcely  keep  up  with  depreciation  levels.  If 
sustained,  these  low  public  investment  levels  would  result  in  a  gradual  deterioration  of  the 
public capital stock.  

Graph  1:  Gross  public  and  private  investment  in  the  EU  (%  of  GDP)  –  left  panel;  and  net  public 
investment for the Union and other international partners (% of GDP) – right panel 

Source: Commission services. Investment is defined as fixed capital formation.  

While investment dropped in the first half of 2020 as economic activity collapsed, policy 
support  is  set  to  lift  it  above  pre-pandemic  levels.  Thanks  to  monetary  and  fiscal  policy 
support, the shared commitment to avoid a premature return to fiscal consolidation, and the 
investment  boost  from  NextGenerationEU  and  the  EU  budget,  both  private  and  public 
investments  are  set  to  surpass  pre-pandemic  levels  in  2022,  confirming  that  we  are  on  the 
right  path.  Nevertheless,  additional  high  quality  investment  remains  necessary  to  meet  the 
2030 targets of the twin transition. Moreover, the crises of the past decade have demonstrated 
the importance of accompanying the investments with reforms.  

2.1. DELIVERING ON THE EUROPEAN GREEN DEAL 

The green transition is an opportunity to put Europe on a new path of a sustainable and 
inclusive growth. It is urgent to act and the current decade is a make or break moment. The 
green transition will also help reduce energy bills and dependence on fossil fuel imports, thus 
improving  energy  and  resource  security  of  the  Union.  The  geopolitical  situation  and  recent 
developments  in  energy  prices  have  highlighted  the  need  to  accelerate  this  change.  The 
transition  will also  entail transformations of our industry  and  food system,  require building 

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renovations, accelerate the shift  to  sustainable and  smart  mobility,  and create new jobs and 
business opportunities in a circular economy.  

The  transition will  also  bring  challenges.  For  the  green  transition  to  succeed,  it  must  put 
people first and  care for those who will be most affected. To this end, the Commission has 
put fairness at the heart of its policies under the European Green Deal, including the ‘Fit for 
55’  package.  In  addition,  the  proposal  for  a  Council  Recommendation  on  ensuring  a  fair 
transition  provides  specific  guidance  to  help  Member  States  devise  and  implement  policy 
packages,  addressing  the  employment  and  social  aspects  linked  to  the  transition  in  a 
comprehensive manner.1 

The  European  Green  Deal2  sets  out  the  roadmap  for  making  the  Union’s  economy 
sustainable in a fair and inclusive manner, tackling climate and environmental-related 
challenges.  In  line  with  the  Paris Agreement,  the  Union  has  committed  to  reducing 
greenhouse gas (‘GHG’) emissions by at least 55% in 2030, compared to levels in 1990.3 In 
an  effort  to  mobilise  all  policies  and  align  current  rules  with  the  European  Green  Deal 
objectives, the Commission has proposed the ‘Fit for 55’ package at EU level, which aims at 
revising  all  relevant  policy  instruments.4  The  Commission  has  also  identified5  a  number  of 
additional  actions  needed  in  order  to  meet  the  environmental  objectives  of  the  European 
Green Deal, including the protection of biodiversity  and ecosystems,  tackling pollution and 
decoupling economic growth from resource use.  

To deliver on the Green Deal objectives, we will need to increase the annual investments 
by around EUR 520 billion in the coming decade (2021-2030), compared to the previous 
decade.6 Such investments have high benefits to  society and the costs of  non-action are far 
higher.  From  those  additional  investments,  EUR  390  billion  per  year  correspond  to  the 
decarbonisation of the economy and in particular the energy sector, including energy-related 
investments  in  the  buildings  and  transport  sectors.7  The  additional  investment  needed  to 
deliver  on  the  other  environmental  objectives  of  the  green  transition  (beyond  climate  and 
energy)  is  estimated  to  be  about  EUR  130  billion  per  year.  We  will  also  need  to  invest  in 
climate change adaptation and key technologies that will enable the green transformation and 
EU’s future growth, such as batteries, solar panels, and hydrogen, as well as in upskilling and 
reskilling of the workforce and training. This investment effort will also help to fully unlock 
the potential of EU regions and their different competitive advantages.  

1   Proposal for a Council Recommendation on ensuring a fair transition towards climate neutrality, COM(2021) 

801 final. 

2  Communication  on  The  European  Green  Deal,  COM(2019)  640  final.  See  also  European  Parliament 

resolution of 15 January 2020, and European Council conclusions of 11 December 2020. 

3   In addition, the Union has committed to climate neutrality by 2050. See Regulation 2021/1119 establishing 

the framework for achieving climate neutrality (OJ L 243, 9.7.2021, p. 1).  

4  Communication on ‘Fit for 55’: delivering the EU’s 2030 Climate Target, COM(2021) 550 final. 
5   For instance: Communications on EU Soil Strategy for 2030, COM(2021) 699 final; Communication on New 
EU Forest Strategy for 2030, COM(2021) 572 final; Communication on EU Biodiversity Strategy for 2030, 
COM(2020) 380 final; Communication on A new Circular Economy Action Plan, COM(2020) 98 final; and 
Communication on EU Action Plan: towards zero pollution for air, water, and soil, COM(2021) 400 final. 
6   Communication on The EU economy after COVID-19: implications for economic governance, COM(2021) 

662 final, p.17.  

7   These  estimates  include  investments  in  the  power  grid,  power  plants,  industrial  boilers  and  new  fuels 
production  and  distribution,  investments  in  building  insulation,  energy  renovation,  and  transport-related 
infrastructure  such  as  recharging  and  refuelling  stations.  However,  they  do  not  include  investments  in  rail, 
road,  airports  or  ports  infrastructure,  nor  future  climate  adaptation  needs  such  as  investments  dedicated  to 
making  existing  assets  more  resilient  to  climate  change  or  increased  costs  due  to  more  frequent  extreme 
weather  events.  See  SWD(2020)  98  final,  p.17.  See  COM(2020)  789  final  and  SWD(2020)  331  final  for 
estimates on the investment gap regarding transport infrastructure.  

