In a Belgian castle on February 12, Europe’s leadership staged what was billed as a competitiveness summit—and politely agreed to delay the hard choices until 2027. That delay did not create the continent’s decline; it merely formalized a trajectory set by decades of policy choices: high energy costs, a rules-first regulatory culture that penalizes production, protection for fading industries, and an institutional design that fragments sovereignty just as rivals centralize power.
The summit’s outcome exposed a recurring pattern. Crises—Ukraine, Brexit, the pandemic, migration waves, geopolitical shocks—consume the political bandwidth needed to address slow-burning economic decline. Each shock becomes the priority; long-term competitiveness gets commissioned, studied and promised for the “next” meeting while factories, investment and know-how quietly migrate elsewhere.
Concrete examples make the dysfunction obvious. While Brussels drafts frameworks for battery policy, Chinese firms build gigafactories. Chinese automakers produce electric vehicles at much lower cost; Europe slapped tariffs on them in 2024, then lifted those tariffs in 2026 and wobbled on a planned 2035 combustion-engine ban, creating volatility for producers and buyers. Chemical plants and other energy‑intensive facilities are relocating to the U.S., where energy costs reflect a policy choice—American industry benefits from gas and power priced at levels Europe traded away after cutting Russian supplies for geopolitical reasons.
Energy costs are the clearest manifestation of the problem: industrial gas in the EU costs about five times what U.S. manufacturers pay, and electricity is more than twice as expensive than in the U.S., China or India. Faced with those figures, summit declarations and promises of “options” by the next Council meeting feel inadequate. Leaders offered timelines and slogans but no decisive reorientation.
Two debates now dominate: protectionism—mandating purchases of European-made goods to shore up uncompetitive firms—and deregulation to remove what many companies call a growing structural burden. The so‑called “Brussels Effect” that once exported European standards has begun to hem in Europe itself; regulation has become a cost rather than a comparative strength. The share of EU firms citing regulation as a major obstacle jumped sharply in recent years. Between 2019 and 2024 the EU enacted roughly 13,000 legislative measures—far more than the U.S. Congress in the same period—yet legislation has not translated into faster factory approvals or more build-out. Projects can stall for years.
That outcome reflects incentives inside the system: institutions and officials gain from expanding rules and scope, rapporteurs bolster careers by closing files, rotating Council presidencies chase six-month wins. No actor is rewarded for throttling back the regulatory machine.
The industrial consequences are tangible. Sectors where Europe once led—pharmaceuticals, semiconductors, renewable-energy equipment—are increasingly assembly operations using components made in Asia. A Eurozone current-account surplus north of €500 billion in 2024 masks the reality that much of that surplus is rent on intellectual property accumulated in a different era, while the underlying production shifts offshore and competitors edge toward owning that IP too.
Policy responses have been partial and fragmented. Brussels talks of deepening the single market and uses “enhanced cooperation” to let willing states move ahead of holdouts, effectively creating a two-speed Europe where a minority accelerates while the rest drift. The summit also ducked a long-run contradiction: promoting Ukraine’s reconstruction as a path to EU membership while postponing the institutional, fiscal and governance reforms enlargement would require. Accession before the 2030s looks implausible when every enlargement step demands unanimity and countless practical roadblocks.
Fixing the problem would mean redesigning a social model conceived when Europe was the world’s manufacturing engine—a model financed by export surpluses that allowed generous welfare, early retirement and long vacations. Today that model survives on deficit spending, a decade of low or negative interest rates and hope. Hope is not a policy. The green transition—carbon pricing, border adjustments, sustainable procurement—adds real costs that European firms cannot always pass on to consumers who can choose cheaper imports from countries with lower climate ambitions.
Ambitious reforms—capital markets union, defense integration, creation of industrial champions—die in committee because they demand national sovereignty concessions and upfront pain voters will not readily accept. The summit handed the diagnostic work to figures like Mario Draghi and Enrico Letta—capable administrators whose reports will multiply—but commissioning experts is not the same as mustering political will. What’s needed is leadership willing to tell citizens that the era of easy social spending is over unless competitiveness is rebuilt: higher taxes, cutbacks, or a painful transition to lower living standards now to avoid harsher outcomes later.
Political survival repeatedly overrides the public interest. Pre-summit bargaining saw a bloc of 19 states coordinate while others protested outside. National leaders calibrate action by electoral risk, not continental need. That instinct—optics first, collective adjustment second—explains why the summit scheduled substantive debate for 2027, effectively starting a countdown as industrial competitors entrench. By then, Chinese carmakers may be firmly established in EU markets, U.S. tariff policies may have shifted investment west, and chronic underinvestment—now accentuated by higher defense spending—will crowd out industrial renewal.
Europe still possesses universities, research institutions and manufacturing infrastructure. What it lacks at the moment is politicians prepared to mobilize those assets with the urgency and coherence displayed by rival states that treat industrial policy as existential. China reassigns capital, rewrites regulations and reorganizes sectors in months; the U.S., despite political dysfunction, can still marshal trillion-dollar efforts when the cost of waiting exceeds the pain of acting.
Competitors will not pause for Europe’s internal debates. Over recent decades Europeans chose a social model and consensus-based governance over the speed and centralization that industrial competition demands. At the castle, leaders acknowledged the diagnosis and postponed treatment. The narrow, urgent question is whether Europe will dig up the problem and act while there is still time to preserve meaningful industrial capacity and a viable social contract.
