Across European capitals, a common refrain has taken hold: the European Union must act decisively if it is to compete with the scale, speed and strategic ambition of the United States and China. What was once a gradual debate about productivity and integration has evolved into a more urgent reckoning about Europe’s place in a world shaped by industrial policy, technological rivalry and geopolitical fragmentation.
EU leaders increasingly frame the challenge not as a cyclical slowdown but as a structural gap. The concern is that without coordinated reforms—on energy, capital markets, innovation and trade—the bloc risks falling into a prolonged period of relative decline, squeezed between American dynamism and Chinese state-backed expansion.
The debate unfolding in Brussels and national capitals is therefore less about whether to act than about how, and how quickly.
Energy Costs and Industrial Survival
At the heart of Europe’s competitiveness dilemma lies energy. European manufacturers have long faced higher electricity and gas prices than their counterparts in the United States and China, but recent volatility has amplified the disparity. In sectors such as chemicals, steel, aluminum and petrochemicals, energy constitutes a significant share of production costs. When power prices are structurally higher, margins narrow and investment decisions shift elsewhere.
EU leaders have increasingly acknowledged that fragmented energy markets and uneven national policies undermine the bloc’s industrial base. While the EU has pursued ambitious decarbonization goals under its Green Deal framework, the transition has coincided with supply disruptions and price spikes that exposed vulnerabilities in energy security and infrastructure.
Calls for a more unified energy market reflect the recognition that scale matters. A truly integrated grid, deeper cross-border interconnections and coordinated procurement could reduce volatility and smooth disparities between member states. Joint investment in renewables, storage and hydrogen infrastructure is seen as critical not only for climate goals but for cost competitiveness.
Business groups warn that without structural relief on energy prices, Europe risks deindustrialization. Investment decisions in heavy industry increasingly weigh U.S. incentives—such as those embedded in the Inflation Reduction Act—against Europe’s regulatory complexity and higher costs. Leaders fear that once factories relocate, the ecosystem of suppliers and skilled labor may follow.
The Single Market’s Untapped Potential
The European Union’s single market remains one of its greatest achievements, yet leaders concede that it is incomplete. Services, digital platforms and capital still face regulatory and administrative barriers across borders. In contrast, the United States operates as a single, deep market with unified financial and legal systems, while China leverages centralized authority to mobilize resources rapidly.
Reports led by former European Central Bank president Mario Draghi and former Italian prime minister Enrico Letta have underscored the cost of fragmentation. Europe’s financial markets remain segmented, limiting the ability to mobilize large-scale private capital for innovation. Venture capital funding, particularly in technology and artificial intelligence, lags behind U.S. levels, constraining the growth of European champions.
A deeper capital markets union is widely seen as essential. By harmonizing insolvency laws, improving cross-border investment frameworks and reducing bureaucratic hurdles, the EU could unlock savings and channel them into strategic sectors. The goal is to foster companies capable of competing globally rather than remaining confined to national markets.
Yet progress has been slow. National governments guard fiscal sovereignty and regulatory autonomy, often prioritizing domestic interests over collective efficiency. The paradox is clear: while leaders call for unity to compete with global powers, internal divisions impede decisive action.
Diverging Visions in Paris and Berlin
The strategic debate is often crystallized in differences between Emmanuel Macron and Friedrich Merz. France advocates for more assertive industrial policy, including joint borrowing to finance large-scale investments in defense, technology and green infrastructure. Paris has also promoted “Made in Europe” provisions to ensure that public procurement strengthens domestic industry.
Germany, traditionally more cautious about shared debt, emphasizes productivity reforms, fiscal discipline and trade liberalization. Berlin argues that Europe’s strength lies in open markets and export competitiveness, pointing to the importance of agreements such as the Mercosur trade deal to expand market access.
These differences are not merely tactical; they reflect distinct economic philosophies. France sees strategic autonomy as a response to geopolitical fragmentation and U.S.-China rivalry. Germany, shaped by its export-driven model, remains wary of protectionism and large-scale debt mutualization.
Bridging these approaches is central to any credible European strategy. Without Franco-German alignment, broader EU consensus becomes elusive.
Industrial Policy in an Era of Geopolitics
The competitive challenge Europe faces is magnified by the assertive industrial policies of both Washington and Beijing. The United States has deployed subsidies, tax credits and regulatory incentives to attract manufacturing investment, particularly in semiconductors, electric vehicles and clean energy. China, meanwhile, continues to leverage state support and long-term planning to dominate strategic supply chains.