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This  increase  of  more  than  50%  of  the  energy  investment  needs  compared  to  the 
historical  trend  is  mostly  driven  by  the  need  to  decarbonise  the  economy  and  will 
support our efforts to ensure security of supply. The table below provides a breakdown of 
the  sectors  where  those  energy-related  investments  will  be  needed.  On  the  energy  supply 
side,  investments  will  be  needed  in  new  infrastructure,  including  renewable  energy,  energy 
storage,  upgrades  of  existing  power  grids,  gas  and  electricity  interconnections  and  the 
development of new fuels, such as synthetic fuels. On the energy demand side, investments 
will be needed in relation to the industrial, residential, tertiary, and transport sectors.  

Table 1: Additional annual investments needs for the climate and energy policy              
(EUR bn) 

Supply side 

  Power grid 
  Power plants, incl. boilers and new fuels 

Demand side  

  Industrial sector 
  Residential 
  Tertiary 
  Transport sector 

31 
25 

14 
92 
54 
175 

Total 

                                                                                        392 

Source:  Commission  services,  based  on  data  from  table  7  of  SWD(2021)  621  final.  Additional  annual  investments 
calculated  as  the  difference  between  the  average  total  annual  investments  2011-2020,  and  the  average  total  annual 
investments 2021-2030 (MIX scenario). Numbers have been rounded. 

As  stated  above,  additional  investments  will  also  be  needed  to  deliver  on  the 
environmental  objectives  of  the  European  Green  Deal,  amounting  to  EUR  130  billion 
annually. Those objectives notably concern the protection and restoration of biodiversity and 
ecosystems, the transition to a circular economy, the sustainable use and protection of water 
and  marine  resources,  and  pollution  prevention  and  control.  The  table  below  provides  a 
breakdown  of  the  additional  investments  needed  for  each  of  those  objectives,  including 
research and development activities.  

Table 2: Additional annual investment needs for environmental objectives                  
(EUR bn) 

Protection of 
biodiversity and 
ecosystems 

Circular Economy and 
Resource Efficiency 

  Biodiversity landscapes/nature restoration 

  Management of forest resources 

  Management of wild flora and fauna 

  Management of materials and efficiencies 
  Waste management 
  Additional potential in 3 sectors   
  (food, mobility and built environment) 

Pollution prevention 
and control 

  Protection of ambient air and climate 
  Noise and vibration abatement 
  Protection against radiation 

Water protection and 
management 

  Management of waters 

  Wastewater management 

Research and 
Development 

  Resource management R&D 
  Environmental R&D 

4 

2 

1 

10 

10 

15 

40 
1 
5 

21 

15 

5 
2 

Total 

                                                                                          130 

Source: Commission services, based on data from table 1 of SWD(2020) 98 final. Numbers have been rounded.  

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The  required  total  investment  levels  will  remain  high  also  in  the  period  after  2030. 
Hence,  it  is  important  that  a  proper  policy  framework  that  incentivises  and  enables 
investment  is  in  place  to  sustain  the  level  of  investment  needed  for  the  green  transition  up 
until 2050. 

The impacts of climate change on our economy, including direct physical impacts and 
their  consequences  in  Europe  and  beyond,  will  intensify  and  we  need  to  be  better 
prepared. This  may  entail, for instance, the  disruption  of regular trade  and travel,  but also 
social and geopolitical  developments  that may be spurred by the climate crisis  or the green 
transition and that could affect our economy. The Strategy on Adaptation to Climate Change8 
outlines  measures  to  strengthen  Europe’s  resilience  in  that  regard,  from  climate-proofing 
infrastructure to limiting the effects of climate change on human health. 

The  digital  transition  will  contribute  to  the  green  objectives,  with  synergies  in  many 
areas  of  a  smart  circular  economy.  The  uptake  of  innovative  digital  solutions  can  help 
achieve  sustainability  objectives  in  various  sectors  of  the  economy  (e.g.  smart  buildings, 
smart  and  sustainable  mobility  systems,  digital  ‘product  passports’,  precision  farming). 
Moreover, digital technologies can also support innovative data solutions that can contribute 
to  the  Green  Deal  objectives  (e.g.  European  Green  Deal  data  space,  Destination  Earth 
initiative). At the same time, the digital sector should foster the uptake of technologies with 
lower  environmental  footprint  and  higher  energy  and  material  efficiency,  for  instance  by 
promoting technological excellence through energy efficient semiconductors. 

2.2. SEIZING THE OPPORTUNITIES OF EUROPE’S DIGITAL DECADE 

The COVID-19 pandemic has accelerated the digital transformation of our societies and 
further highlighted the importance of digital technologies for Europe’s future economic 
growth.  Digitalisation  is  transforming  the  way  people  study,  work  and  connect  with  each 
other. At the same time, it allows entrepreneurs to set up and grow their business wherever 
they  live,  opening  markets  and  investments  across  Europe  and  globally,  and  creating  new 
jobs.  We  need  to  make  sure  that  everyone  can  actively  participate  and  gain  from  this 
transformation. A fair digital transformation has the potential to increase the innovation and 
productivity of the EU economy, offering new opportunities for people and businesses. 

The  Digital  Compass9  proposed  by  the  Commission  sets  out  the  Union’s  digital 
ambitions for 2030. They cover four broad areas: the development of digital education, skills 
and  competences,  secure  and  sustainable  digital  and  connectivity  infrastructures,  digital 
transformation of businesses, and the digitalisation of public services and education systems. 
In  order  to  achieve  these  goals,  we  will  need  to  step  up  investments  in  key  digital 
technologies,  including  cyber  security,  cloud  computing,  artificial  intelligence,  data  spaces, 
blockchain  and  quantum,  and  semiconductors,  as  well  as  in  the  relevant  skills.  A  recent 
proposal for a Path to the Digital Decade10 confirms the 2030 digital targets and sets out the 
way to reach them.  

