EU elites met at a Belgian castle on February 12 to formalize what others had long priced in: Europe is losing. This was not a routine policy spat but an admission about the century. Branded a competitiveness summit, its outcome—postponing substantive action until 2027 on a crisis in its third decade—reads like surrender.
Europe’s decline, however, did not begin there. It stems from operational choices: energy priced at uncompetitive levels, a regulatory system that rewards paperwork over production, protection of fading sectors, and a sovereignty framework that fragments decisions while rivals consolidate them. The summit exposed whether the EU is simply chasing events while ignoring entrenched problems. Ukraine, a unifying focus, consumes political energy, leaving leaders little appetite for confronting Europe’s economic rot.
Brexit, the pandemic, China’s industrial rise, Trump’s return, Gaza, Venezuela, Iran and migration have each monopolized the agenda. The pattern is structural: delay recognition of core problems, commission studies, promise action at the next summit, and repeat—while Beijing builds battery plants and global competitors move from idea to factory in months. Chinese automakers make EVs at half Europe’s cost; Europe imposed tariffs in 2024, removed them in 2026, and wavered on the 2035 combustion-engine ban—creating uncertainty for producers and consumers. Chemical production migrated to the US, where energy is cheaper after Europe chose to cut Russian gas for political reasons rather than industrial logic.
Energy exposes the surrender most clearly. Industrial gas in the EU costs roughly five times what American manufacturers pay; electricity is more than twice as expensive as in the US, China and India. Ursula von der Leyen conceded: “We did not come to a conclusion… I will bring different options” to the next Council. Antonio Costa’s calls for timelines amounted to the same ritual: failed plans and new slogans.
Two debates dominated the castle: whether to force public procurement to “Buy European,” and whether to deregulate. The “Brussels Effect” that once shaped global rules now disciplines mainly Europe itself. Regulators who built careers on assuming Europe could set global standards still cling to that faith, while production has shifted to jurisdictions that approve factories quickly, price energy competitively, and treat regulation as an enabler of growth. Compliance is a structural cost, not a competitive edge.
The EU’s legislative output is staggering—about 13,000 acts between 2019 and 2024, roughly seven a day—while the US Congress passed about 3,500. Yet Europe does not build at scale: a single factory can wait years for approval. Incentives drive this: the Commission expands remit with every rule; rapporteurs advance careers by closing files; rotating presidencies need deliverables in six months. No one is paid to stop the regulatory machine, as economist Luis Garicano notes.
Industry is suffering in clear terms. Sectors Europe once led—pharmaceuticals, semiconductors, renewable equipment—have become assembly lines for components made in Asia, trading on legacy brands rather than current capability. The Eurozone ran a current-account surplus above €500 billion in 2024, larger than China’s; it looks like strength but mainly reflects rents on intellectual property accumulated when Europe still produced goods, even as production shifts to rivals who will eventually own that IP.
Between 2019 and 2024, 83% of key competitiveness indicators stagnated or worsened. The EU’s response was to accelerate single-market work and preserve “enhanced cooperation” if unanimity fails—admitting the obvious: 27 countries cannot agree on much, so a minority of nine may proceed. Two-speed Europe means a forward-moving minority while the majority slips—set up so the minority’s progress is limited.
The summit also sidestepped a contradiction: promoting Ukrainian reconstruction as a path to membership while deferring the institutional, fiscal and governance implications. Enlargement before the 2030s is implausible given unanimity requirements and procedural roadblocks. Fixing structural problems would require redesigning a social model that was affordable when Europe dominated manufacturing and paid for generous welfare through export-led growth. That model now survives on deficit spending, years of negative rates, and the hope that regulation will magically restore competitiveness. It will not.
The green agenda—emissions trading, carbon border adjustments, sustainability mandates—adds costs that European industry struggles to pass on to consumers who can buy cheaper alternatives from countries with looser climate constraints. China builds coal plants to power manufacturing and then sells Europe solar panels; the US is rolling back some climate commitments. Major reforms—capital markets union, defense integration, industrial champions—die in committee because they require states to surrender sovereignty and voters to accept short-term pain leaders refuse to impose.
The summit handed the diagnosis to Mario Draghi and Enrico Letta—both capable managers who did not fix the Union’s structural dysfunctions when in power—signaling that the response will be more reports. Letta speaks of moving from 27 to one; would he have surrendered his authority as prime minister to make that happen? Reports by Draghi on competitiveness and Letta on the single market will pile up alongside others on energy, defense and demographics. What Europe needs is leadership that tells voters the truth: the welfare model cannot be sustained at current tax and policy settings; protecting dying industries only delays inevitable adjustment; the choice is lower living standards now or a harsher reckoning later.
The pre-summit was convened by Germany, Italy and Belgium; 19 states attended. Spain publicly objected that this violated Union principles even as its government routinely joins selective gatherings. Officials suggested Spain’s prime minister raised no private objection but preferred virtue-signaling outside the room. This episode typifies the pattern: national leaders prioritize domestic optics and electoral risk over collective outcomes.
Setting substantive discussions for 2027 is effectively a countdown. By then, Chinese automakers will be entrenched in EU markets, and American tariffs will likely have pulled more European capital west. Deferred defense spending will crowd out industrial investment. The room to act will be narrower. Leaders may have set the timeline to lie beyond their mandates.
Europe retains universities, research capacity and industrial infrastructure. What it lacks are politicians willing to deploy those resources as governments do in China or, when necessary, in the US. Competitors don’t wait for Europe to decide whether to compete. Europe chose the social model over competitiveness, consensus over speed, and process over power. At the Belgian castle, the crisis was acknowledged and postponed. The narrower question now is whether Europe will confront what it chose to bury while there is still time to exhume it.
