On 12th February, the leaders of the EU-27 retreated to a château in eastern Belgium for high-level talks on securing Europe’s place in an increasingly unstable global economy.
The gathering centred on bolstering Europe’s lagging competitiveness vis-à-vis the United States and China, with the removal of regulatory obstacles, mobilisation of substantial investment and cultivation of homegrown champions topping the agenda.
Former Italian prime ministers Mario Draghi and Enrico Letta – whose 2024 reports offered an unflinching assessment of the EU’s structural economic weaknesses – shaped much of the discussions.
Yet despite the clarity of their diagnosis and prescriptions, the bloc has made little progress implementing their key recommendations. Ahead of the summit, Draghi sharply warned that Europe risks becoming “subordinated, divided and deindustrialised at once” without decisive action.
Against this hostile backdrop, the long-time taboo of European preference has gained traction, with the summit’s participants remarkably agreeing to prioritise European-made goods in strategic sectors such as AI, defence and clean tech. While vital, this step will count for little unless member-states can unite behind other politically contentious reforms essential to restoring Europe’s economic weight on the global stage.
‘Made in Europe’ coming to life
Before the summit, Belgian prime minister, Bart De Wever, warned that Belgium, France, Germany and the Netherlands were facing “an existential crisis”, citing factory closures and dwindling investment driven by high energy costs, regulatory burdens and “Chinese dumping”. The numbers reinforce the alarm: China accounted for 27% of global industrial output in 2023 and, according to the United Nations, could see that share rise to 45% by 2030.
Driven by an expanding wave of cheaper, increasingly sophisticated exports, China’s revamped growth model is exerting considerable pressure on Europe’s industrial base. Powerhouses such as Germany – a major producer of cars, chemicals and industrial machinery – illustrate how core EU sectors now face the steady erosion of global market share to Chinese competitors.
According to newly-published Eurostat figures, the EU’s goods trade deficit with China rose to €359.3 billion last year – up from €304.5 billion in 2024 – as imports surged and European exports declined.
In this context, “Made in Europe” has shifted from a largely France-backed initiative to one drawing wider support, intended to favour EU companies in strategic sectors such as defence, steel and electric vehicles.
Long promoted by President Macron, this effort was met with initial pushback from more free market-minded economies like Sweden, which are fearful of alienating trade partners and whose industries are less exposed to the “existential threat” identified by Mario Draghi.
While Emmanuel Macron and Friedrich Merz clashed ahead of the Belgian summit over the scope of “Made in Europe”, the new compromise ultimately confines preferential treatment to critical, threatened sectors where Europe can still compete – aligning more closely with Germany’s market-driven approach. As Mario Draghi rightly argued in 2024,
Europe must concentrate resources where scale and innovation remain achievable, and stop expending energy on industries, such as solar panels, lost to China over a decade ago.
Strategic consolidation to grow EU champions
Reflecting on Europe’s shifting relationship with Trump’s America and the damage inflicted by Chinese overcapacity, Clément Beaune – Macron’s former Europe Minister – recently argued that Brussels’ push for regulatory simplification will not suffice to restore EU competitiveness. Beyond cutting red tape, “Europe needs to change its very operating software,” Beaune warns.
As Mario Draghi stresses, this ‘software upgrade’ must involve market consolidation in Europe’s strategic sectors, such as telecoms, where a fragmented landscape and longstanding regulatory caution toward ambitious mergers have hindered the emergence of globally-competitive European champions. France’s telecoms sector could provide a concrete springboard for Europe’s consolidation drive this year, helping unlock greater financial firepower for sustained investment in next-generation network innovation.
In recent months, Patrick Drahi, the founder of Altice and controlling shareholder of SFR, has initiated discussions to offload SFR’s operations, prompting concrete interest from Orange, Bouygues Telecom and Free. The envisaged deal would divide SFR’s assets among the three telcos, creating a compromise between necessary consolidation and regulatory safeguards on competition and pricing.
Moreover, Drahi’s innovative and forward-looking approach to the SFR sale mirrors a broader trend identified in recent KPMG analysis: US tech and telecom groups expanding into Asia-Pacific are increasingly “opting to take a smaller percent share to spread their bets” rather than pursuing full acquisitions. By allowing Orange, Bouygues Telecom and Free to acquire the segments of SFR best suited to their respective strategies, the transaction could strengthen each operator’s position, thus enhancing the long-term competitiveness of France’s telecom market.
After Patrick Drahi rejected an initial joint offer for SFR last October, negotiations have regained momentum, reportedly at a higher valuation. A new phase was reached between the consortium and SFR parent Altice, with formal due diligence checks launched in January and nearing completion in February. Drahi is keen to conclude a deal before year’s end, with French media indicating that a revised offer for SFR should arrive by late April.
Scaling up joint EU investment
Beyond consolidation, Mario Draghi’s blueprint for restoring EU competitiveness rests on completing a true capital markets union capable of unlocking trillions for the European economy. With Macron’s vision of joint EU debt – so- called ‘eurobonds’ – to fund ambitious European programmes in strategic industries facing strong scepticism from Germany, the frugal Nordics and even Italy, capital markets reform appears to offer the more politically feasible path forward.
The EU’s proposed Savings and Investment Union (SIU), a major upgrade to the stalled Capital Markets Union (CMU), aims to integrate the bloc’s fragmented national financial systems and channel household savings into productive investment. If completed, it would create a genuine single capital market capable of attracting more of the €35 trillion held by EU households, much of which is dispersed across member states or invested abroad rather than strategically
deployed within Europe, as in the United States.
The new E6 format, bringing together the EU’s six largest economies, offers a promising platform to forge consensus among the pivotal Franco-German-Italian trio on this initiative, with Germany’s Finance Minister Lars Klingbeil backing faster SIU progress after the group’s 16th February meeting.
Slated in March, the next E6 gathering will be crucial in sustaining momentum. Yet success will require not only regulatory alignment but a fundamental recalibration of how national priorities are balanced against Europe’s collective interest to build a truly integrated capital market fit for a fractured global economy.
With the US and China investing boldly and acting strategically, EU hesitation carries a cost measured in jobs, innovation and sovereignty. Moving forward, the bloc must turn consensus into legislation, capital into factories and ambition into scale, backed by clear regulatory support to build European champions in strategic industries.
Competitiveness will not be rebuilt through declarations, but through decisions taken swiftly and upheld collectively.
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