In  order  to  deliver  on  the  digital  transformation  of  the  Union,  a  2020  estimate 
considered  the  additional  investment  needs  to  be  around  EUR  125  billion  per  year.11 

8   Communication on the new EU Strategy on Adaptation to Climate Change, COM(2021) 82 final.  
9   Communication  on  the  2030  Digital  compass:  the  European  way  for  the  Digital  Decade,  COM(2021)  118 

final.  

10  Proposal  for  a  decision  of  the  European  Parliament  and  of  the  Council  establishing  the  2030  Policy 

Programme ‘Path to the Digital Decade’, COM(2021) 574 final.  

11  COM(2021) 662 final, p.17.  

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This  includes  investments  in  digital  infrastructure,  digital  skills  and  advanced  technologies, 
but  leaves  out  other  dimensions  such  as  digital  public  services.  Table  3  below  provides  a 
breakdown of that investment gap until 2030 as analysed at the time for each area.  

Table 3: Additional annual investment needs for the digital transformation                 
(EUR bn) 

Communication networks 
Digital Skills  
AI 
Cloud 
Semiconductors/Photonics 
Cybersecuriy 
Digital Green Technologies 
HPC, Graphene and Quantum 
Blockchain 
Common European data spaces 
Digital Innovations/Data and Next Generation Internet 

Total 

42 
9 
20 
11 
17 
3 
6 
6 
3 
3 
5 

125 

Source: Commission services, based on data from table 2 of SWD(2020) 98 final. 12 Numbers have been rounded.   

While  the  bulk  of  the  investment  for  the  digital  transformation  will  come  from  the 
private sector, public intervention will as well be needed to crowd in private investments 
and  help  correct  market  failures.  The  programme  of  policy  reforms  at  EU  level  aims  at 
creating a digital Single Market which protects the fundamental rights of users, offers a level 
playing field for businesses, and facilitates the uptake and deployment of digital technologies 
by the business sector and in particular SMEs. This is the objective, for instance, of the EU’s 
Cybersecurity  Strategy,13  the  European  Digital  Identity,14  the  European  Democracy  Action 
Plan,15 the Platform to Business Regulation,16 and the Geo-blocking Regulation.17 Moreover, 
the Commission adopted horizontal and sectoral strategies to promote the creation of a Single 
Market  for  data.  The  recently  launched  Structural  Dialogue  on  digital  education  and  skills 
aims  to  increase  Member  States’  commitments  and  to  improve  investments,  reforms  and 
deliverables in this area, as well as to inform future EU actions. 

Europe  aspires  to  be  a  frontrunner  in  setting  global  standards  that  put  people  at  the 
centre  of  the  digital  transition.  The  digital  technologies  and  services  people  use  must  be 
compliant with the applicable legal framework and respect the rights and values intrinsic to 
the Union. The Union has pioneered regulation of the digital space, for instance, through the 
Digital Services Act and Digital Markets Act,18 and more recently Artificial Intelligence,19 by 

12  Commission services are reviewing these numbers. 
13  Joint Communication on the EU’s Cybersecurity Strategy for the Digital Decade, JOIN(2020) 18 final.  
14  Proposal for a Regulation as regards establishing a framework for a European Digital Identity, COM(2021) 

281 final.  

15  Communication on the European democracy Action Plan, COM(2020) 790 final.  
16  Regulation  2019/1150  on  promoting  fairness  and  transparency  for  business  users  of  online  intermediation 

services (OJ L 186, 11.7.2019, p. 57).  

17  Regulation  2018/302  on  addressing  unjustified  geo-blocking  and  other  forms  of  discrimination  based  on 
customers'  nationality,  place  of  residence  or  place  of  establishment  within  the  internal  market  (OJ  L  60I, 
2.3.2018, p. 1).  

18  Proposal for a Regulation on a Single Market for Digital Services (Digital Services  Act), COM(2020) 825 
final;  and  proposal  for  a  Regulation  on  contestable  and  fair  markets  in  the  digital  sector  (Digital  Markets 
Act), COM(2020) 842 final.  

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proposing a Directive on improving working conditions in platform work20 and a Declaration 
on  digital  rights  and  principles.21  By  leading  the  way,  Europe  also  promotes  its  values 
worldwide. In the same vein, the EU is having a central role in the negotiations carried out 
within  the  World  Trade  Organisation  to  set  the  multilateral  international  framework  for 
digital trade.  

2.3. ENHANCING RESILIENCE AND CRISIS PREPAREDNESS 

The Single Market is our main source of resilience, even if recent events demonstrated 
that it is not immune to shocks. While the economy showed considerable resilience during 
the  pandemic,  the  rebound  has  left  some  companies  struggling  to  keep  up  with  surging 
demand as they rebuild their supply chains and search for input materials as well as available 
and qualified staff. The resulting price pressures, coupled with high energy prices, have led to 
higher than expected inflation, which weighs on households’ purchasing power.  

Most  supply  chains  proved  strong  and  adapted  to  the  unprecedented  shock  to  the 
economy.  However,  a  few  industrial  ecosystems  have  been  strongly  affected  by  shortages 
and  supply  disruptions,  with  a  significant  effect  on  the  overall  economy.  The  updated 
industrial strategy22 has helped identify areas in which we have strategic dependencies23 that 
need  to  be  addressed.  The  second  Report  on  EU  strategic  dependencies  and  capacities24 
deepens  the  assessment  related  to  raw  materials25  of  strategic  importance  and  chemicals.  It 
also assesses additional areas, namely cybersecurity,  IT software and photovoltaic panels. It 
confirms  the  progress  made  to  address  the  strategic  dependencies  identified  in  the  first 
review, thanks to international partnerships, industrial alliances, important public and private 
investments and fit-for-purpose regulatory proposals. 

