The European Commission presented the Competitiveness Compass, a strategic blueprint aimed at restoring the European Union (EU)'s economic edge and driving technological leadership as it seeks to close the gap with the US and China.

Acknowledging a two-decade lag in productivity growth compared to other major economies, the Compass focuses on boosting innovation, advancing decarbonisation, and strengthening security, according to the Commission's statement.

"Europe has everything it needs to succeed in the race to the top. But, at the same time, we must fix our weaknesses to regain competitiveness," European Commission President Ursula von der Leyen said in the statement.

The Compass builds on a strategic report released last year by Mario Draghi, the former Italian prime minister and former president of the European Central Bank (ECB), which calls for an additional annual investment of between 750 billion euros ($779 billion) and 800 billion euros to counteract Europe's decline in competitiveness, Xinhua news agency reported.

The Commission will launch "AI Gigafactories" and "Apply AI" initiatives to accelerate AI development and adoption across key industries, the Compass says. It also promises actions for advanced materials, quantum, biotech, robotics, and space technologies.

A separate report released by the Commission on Wednesday highlighted the EU's ongoing struggles in scaling up its businesses. This report provides the analytical context for the Competitiveness Compass.

In this regard, the Compass outlines a strategy to remove barriers to facilitate startup growth, and legislative changes to simplify rules.

It also noted the upcoming Clean Industrial Deal to drive decarbonisation, a plan for affordable energy to reduce costs, and targeted strategies for high-risk sectors like steel, metals, and chemicals.

To reduce dependencies, the bloc plans to prioritise European companies in critical sectors and technologies under reviewed public procurement rules.

To further underpin the competitiveness, the Compass sets a target of cutting the administrative burden for firms by at least 25 per cent and by at least 35 per cent for SMEs.

It also proposes measures to lower the barriers to the functioning of the EU Single Market, which has struggled with regulatory fragmentation for decades, and to advance the European Savings and Investments Union project to enhance the EU's financing competitiveness, despite its slow progress over the years.