European leaders increasingly acknowledge that traditional reliance on market forces may be insufficient in this environment. Strategic sectors—from batteries to microchips to artificial intelligence—require coordinated investment and regulatory clarity. The EU’s Chips Act and battery alliances represent steps in this direction, but funding levels and execution speed remain under scrutiny.
At the same time, leaders must balance competitiveness with Europe’s social model. Unlike the U.S. and China, the EU integrates strong labor protections, environmental standards and social welfare systems. These features are politically and culturally entrenched, yet they can complicate rapid industrial transformation.
The challenge, therefore, is not simply to mimic American or Chinese strategies, but to craft a European model that preserves social cohesion while enhancing productivity and innovation.
The Urgency of Collective Action
Repeated summits and communiqués have reinforced the sense of urgency. Leaders such as Lithuania’s president Gitanas Nauseda and Sweden’s prime minister Ulf Kristersson have expressed frustration at the pace of reform. The risk, in their view, is that rhetoric outpaces implementation.
Some have suggested that if consensus among all 27 member states proves unattainable, smaller coalitions could move forward under mechanisms of enhanced cooperation. Such flexibility could accelerate progress in areas like defense procurement or digital integration. Yet it also raises questions about cohesion and equality within the bloc.
The broader strategic imperative is clear. Europe’s share of global GDP has declined over decades relative to faster-growing economies. Demographic aging, slower productivity growth and fragmented markets compound the challenge. Without structural reform, leaders warn, the bloc could face what Draghi has described as a “slow agony” of diminished influence.
In response, calls for concrete timelines and measurable targets have grown louder. Leaders increasingly argue that competitiveness must be treated with the same urgency as fiscal stability or climate policy. Energy reform, capital markets integration and industrial coordination are no longer peripheral issues; they define Europe’s economic sovereignty.
As the global economy reorganizes around power blocs and strategic technologies, the European Union confronts a pivotal moment. Its leaders agree on the stakes: to remain a global economic force capable of shaping standards and defending its interests, Europe must translate urgency into sustained action. The debate is no longer about whether competition with the United States and China exists, but about whether Europe can align its internal structures swiftly enough to meet it.
(Source:www.france24.com)
EU leaders increasingly frame the challenge not as a cyclical slowdown but as a structural gap. The concern is that without coordinated reforms—on energy, capital markets, innovation and trade—the bloc risks falling into a prolonged period of relative decline, squeezed between American dynamism and Chinese state-backed expansion.
The debate unfolding in Brussels and national capitals is therefore less about whether to act than about how, and how quickly.
Energy Costs and Industrial Survival
At the heart of Europe’s competitiveness dilemma lies energy. European manufacturers have long faced higher electricity and gas prices than their counterparts in the United States and China, but recent volatility has amplified the disparity. In sectors such as chemicals, steel, aluminum and petrochemicals, energy constitutes a significant share of production costs. When power prices are structurally higher, margins narrow and investment decisions shift elsewhere.
EU leaders have increasingly acknowledged that fragmented energy markets and uneven national policies undermine the bloc’s industrial base. While the EU has pursued ambitious decarbonization goals under its Green Deal framework, the transition has coincided with supply disruptions and price spikes that exposed vulnerabilities in energy security and infrastructure.
Calls for a more unified energy market reflect the recognition that scale matters. A truly integrated grid, deeper cross-border interconnections and coordinated procurement could reduce volatility and smooth disparities between member states. Joint investment in renewables, storage and hydrogen infrastructure is seen as critical not only for climate goals but for cost competitiveness.
Business groups warn that without structural relief on energy prices, Europe risks deindustrialization. Investment decisions in heavy industry increasingly weigh U.S. incentives—such as those embedded in the Inflation Reduction Act—against Europe’s regulatory complexity and higher costs. Leaders fear that once factories relocate, the ecosystem of suppliers and skilled labor may follow.
The Single Market’s Untapped Potential
The European Union’s single market remains one of its greatest achievements, yet leaders concede that it is incomplete. Services, digital platforms and capital still face regulatory and administrative barriers across borders. In contrast, the United States operates as a single, deep market with unified financial and legal systems, while China leverages centralized authority to mobilize resources rapidly.