Diversification and openness are key ingredients of a resilient European economy. The 
current  geopolitical  instability  and  accelerating  climate  change  demonstrate  that  Member 
States and regions  that  rely heavily on  a limited set  of economic activities  or providers  are 
more exposed to shocks and more limited in their ability to react.26 To support diversification 
and competitiveness, the EU needs to remain open to trade, strengthen the multilateral trading 
system  and  make  active  use  of  the  trade  policy  tools  at  its  disposal,  including  Free  Trade 
Agreements  and  measures  to  ensure  undistorted  trade.  The  EU’s  credibility  and  interests 
hinge  on  its  ability  to  negotiate  and  conclude  agreements,  and  effectively  implement  and 
enforce them. Meanwhile, businesses need to diversify their supply chains to manage risks to 
raw  material  prices,  quality  and  supplies.  Competition  policy  and  its  enforcement  plays  an 
instrumental role in this respect. 

19  Communication  on  a  Digital  Finance  Strategy  for  the  EU,  COM(2020)  591  final;  Communication  on  a 
European  strategy  for  data,  COM(2020)  66  final;  Communication  on  Fostering  a  European  approach  to 
Artificial Intelligence, COM(2021) 205 final.  

20  Proposal for a Directive on improving working conditions in platform work, COM(2021)762 final. 
21  Communication  on  Establishing  a  European  Declaration  on  Digital  rights  and  principles  for  the  Digital 

Decade, COM(2022) 27 final.  

22  Communication on updating the 2020 New Industrial Strategy, COM(2021) 350 final.  
23  These areas include for example active pharmaceutical ingredients and other health related products. 
24  SWD ‘Strategic dependencies and capacities: second stage of in-depth reviews’, SWD(2022) 41 final. 
25  As  part  of  the  critical  raw  materials  action  plan,  the  Commission  is  accelarating  the  work  with  Member 
States to address strategic dependencies for the EU’s raw material supplies by a) diversified sourcing outside 
the Union (e.g. partnerships with Canada); b) recycling; and c) sustainable extraction and processing of raw 
materials in the EU. The Commission is identifying how to tailor this approach per critical raw materials for 
the green and digital transition (e.g. critical raw materials needed for batteries, solar panels, semiconductors 
or hydrogen). 

26  Communication ‘2021 Strategic Foresight Report: The EU’s capacity and freedom to act’, COM(2021) 750 

final. 

8 

 
 
                                                                                                                                                                                     
The transition towards a greener, more digital and more resilient economy and business 
models  is  taking  root  in  Europe.  Important  investment  pipelines  are  emerging  that  can 
promote  Europe’s  industrial  leadership  in  the  technologies  of  the  future.  The  2022  Annual 
Single  Market  Report27  takes  stock  of  investment  volumes  for  certain  products  and 
technologies  playing  a  key  enabling  role  of  most 
the 
competitiveness of tomorrow’s industry. It covers investment volumes in raw materials, solar 
PV,  batteries,  clean  hydrogen,  green  steel,  cement,  chemicals,  clouds  services  and 
cybersecurity projects.  

industrial  ecosystems  and 

Industrial  alliances  can  play  an  important  role  in  mobilising  actors  and  investment  in 
strategic  areas,  identifying  regulatory  barriers  and  enablers  and  building  a  suitable 
project  pipeline.  Existing  industrial  alliances,  as  shown  in  the  graph  below,  have  proved 
instrumental to strengthening European capacities (e.g. batteries). They are bringing tangible 
results by aligning European, national and private sector reform and investment priorities. 

Graph 2: Overview of industrial alliances                                                                                  

Source: Commission services, figure 11 of SWD(2022) 40 final.  

Important  Projects  of  Common  European  Interest  (IPCEI)  can  help  stimulate  public 
and  private  investments  by  supporting  research,  innovation  and  first  industrial 
deployment across the Union. Possible new IPCEIs on cloud, hydrogen and additional ones 
on microelectronics and connectivity as well as health are in preparation by Member States, 
in addition to the existing IPCEI on batteries and the first IPCEI on microelectronics.  

In the area of semiconductors, the recently proposed European Chips Act28 comprises a 
comprehensive set of measures to strengthen the EU's security of supply, resilience and 
technological leadership. To achieve these objectives, it aims to mobilise more than EUR 43 
billion  of  public  and  private  investments  and  set  measures  to  prevent,  prepare  and  swiftly 
respond to any future supply chains disruption, together with Member States and the Union’s 
international partners.  

To further enhance Europe's technological edge and support its industrial base, the EU 
and its Member States will also have to considerably increase investment in European 
defence  and  space  industries,  including  in  cyber  defence.  The  invasion  of  Ukraine 
highlights that in order for the Union to retain the ability to act and take responsibility for its 
own  security,  it  must  strengthen  its  resilience  and  develop  strategic  capacities,  such  as  in 

27  Annual Single Market Report 2022, SWD(2022) 40 final. 
28  Proposal  for  a  Regulation  establishing  a  framework  of  measures  for  strengthening  Europe's  semiconductor 

ecosystem (Chips Act), COM(2022) 46 final.  

9 

 
 
                                                           
energy, defence and cyber. Regarding cyber resilience, the EU needs to enhance its collective 
preparedness, coordinate joint situational awareness, and strengthen its operational assistance 
capacity,  including  through  the  proposed  Joint  Cyber  Unit  and  launch  a  European 
infrastructure  of  SOCs  (Security  Operations  Centres).  The  recently  adopted  space  and 
defence  packages29  aim  to  set  out  concrete  measures  to  support  the  Union’s  ambitions  in 
space  and  defence  policies.  These  initiatives  will  also  promote  synergies  between  the  civil 
and defence industries in view of maximising spin-offs and cross-fertilisation.  

