What the EU needs to do to compete with China and the US. The big problem, identified by Ursula von der Leyen

The European Union must simplify its regulations to increase the competitiveness of the EU bloc against countries such as the United States and China, said the president of the European Commission, Ursula von der Leyen, before the summits of the political and economic leaders of the EU, writes Reuters on Wednesday.

Over the past two decades, the Union's economic growth has consistently been lower than that of the United States, with EU productivity and innovation, particularly in areas such as artificial intelligence (AI), lacking.

“Let's take the US example again. One financial system, one financial capital,” von der Leyen said on Wednesday.

“Here in Europe, we don't just have 27 different financial systems, each with its own supervisory body. We also have more than 300 trading venues across the Union. This is extreme fragmentation. We need a large, deep and liquid capital market,” added the head of the Community Executive.

Requests from business leaders

Before EU leaders gather at a castle in Belgium on Thursday to discuss how they can compete economically with China and the US amid the unraveling of the rules-based world order, some leaders, including France's Emmanuel Macron and Germany's Friedrich Merz, met with business leaders for an industrial summit on Wednesday to hear the demands of European business.

Companies such as ArcelorMittal, Europe's biggest steelmaker, Heidelberg Materials, a construction materials maker, and chemical industry group Solvay have called on the EU to take stronger action to stem industrial decline.

Demands from business leaders include the EU's tackling of Europe's high energy prices and intervention to boost demand for low-carbon products.

“The positive side of Europe's problems is that Europe could solve them itself if it wanted to. Because many of them are about flexibility, cutting red tape and more flexible labor laws,” Christian Bruch, CEO of Siemens Energy, told Reuters.

EU in decline?

An industry-commissioned study published on Wednesday suggests Europe's vital economic indicators are falling.

The Deloitte report found that the EU had a clear advantage over international counterparts in only three of the 22 criteria assessed for competitiveness, including the use of recycled materials. In terms of energy prices, bureaucratic costs for companies and other indicators, Europe lagged behind the US and China.

The EU is drawing up a law to set “Made in Europe” requirements for goods purchased through public contracts in a bid 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 grapple with high energy prices and cheaper imports.

Divergences about strategy

The EU is grappling with Donald Trump's trade war as well as Chinese restrictions on exports of critical minerals that the 27-nation bloc urgently needs.

The EU bloc also needs more economic growth to cover decarbonisation and digitalisation and to bolster its defenses against a Russia at war.

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

French President Emmanuel Macron has renewed his call for the EU to commit to greater joint borrowing to invest widely and challenge the hegemony of the dollar, as well as promote the “Made in Europe” strategy.

This approach has divided EU countries and alarmed carmakers, who buy many car components from outside the EU.

Germany argues that the solution is to increase productivity rather than build up new debt, stressing the need for trade deals.

Former Italian prime ministers Mario Draghi and Enrico Letta, authors of two influential 2024 reports on challenges to the competitiveness of the EU and its single market, will attend Thursday's summit.

Letta said his main message would be a commitment to meet the 2028 deadline to complete the EU's single market.

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