In the shadow of Europe’s new embrace of defence spending, another seismic shift is in the making: a reshaping of research that is at the heart of economic policy.
The EU is the world’s largest transnational funder of research and innovation, spending around €12 billion annually through its Horizon Europe programme. This enables it to fund the best researchers from anywhere in Europe, through instruments such as the European Research Council. It also funds research collaborations across several countries, enabling Europe’s best minds to work together on complex challenges.
The results have been impressive. Both European Covid vaccines—from Oxford University and BioNTech—were developed with research funded by the EU. Little wonder that many non-EU countries have associated for privileged access to its funding instruments, including the UK, Switzerland and Norway. Even research powerhouses further afield have joined, including Canada, Japan and New Zealand.
It is not surprising then, that research has moved centre stage of the political debate in Brussels. A report commissioned by Ursula von der Leyen, president of the European Commission, and written by former Italian prime minister (and European Central Bank president) Mario Draghi, warned in September that the EU had fallen dramatically behind its key competitors in complex advanced technologies. He urged a doubling of investment in breakthrough research, disruptive innovation, and in the connectivity between the two.
Shifting priorities
When von der Leyen was re-elected as Commission president in July 2024, she pledged to put research and innovation at the heart of the economy, focusing on scientific excellence. But as the new Commission began to form last autumn, its commitment to research excellence was cast into doubt.
To strengthen the European economy, the Commission favours a simplified budget, with a Competitiveness Fund at its core. Most research funding would be located there, along with other initiatives, such as the EU’s digital infrastructure. With key funding allocations to be made by von der Leyen’s inner circle, spending priorities could shift from one year to the next, according to political need (and expediency).
This would have far-reaching consequences. Writing bids for research funding is costly and risky, and it takes time. Researchers could see their preparations wasted if priorities keep changing. Moreover, in Horizon Europe, awards are currently made according to scientific excellence. If all instruments in a Competitiveness Fund were allocated according to political parameters, industrial policy—not science—would be at the heart of funding decisions. No serious researcher would put up with this. Such a fund would spell the end, not the rejuvenation, of collaborative, EU-funded research.
Competitiveness compass
The European Commission is contemplating this transformation with open eyes. In its landmark strategy published at the end of January, the Competitiveness Compass, it promises to fund research to support “the transition from applied research to scale-up phase”. In other words, it wants to use funding earmarked for research to pay for projects where the research has already happened, to ensure they can transform Europe’s economy.
The Commission leadership is increasingly guided by a vision, it seems, where it selects a number of industries and prioritises a number of outcomes, before putting resources in place to achieve them. But are politicians really best placed to identify the commercial winners of tomorrow?
We are at the beginning of a scientific revolution. This begins with artificial intelligence and quantum computing, includes the biological sciences (based on advances such as gene editing), and encompasses advanced materials (including batteries). There is a lot going on. Can anyone really predict a few big winners among these that will make Europe competitive?
It is hard to see how, with the emerging directive approach of von der Leyen, Europe can overcome its lag in advanced technologies. For if it simply focuses on scaling up what it has already, how can it get ahead of its competitors?
It appears that the European Research Council and the European Innovation Council—two flagship institutions funded by the EU—will survive. But beyond this, it is difficult to see how universities will be able to engage in EU research funding in the future.
Loosening ties
This has deep repercussions. First, how can countries like the UK, Norway and Switzerland associate with a Competitiveness Fund narrowly focused on the EU’s own strategic interests (and changing from one year to the next)? By introducing it, the EU would throw away a golden opportunity to cement its ties with the UK (and Canada), which have been strengthened by a common alignment over defence. Does the EU seriously think it can compete globally in AI or other strategic priorities without its European neighbour, home to Europe’s leading universities?
The Commission’s new approach could also have serious ramifications within the EU. Through its pan-European research fund, the EU has had a growing influence on national funding, setting standards and priorities often copied by member states. Indeed, an alignment between EU and national approaches is the express purpose of the Commission. But if member states align their research funding with an EU competitiveness fund, to the exclusion of universities, it would have a multiplier effect, destroying much of Europe’s research base.
Europe’s universities are fighting back. Led by the Guild of European Research Universities and the League of European Research Universities, university presidents have been registering protests during the Commission’s consultation phase about its plans.
While the US spends around 3.6 per cent of its GDP on research, the EU spends just 2 per cent. Given the strength of private research investment in the US, led by companies like Google and OpenAI, Europe can only compete if it pools talent and responds smartly. It must mobilise, rather than ignore, its public universities—the backbone of European research.
For universities, it means being flexible, open to the private sector and responsive to accelerating societal and economic needs like never before. Meanwhile, EU policymakers must conduct research policy not in abeyance of universities, but in full partnership with them.
Anton Muscatelli
Professor Sir Anton Muscatelli is Principal and Vice-Chancellor of the University of Glasgow, since 1 October 2009. From 2007-2009 he was Principal and Vice-Chancellor of Heriot-Watt University. An economist, his research interests are monetary economics, central bank independence, fiscal policy, international finance and macroeconomics. Prior to 2007 he held various roles at the University of Glasgow including Vice-Principal - Strategy, Budgeting and Advancement (2004-07), Daniel Jack Professor of Political Economy (1994-2007), and Professor and Lecturer, Department of Economics (1984-94). Sir Anton was Chair (2016-21) of the First Minister’s Standing Council on Europe, a non-political group providing expert advice to Scottish ministers on Scotland’s relationship with the EU. He was a member of the Scottish Government’s Council of Economic Advisers 2015-21, and subsequently advised them on the National Strategy for Economic Transformation. He is a member of the Scottish Government’s Council of Economic Advisers. From 2017-20 he was Chair of the Russell Group of UK research-intensive universities.