Additional targeted investment has been mobilised to strengthen our risk management 
and  emergency  response  capabilities.  The  European  Health  Emergency  preparedness  and 
Response Authority  (HERA) was designed for this purpose. It will help anticipate potential 
health crises,  through intelligence  gathering and  building the necessary  response capacities. 
When  an  emergency  does  arise,  HERA  will  help  ensure  the  production  and  distribution  of 
medicines, vaccines and medical equipment. Moreover, through the EU4Health Programme, 
the  Union  is  also  investing  in  actions  to  complement  Member  States’  action  in  the  area  of 
disease  prevention,  health  promotion,  cross-border  health  cooperation,  health  systems 
resilience  and  resource  efficiency.  The  Union  is  also  investing  in  the  development  of  the 
rescEU strategic reserve of response capacities under the Union Civil Protection Mechanism 
to  improve  our  preparedness  for  future  large-scale  crises,  including  health  and  disaster 
scenarios with transboundary effect, triggered by climate change-induced disasters and new 
and emerging threats.  

Latest  developments  have  confirmed  the  importance  of  an  integrated  and  well-
functioning Single Market for products, workers, services and capital, which is essential 
for  our  resilience.  It  is  estimated  that  further  improvements  of  the  Single  Market  for 
manufactured  products  could  generate  gains  in  GDP  between  183  and  269  billion  EUR 
annually, while further integration of the services markets could amount to gains in GDP of 
297  billion  EUR  per  year.  These  increases  alone  could  raise  the  economic  benefits  of  the 
Single Market from 8-9% to around 12% of additional GDP.30 To that end, the Commission 
is  actively  promoting  the  removal  of  existing  barriers  and  unjustified  obstacles,  notably 
through  coordinated  work  and  dialogue  with  Member  States  in  the  context  of  the  Single 
Market  Enforcement  Task  Force.31  The  Commission  also  works  to  prevent  the  creation  of 
new  barriers,  for  example  through  the  existing  notification  mechanisms,  and  takes 
enforcement action if needed.  

To  bolster  the  resilience  of  its  Single  Market,  Europe  must  increase  its  capacity  to 
ensure security of supply in case of an emergency. To guarantee more information sharing, 
coordination  and  solidarity  when  Member  States  adopt  crisis-related  measures,  the 
Commission  is  working  on  a  proposal  for  a  Single  Market  Emergency  Instrument.  The 
instrument  will  put  in  place  a  mechanism  for  crisis  preparedness  and  action  through  which 
the  Union  can  address  critical  product  shortages  by  speeding  up  product  availability  (e.g. 

29  As regards the space package, see in particular the Joint Communication on EU approach for Space Traffic 
Management and an EU contribution addressing a global challenge, JOIN(2022) 4 final; and proposal for a 
Regulation establishing the Union Secure Connectivity Programme for the period 2023-2027, COM(2022) 57 
final. Concerning the defence package, see in particular the Communication on Commission contribution to 
European  defence,  COM(2022)  60  final;  and  Communication  on  roadmap  on  critical  technologies  for 
security and defence, COM(2022) 61 final.  

30  Communication on Long term action plan for better implementation and enforcement of Single Market rules, 

COM(2020) 94 final.  

31  Communication on identifying and addressing barriers to the Single Market, COM(2020) 93 final. 

10 

 
 
                                                           
standard  setting  and  sharing,  fast-track  conformity  assessment)  and  reinforcing  public 
procurement cooperation.  

3.  ENSURING A FAIR AND INCLUSIVE ECONOMIC TRANSFORMATION  

The  green  and  digital  economic  transformation  can  only  succeed  if  it  is  fair  and 
inclusive. The welfare effects of digitalisation and decarbonisation are likely to be unequally 
distributed.  As  lower-  and  middle-income  households  often  spend  a  larger  share  of  their 
disposable income on food and essential services, such as housing, energy and transport, they 
are likely to be more affected as the cost of emissions is internalised, driving up the price of 
certain economic activities relative to others.  

Labour  reallocation  within  and  between  sectors  will  require  reforms  and  large-scale 
investment  in  reskilling  and  upskilling.  Similarly,  the  digital  transformation  is  likely  to 
create  new  employment  opportunities  in  advanced  technologies  while  other  jobs  will  most 
likely  be  fully  or  partially  automated.  New  forms  of  work  organisation  create  both 
opportunities and challenges for policy makers, especially when it comes to ensuring broad 
access  to  social  protection  and  high-quality  working  conditions.  To  facilitate  restructuring 
and  adjustment,  Member  States  should  follow  granular  approaches,  focusing  on  the 
individual  regions  and  sectors  concerned.  The  approach  for  comprehensive  and  coherent 
policy packages set out in the Commission Recommendation for Effective Active Support to 
Employment (EASE) can guide this process.  

A strong policy response at all levels will be needed to effectively address the social and 
cohesion challenges ahead of us. At EU level, the European Pillar of Social Rights and the 
associated Action Plan32 provide a coherent framework for action, including three ambitious 
EU  headline  targets  for  2030  in  the  areas  of  employment,  skills  and  poverty  reduction.33 
Member States and regional and local governments will also have to play their part, involving 
the relevant actors on the ground, including social partners and civil society, in the design and 
implementation  of  effective  enabling  policies  and  flanking  measures.  The  EU  budget  will 
continue  providing  support  to  reduce  regional  and  social  disparities,  in  particular  through 
cohesion policy.  

As emphasised in the Porto Declaration,34 education and skills must be at the centre of 
our  political  action.  Existing  systems  will  have  to  adjust  to  support  the  transition  towards 
newly  created  jobs.  The  Communication  on  the  European  Education  Area35  formulates  a 
shared  vision  to  improve  access  to  quality  education  and  training  and  to  equip  EU  citizens 
with the right knowledge and skills to reap the benefits of the green and digital transitions. In 
addition,  the  Digital  Education  Action  Plan  proposes  a  set  of  initiatives  to  foster  the 
development  of  a  digital  education  ecosystem  with  enhanced  digital  competences  for  the 
digital transformation. 

The  European  Skills  Agenda,  including  the  Pact  for  Skills,  provides  a  comprehensive 
framework of future action and a set of ambitious objectives to steer investment in adult 
learning  across  the  EU.  It  notably  includes  proposals  linked  to  vocational  education  and 
training, micro-credentials and individual learning accounts. To implement the initiatives and 

32  Communication on the European Pillar of Social Rights Action Plan, COM(2021) 102 final.   
33  At least 78% of the population aged 20 to 64 should be in employment by 2030; at least 60% of all adults 
should participate in training every  year; the number of people at risk of poverty or social exclusion should 
be reduced by at least 15 million by 2030. 

