EU must simplify regulation to compete with US, China, says European Commission chief

ANTWERP/BRUSSELS - The European Union must simplify its regulations to make the bloc more competitive against the likes of the United States and China, European Commission President Ursula von der Leyen said ahead of summits of EU political and business leaders.

EU growth has been persistently lower than that of the US over the past two decades, with EU productivity and innovation, particularly in fields like artificial intelligence, falling short.

“Let me take the US example again. One financial system, one financial capital,” Dr von der Leyen said on Feb 11. “Here in Europe, we do not only have 27 different financial systems, each with its own supervisor, but also more than 300 trading venues across our Union. That is fragmentation on steroids. We need one large, deep and liquid capital market.”

Business leaders’ demands

Before EU leaders gather in a Belgian castle on Feb 12 to thrash out how they can

compete economically with China and the US as the rules-based world order frays

, some leaders will convene on Feb 11 with company chiefs for an industry summit to hear the demands of European business.

The European leaders attending this summit include French President Emmanuel Macron and German Chancellor Friedrich Merz.

Firms including Europe’s largest steelmaker ArcelorMittal, building materials company Heidelberg Materials and chemicals group Solvay will make their pitch for stronger EU action to stem industrial decline.

Among business leaders' asks are that the EU tackle Europe’s high energy prices and step in to stir up demand for low-carbon products.

“The good thing about European problems is that Europe could actually fix them itself if it wanted to because a lot is about flexibility, less bureaucracy, more flexible labour laws,” Siemens Energy chief executive officer Christian Bruch told Reuters.

EU trending downwards?

Industry-commissioned research, published on Feb 11, suggested Europe’s economic vital signs are trending downwards.

The report by consulting firm Deloitte found the EU had a clear advantage over international peers in just three of 22 assessed criteria for competitiveness, including the use of recycled materials.

On energy prices, and the cost to businesses of bureaucracy and other metrics, Europe trailed behind the US and China.

The EU is drafting a law to set “Made in Europe” requirements for goods bought through public contracts, to attempt to reduce its heavy reliance on China for key technologies.

Brussels is also preparing to overhaul its main climate policy, the EU carbon market, which has become increasingly politically sensitive as industries struggle with high energy prices and cheaper imports.

Divergence over strategy

The EU is contending with US President Donald Trump’s trade war, as well as Chinese restrictions on exports of critical minerals that the 27-nation bloc urgently needs.

It needs greater wealth to cover decarbonisation and digitalisation and strengthen its defence in the face of a belligerent Russia.

But while all EU countries want a more competitive bloc, they disagree on how to get there.

Mr Macron has renewed his call for the EU to embark on more common borrowing to invest at scale and challenge the hegemony of the US dollar, as well as pushing the “Made in Europe” strategy.

The approach has split EU countries and alarmed carmakers, who get many components for cars from outside the EU.

Germany says the key is to boost productivity rather than build new debt, stressing the need for trade deals.

Former Italian prime ministers Mario Draghi and Enrico Letta, authors of two influential reports in 2024 on the EU’s competitiveness challenge and its single market, will attend the Feb 12 summit.

Mr Letta said his key message would be to commit to a deadline of completing the EU single market by 2028.

“I think that is the only way to respond to Trump and to external pressures that the European Union is under from China, Russia and the US in different ways,” he told Reuters. REUTERS