Reports led by former European Central Bank president Mario Draghi and former Italian prime minister Enrico Letta have underscored the cost of fragmentation. Europe’s financial markets remain segmented, limiting the ability to mobilize large-scale private capital for innovation. Venture capital funding, particularly in technology and artificial intelligence, lags behind U.S. levels, constraining the growth of European champions.
A deeper capital markets union is widely seen as essential. By harmonizing insolvency laws, improving cross-border investment frameworks and reducing bureaucratic hurdles, the EU could unlock savings and channel them into strategic sectors. The goal is to foster companies capable of competing globally rather than remaining confined to national markets.
Yet progress has been slow. National governments guard fiscal sovereignty and regulatory autonomy, often prioritizing domestic interests over collective efficiency. The paradox is clear: while leaders call for unity to compete with global powers, internal divisions impede decisive action.
Diverging Visions in Paris and Berlin
The strategic debate is often crystallized in differences between Emmanuel Macron and Friedrich Merz. France advocates for more assertive industrial policy, including joint borrowing to finance large-scale investments in defense, technology and green infrastructure. Paris has also promoted “Made in Europe” provisions to ensure that public procurement strengthens domestic industry.
Germany, traditionally more cautious about shared debt, emphasizes productivity reforms, fiscal discipline and trade liberalization. Berlin argues that Europe’s strength lies in open markets and export competitiveness, pointing to the importance of agreements such as the Mercosur trade deal to expand market access.
These differences are not merely tactical; they reflect distinct economic philosophies. France sees strategic autonomy as a response to geopolitical fragmentation and U.S.-China rivalry. Germany, shaped by its export-driven model, remains wary of protectionism and large-scale debt mutualization.
Bridging these approaches is central to any credible European strategy. Without Franco-German alignment, broader EU consensus becomes elusive.
Industrial Policy in an Era of Geopolitics
The competitive challenge Europe faces is magnified by the assertive industrial policies of both Washington and Beijing. The United States has deployed subsidies, tax credits and regulatory incentives to attract manufacturing investment, particularly in semiconductors, electric vehicles and clean energy. China, meanwhile, continues to leverage state support and long-term planning to dominate strategic supply chains.
European leaders increasingly acknowledge that traditional reliance on market forces may be insufficient in this environment. Strategic sectors—from batteries to microchips to artificial intelligence—require coordinated investment and regulatory clarity. The EU’s Chips Act and battery alliances represent steps in this direction, but funding levels and execution speed remain under scrutiny.
At the same time, leaders must balance competitiveness with Europe’s social model. Unlike the U.S. and China, the EU integrates strong labor protections, environmental standards and social welfare systems. These features are politically and culturally entrenched, yet they can complicate rapid industrial transformation.
The challenge, therefore, is not simply to mimic American or Chinese strategies, but to craft a European model that preserves social cohesion while enhancing productivity and innovation.
The Urgency of Collective Action
Repeated summits and communiqués have reinforced the sense of urgency. Leaders such as Lithuania’s president Gitanas Nauseda and Sweden’s prime minister Ulf Kristersson have expressed frustration at the pace of reform. The risk, in their view, is that rhetoric outpaces implementation.
Some have suggested that if consensus among all 27 member states proves unattainable, smaller coalitions could move forward under mechanisms of enhanced cooperation. Such flexibility could accelerate progress in areas like defense procurement or digital integration. Yet it also raises questions about cohesion and equality within the bloc.
The broader strategic imperative is clear. Europe’s share of global GDP has declined over decades relative to faster-growing economies. Demographic aging, slower productivity growth and fragmented markets compound the challenge. Without structural reform, leaders warn, the bloc could face what Draghi has described as a “slow agony” of diminished influence.
In response, calls for concrete timelines and measurable targets have grown louder. Leaders increasingly argue that competitiveness must be treated with the same urgency as fiscal stability or climate policy. Energy reform, capital markets integration and industrial coordination are no longer peripheral issues; they define Europe’s economic sovereignty.
As the global economy reorganizes around power blocs and strategic technologies, the European Union confronts a pivotal moment. Its leaders agree on the stakes: to remain a global economic force capable of shaping standards and defending its interests, Europe must translate urgency into sustained action. The debate is no longer about whether competition with the United States and China exists, but about whether Europe can align its internal structures swiftly enough to meet it.
(Source:www.france24.com)