34  See https://www.consilium.europa.eu/en/press/press-releases/2021/05/08/the-porto-declaration/ 
35  Communication on achieving the European Education Area by 2025, COM(2020) 625 final.  

11 

 
 
                                                           
meet  the  objectives  of  the  Skills  Agenda,  the  EU  will  need  additional  public  and  private 
investments in skills of approximately EUR 48 billion annually.36 NextGenerationEU and the 
EU budget provide significant resources which contribute to meeting these needs.37  

Flanking  measures  will  be  required  to  mitigate  the  distributional  impacts  of  the  twin 
transition.  Measures  will  have  to  be  carefully  designed  to  provide  the  right  incentives  and 
support  the  shift  to  climate  neutrality.  At  EU  level,  financing  for  supporting  policies  is 
available from  cohesion  policy, the Just  Transition Mechanism, the  RRF and, in  the future, 
from  the  proposed  Social  Climate  Fund  linked  to  the  introduction  of  emissions  trading  in 
buildings  and  road  transport.  By  ensuring  a  balanced  territorial  development  and  creating 
quality job opportunities for everyone while taking measures to mitigate the negative impact 
on the most vulnerable, including those at risk of energy poverty, and strengthening access to 
social protection, the economic transformation can help address pre-existing socio-economic 
inequalities,  improve  health  and  promote  equality.  The  fairness  of  the  twin  transitions  will 
also  require  measures  to  promote  adequate  working  conditions,  including  as  regards 
minimum wage.38  

4.  MOBILISING COORDINATED ACTION AT ALL LEVELS 

In  order  to  master  such  a  massive  transformation  of  the  European  economy,  an 
enabling  policy  framework  must  support  innovation  and  accompany  change.  Tackling 
the  challenges  in  the  post-pandemic  world  will  require  innovative  products  and  services  as 
well as new business models and a well-prepared and adaptable workforce.  

The  investments  needed  in  order  to  complete  the  twin  transition  and  to  enhance 
resilience  will  need  to come  primarily  from  the  private  sector.  Hence,  the  need  to  fully 
seize the business  opportunities offered by the Single Market, to start-up and scale up, and 
top  tap  the  potential  for  the  Capital  Markets  Union  to  improve  the  efficiency  of  funds 
allocation within the Union. Member States have a key role to play when it comes to lifting 
barriers linked to the transposition, implementation and application of EU legislation, lengthy 
and  complex  administrative  procedures,  regulatory  uncertainty,  fragmentation,  complex  tax 
systems and a weak business environment. Moreover, cross-cutting policies, such as taxation, 
trade,  and  competition  policy,  also  support  Union’s  favourable  business  environment  and 
help attract investment.  

Strong and efficient Capital Markets Union and Banking Union are needed, to mobilise 
the  flow  of  private  money  necessary  to  support  the  twin  transition.39  The  scale  of 
investments needed for the recovery and the twin transition can only be provided by a strong 
and  competitive  banking  sector  and  well-functioning,  deep  and  integrated  capital  markets. 
They  support  the  twin  transition  by  making  companies,  including  SMEs,  more  visible  to 
investors,  supporting  access  to  public  markets  and  encouraging  more  long-term  and  equity 
financing, also through InvestEU. Access to finance for companies in  general  and SMEs in 
particular  can  be  improved  by  completing  the  Banking  Union  and  by  developing  capital 

36  Communication  on  European  Skills  Agenda  for  sustainable  competitiveness,  social  fairness  and  resilience, 

COM(2020) 274 final, p.20  

37  These include cohesion policy funding under the ESF+ and ERDF, Erasmus+, Horizon Europe, the dedicated 
Digital  Europe  Programme,  InvestEU,  the  Just  Transition  Fund,  the  European  Globalisation  Adjustment 
Fund and the Modernisation Fund. 

38  In  this  context,  the  Commission’s  proposal  for  a  Directive  on  Minimum  Wages  provides  a  framework  for 
ensuring that workers in the Union are protected by adequate minimum wages, allowing for a decent living 
wherever they work. 

39  Communication on A Capital Markets Union for people and businesses, COM(2020) 590 final.  

12 

 
 
                                                           
markets  so  as  to  diversify  sources  of  funding,  as  well  as  by  removing  barriers  to  financial 
services provided across borders. In order to reap the benefits of integrated capital markets, it 
is  important  to  complete  the  Capital  Markets  Union  by  swiftly  adopting  and  implementing 
the  measures  put  forward  by  the  Commission  last  year  and  the  upcoming  proposals  to  be 
presented this year. In particular, the Commission intends to put forward proposals to cut red 
tape  for  companies  wanting  to  raise  funds  on  EU  public  markets  and  to  harmonise  certain 
aspects of insolvency frameworks and procedures.  

The  sustainable  finance  framework  will  increase  private  investments  in  sustainable 
economic activities, businesses and projects. The new sustainable finance strategy40 lists a 
set  of  measures  to  ensure  that  the  financial  system  fully  supports  the  transition  towards 
sustainability. It strongly relies on the EU Taxonomy,41 which provides companies, investors 
and  policymakers  with  criteria  on  which  economic  activities  substantially  contribute  to 
climate  and  environmental  objectives,  including  transition  activities.  It  also  comprises 
measures  to  promote  the  transparency  of  sustainable  investments,  empower  retail  investors 
and SMEs, and better integrate sustainability risks in the financial system. In addition and as 
a  result  of  its  strategy  review,  the  European  Central  Bank  has  agreed  on  an  ambitious 
roadmap  on  how  to  integrate  climate  change  considerations  into  its  work.  Moreover,  to 
finance  sustainable  projects  under  the  RRF,  the  Commission  is  issuing  green  bonds  under 
NextGenerationEU, thereby further strengthening the market for sustainable finance.  

