At a Belgian castle on February 12, EU leaders did more than negotiate policy. They formalized what many markets had already priced in: Europe is losing ground. Branded a competitiveness summit, the meeting ended not with decisive measures but with a timetable that effectively postpones real action until 2027. That is not a routine delay; it reads like an admission that the continent cannot or will not respond quickly enough to an era of rapid industrial change.
The decline is not new or accidental. It is the product of policy choices and institutional habits. Energy priced well above global competitors, a regulatory culture that rewards paperwork over production, protection for sunset industries, and a sovereignty model that fractures decision making have all eroded Europe’s edge. While officials debate formats and reports, rivals build factories, scale supply chains and lower costs.
Ukraine has been a unifying political project, sucking up diplomatic energy and political capital. But a string of crises — Brexit, pandemic disruption, China’s industrial surge, shifts in US politics, wars and migration — have repeatedly displaced the hard work of economic renewal. The pattern is now familiar: delay recognition of core problems, commission studies, promise action for the next meeting, and repeat while competitors move from blueprint to plant in months.
China’s makers now produce electric vehicles and batteries at a fraction of European cost. Policy whiplash has added uncertainty: tariffs applied then lifted, long debates over future bans on combustion engines, and shifting industrial incentives. Chemical and heavy industry investment has migrated to the United States, where cheaper energy has made production economically viable after Europe chose, for geopolitical reasons, to cut reliance on Russian gas.
Energy shows the structural weakness in the starkest terms. Industrial gas prices in the EU are several times higher than US levels, and electricity costs exceed those in the US, China and India by large margins. That price gap translates directly into lost factories, investment and jobs. Rather than present a credible, fast plan to close that gap, leaders deferred decisions and promised options at future councils.
Two debates dominated the castle: whether public procurement should be used to favor domestic firms, and whether rules should be loosened to speed approvals and reduce compliance burdens. The regulatory influence Europe once exerted globally now mostly confines itself to Europe. Where regulators built careers believing European standards would become global norms, production has moved to places that approve plants quickly, keep energy prices competitive, and treat regulation as a growth enabler rather than an end in itself. Compliance is a cost center, not a competitive advantage.
The scale of regulation is enormous. Between 2019 and 2024 the EU adopted thousands of legislative acts, at a rate far outpacing the US. Yet regulatory throughput has not translated into factories. Permitting times are long, and incentives within the system favor more rules and more files closed over the harder task of stopping or simplifying regulations. No institution pays the political price for saying no to the regulatory machine.
The industrial consequences are visible. Sectors in which Europe once led, from pharmaceuticals to semiconductors to renewable equipment, increasingly function as assembly nodes for components made elsewhere. Legacy brands mask a shift in real capacity. The Eurozone ran a large current-account surplus in 2024, but much of that reflects intellectual property rents accumulated in an earlier era of manufacturing rather than present-day industrial strength.
Most key competitiveness metrics stalled or deteriorated in the 2019–2024 period. The European response so far has been to push more single-market work and to make greater use of enhanced cooperation when unanimity fails. That is an implicit admission that a union of 27 cannot easily deliver collective choices, and that faster-moving clubs of member states will have to carry initiatives forward. Two-speed Europe may allow a minority to advance, but it limits how much they can do and leaves the larger polity drifting.
A further contradiction was left unresolved: using Ukrainian reconstruction as a vehicle toward closer ties while postponing the hard institutional, fiscal and governance choices that enlargement would require. Enlargement under current unanimity rules and procedures is unlikely before the end of the decade. Meanwhile, the social model that Europe seeks to defend was financed during the era when export-led manufacturing covered generous welfare commitments. That model now relies on deficits, protracted low interest rates, and regulatory hope rather than on renewed industrial output.
Green transition policies add another strain. Emissions trading, carbon border adjustments and sustainability mandates raise costs for producers who face competition from countries with looser climate constraints. Competitors exploit those gaps: building coal plants to feed manufacturing while supplying Europe with cheaper clean technologies. The political appetite for the short-term sacrifices that major structural reforms require is limited; reforms such as capital markets union, integrated defense procurement, or the deliberate creation of industrial champions die in committee because they demand ceding sovereignty and accepting temporary pain.
The summit handed responsibility for further study to seasoned figures who excel at management but did not, when they held office, implement sweeping fixes for structural dysfunction. More reports and roadmaps will now arrive, but what the Union needs is political leadership willing to tell citizens the trade-offs plainly: the existing welfare arrangements cannot be maintained without changes to taxation, spending priorities and the economic model; protecting declining industries only delays the inevitable; and the choice is between orderly adjustment now or harsher dislocation later.
The pre-summit dynamics were telling. Convened by a subset of states, attended by 19 governments, and publicly criticized by others for violating procedural norms, the meeting underscored a recurring theme: national leaders often prioritize domestic optics and electoral risk over frank collective decision making. Setting substantive action out to 2027 is effectively a countdown. By then, foreign manufacturers may be entrenched in European markets, capital may shift further outward, and deferred defense commitments will compete with industrial investment for scarce resources.
Europe still retains deep assets: universities, research institutions and industrial heritage. What it lacks more often is the political will to marshal those assets the way other major powers do. Competitors do not wait for European consensus. The Union has repeatedly chosen the social compact over competitiveness, consensus over speed, and process over decisive power. At the Belgian castle the crisis was acknowledged and then parked.
The narrower, urgent question is whether European leaders will summon the readiness to unearth that crisis and act while they still can. Without timely, politically costly reforms, the delay announced at the summit risks becoming permanent decline rather than a phase to be reversed.