While private funds will account for the major share of investments, public intervention 
may  be  needed  in  certain  cases  to  create  the  right  incentives  and  remove  obstacles  to 
innovation.  Carbon  pricing  through  the  EU  Emissions  Trading  System  (EU  ETS)  and 
environmental  taxation  are  essential  to  send  the  right  price  signals  for  households  and 
businesses.  Regulatory  action  can  also  create  a  level  playing  field  (e.g.  the  proposal  for  a 
Batteries  Regulation).  Standards  can  foster  transparency  and  reduce  market  risks  while 
intellectual property policy protects innovation and supports investment.42  

Public investment can be a catalyst for private investment. It can do so, in particular, by 
improving  access  to  finance  and  risk  capital  for  SMEs,  guiding  and  crowding  in  private 
investments, de-risking innovative projects, overcoming market failures, and fostering closer 
links  between  research  institutions  and  businesses.  For  example,  in  the  production  of 
microprocessors, there are high entry barriers and substantial fixed costs. This may justify the 
deployment of public support in critical areas subject to strong safeguards. However, public 
support  needs  to  be  well  targeted  to  projects  with  clear  added-value  in  order  to  avoid 
crowding out private investment and preserve sound public finances.  

EU competition policy has a key role to play in this respect, as well as in maintaining a 
level  playing  field  and  supporting  companies  to  innovate  and  grow.  Preserving 
competition contributes to the resilience and competitiveness of our companies on the global 
markets.  During  the  pandemic,  the  State  aid  Temporary  Framework  provided  the  required 
flexibility  for  Member  States  to  support  the  economy  during  these  challenging  times.  The 
new  State  aid  guidelines  on  climate,  energy  and  environment  aim  at  supporting  Member 
States in achieving the objectives of the European Green Deal. Moreover, the Commission is 
undertaking  an  unprecedented  review  of  competition  rules  to  ensure  that  they  are  fit  for 
purpose. In this context, it updated guidelines on the public financing of Important Projects of 

40  Communication on a strategy for financing the transition to a sustainable economy, COM(2021) 390 final.  
41  For more information, see https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-

finance/eu-taxonomy-sustainable-activities_en.  

42  Communication  on  an  EU  Strategy  on  Standardisation  -  Setting  global  standards  in  support  of  a  resilient, 

green and digital EU single market, COM(2022) 31. 

13 

 
 
                                                           
Common European Interest (IPCEIs).43 To stimulate innovation and risk taking,44 the revised 
Risk Finance Guidelines clarified the rules under which Member States can support access to 
finance by start-ups, SMEs and companies with a medium capitalization.45  

Public  investment  needs  to  go  hand  in  hand  with  the  need  to  safeguard  the 
sustainability of public finances. This is particularly relevant in light of the need to ensure 
debt  sustainability  through  a  gradual  and  high-quality  fiscal  adjustment  and  economic 
growth.  Promotion  of  investment  and  reforms  should  be  an  integral  part  of  a  credible 
medium-term  fiscal  strategy  that  ensures  fiscal  sustainability.  In  this  context,  it  will  be 
important to foster coherence between fiscal, investment and reform policies in the Member 
States and at  the EU level. These issues  are discussed as part of the ongoing review of the 
European economic governance. 

Supporting recovery and the economic transformation of EU economy in line with the 
twin  transitions  is  also  a  key  objective  of  Union’s  trade  policy.  In  parallel  to  opening 
access to markets, trade policy must protect EU companies and citizens from unfair trading 
practices,  including  with  the  help  of  trade  defence  instruments  and  other  innovative 
instruments such as the anti-coercion instrument.  

EU  investments  have  an  important  signalling  effect.  The  EU  budget,  together  with  the 
temporary recovery instrument NextGenerationEU, with the RRF as its centrepiece, amount 
to EUR 2.018 trillion, a substantial firepower in support of long-term growth.46 Through the 
discussions on the national Plans, the Recovery and Resilience Facility has been instrumental 
in aligning the EU and national priorities for reforms and investment around a set of common 
goals.  NextGenerationEU  will  help  mitigate  the  impacts  of  the  pandemic  while  supporting 
the transformation of the economy and the twin transition. At the same time, borrowing for 
NextGenerationEU bolsters the international role of the euro and strengthens the EU capital 
markets.  

The  RRF  provides  incentives  for  reforms  and  support  for  funding  to  the  key  priority 
areas of the green and digital transitions until 2026. The RRF Regulation47 requires each 
Member State to dedicate at least 37% of its recovery and resilience plan total allocation to 
climate  objectives  and  20%  to  digitalisation  objectives.  Besides  the  green  and  digital 
investments,  the  RRF  is  also  providing  crucial  support  to  social  policies,  to  promote  an 
inclusive growth, social and territorial cohesion, and support health as well as policies for the 
next generation. The visual below shows the allocation to each of the six pillars of the RRF. 
Member States’ commitment to reforms is unique to the design of the RRF and the reforms 
represent almost a third of all the measures included in the  recovery and resilience plans of 
the  Member  States.  They  are  crucial  to  create  the  right  framework  conditions  to  enable 

43  Communication  on  Criteria  for  the  analysis  of  the  compatibility  with  the  internal  market  of  State  aid  to 
promote the execution of important projects of common European interest (IPCEIs), (OJ C 528, 30.12.2021, 
p. 10).  

44  The  European  Investment  Bank  has  also  pointed  out  the  need  to  catalyse  private  investment  through  risk-
sharing  instruments  to  mitigate  ongoing  macroeconomic  uncertainty.  See  European  Investment  Bank, 
Investment Report 2021/2022: Recovery as a springboard for change, 2022, p.124.  

is  made  up  of  EUR  1.211 

45  Communication on Guidelines on State aid to promote risk finance investments (OJ C 508, 16.12.2021, p. 1).  
46   This  amount 
trillion  (long-term  budget)  and  EUR  806.9  billion 
(NextGenerationEU). The majority of funds  from NextGenerationEU  will be spent through the RRF (EUR 
723.8 billion), which provides support in the form of grants (EUR 338 billion) and loans (EUR 385.8 billion). 
For  more 
https://ec.europa.eu/info/strategy/eu-budget/long-term-eu-budget/2021-
2027/whats-new_en. 

information, 

see 

47  Regulation (EU) 2021/241 of the European Parliament and of the Council of 12 February 2021 establishing 

the Recovery and Resilience Facility (OJ L 57, 18.2.2021, p. 17).  

14 

 
 
 
 
                                                           
investments and to generate faster and larger impacts, including cross-border growth effects. 
At present, large amounts of RRF loans remain available, offering the possibility of further 
support to Member States wishing to make use of them.  

Graph 3: Share of Recovery and Resilience funds contributing to each policy pillar48 

60,0%

50,0%

40,0%

30,0%

20,0%

10,0%

0,0%

Green transition

Digital
transformation

Smart,
sustainable and
inclusive growth

Social and
territorial
cohesion

Health, and
economic, social
and institutional
resilience

Policies for the
next generation

Source: Commission services. The amounts refer to the 22 Recovery and Resilience Plans adopted in 2021.  
Legend: The darker-coloured parts of the columns represent those measures which have been tagged and assigned to the 
pillar as primary policy area, while the lighter-coloured parts represent measures tagged as secondary policy area.  

The  EU’s  2021-2027  long-term  budget  and  other  instruments  provide  substantial 
support for the transition. As indicated in the European Green Deal Investment Plan,49 the 
Union aims at mobilising at least EUR 1 trillion over the next decade to support sustainable 
investments  through  the  EU  budget  and  associated  instruments.  This  amount  takes  into 
account  the  public  and  private  funding  obtained  through  leveraging  the  EU’s  budget 
guarantee under the InvestEU Programme. 30% of the 2021-2027 budget will be spent on the 
green transition, for example through Cohesion Policy and the Common Agricultural Policy 
but  also  through  specific  programmes  such  as  the  LIFE  programme,  the  Just  Transition 
Mechanism, and the innovation and modernisation funds. The InvestEU programme supports 
investments  in  digital  infrastructures,  technologies,  and  skills,  in  particular  through  its 
window  on  Research,  Innovation  and  Digitisation.  In  addition,  the  digital  transition  will  be 
supported  by  various  EU  funds,  notably  through  Cohesion  Policy,  Horizon  Europe,  the 
Digital Europe Programme and the Connecting Europe Facility.  

5.  CONCLUSIONS 

The global challenges Europe is facing provide an opportunity to renew our resolve and 
commitment  to  the  economic  transformation  and  reinforce  the  cooperation  with  our 
international  partners.  The transformation of  EU  economy is  taking  place in  a context  of 
geopolitical  instability  and  rising  global  challenges,  such  as  the  COVID-19  pandemic,  the 
invasion of Ukraine, the climate crisis, and the spike in energy  prices. Those developments 
highlight the need to double down on the green and digital transition in an inclusive manner, 
as well as to increase our resilience and crisis preparedness.  The Single Market, as Union’s 
main  source  of  resilience,  will  be  instrumental  in  achieving  those  goals  and  absorbing 
possible shocks.     

48  The six policy pillars are set out in Article 3 of the RRF Regulation.  
49   Communication on European Green Deal Investment Plan, COM(2020) 21 final.  

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There  is  a  strong  consensus  on  what  we  want  to  achieve.  Getting  there  will  require 
investment  and  reforms  in  all  Member  States.  Investment,  which  needs  to  be  substantially 
increased, should be accompanied by ambitious reforms to generate the intended returns, in 
financial  terms  as  well  as  in  terms  of  their  broader  societal  goals.  Both  investment  and 
reforms are equally important and must be fully aligned and strongly coordinated at EU level 
to become mutually reinforcing, prevent divergence across Member States and to strengthen 
the Single Market.  

Public  authorities  at  regional,  national  and  EU  level  should  focus  on  creating  an 
investment-friendly  business environment,  enhancing private  investment with targeted 
financial  support  and  promoting  public  investment,  while  preserving  sound  public 
finances. As the private sector will account for the major share of investment, it is important 
that  the  conditions  are  in  place  to  effectively  channel  private  financing  towards  economic 
activities  that  contribute  to  the  decarbonisation,  digitalisation  and  resilience  of  our 
economies. Public investment and reforms contribute positively to debt sustainability to the 
extent that they are of high quality and support growth. Successful debt reduction strategies 
should  focus  on  fiscal  consolidation,  the  quality  and  composition  of  public  finances  and 
promoting  growth.  The  ongoing  review  of  the  European  economic  governance  framework 
provides  an opportunity  to  improve the  effectiveness  of the EU’s fiscal  rules and to  ensure 
that they play an appropriate role in incentivising the Member States’ investment and reform 
policies, in line with our common priorities, while safeguarding sound public finances. In this 
context,  it  will  be  important  to  ensure  coherence  between  fiscal  surveillance  and  economic 
policy coordination and to align investment and reform policies in the Member States as well 
as national and EU objectives.  

To safeguard the prosperity and wellbeing of its citizens, the EU needs to accomplish a 
fair  and  inclusive  transition  towards  a  greener  and  more  digital  future  while 
strengthening  socio-economic  resilience 
in  an  unstable  world.  Coordinated  and 
complementary  action,  including  between  national  fiscal  policies  and  the  EU  budget,  will 
have a greater impact and foster investments in areas of strategic importance and with strong 
cross-border component to deliver European added value. The ambitious targets we have set 
can  only  be  achieved  by  a  sustained  effort  involving  all  actors  at  European,  national  and 
regional  level.  Reaching  our  common  goals  requires  a  long-term  vision  and  a  coordinated 
approach which calls for a thorough reflection to identify concrete priorities that are common 
to the EU and its Member States, and at the global level. Public authorities at EU level and in 
the Member States need to work together in a consistent manner with private industry actors 
across all sectors to bolster competitive sustainability. 

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