EU leaders agreed to move ahead with a “Buy European” policy to protect “strategic sectors” of European industry, at a summit on how to secure the continent’s future in a more volatile global economy.
At a moated castle in the east Belgian countryside, the EU’s 27 leaders gathered on Thursday for a brainstorming session on how Europe could regain its economic competitiveness relative to the US and China at a time of economic threats and political turbulence.
Before the summit, Belgium’s prime minister, Bart De Wever, said Belgium, France, Germany and the Netherlands were facing “an existential crisis” because of factory closures and declining investment, a result of high energy costs, regulation and “Chinese dumping” – unfairly subsidised goods flooding European markets.
“We all know we must change course,” he said. “Yet, it sometimes feels as if we are still standing on the bridge of the ship, staring at the horizon, without touching the helm.”
After the summit, the European Council president, António Costa, told reporters there was a broadly shared understanding about the need to “protect and reinforce certain sectors”, naming defence, space, clean tech, quantum, artificial intelligence and payment systems. “On European preference, I feel that there is a broad agreement on the need to use it in selected strategic sectors in [a] proportional and targeted way,” he said.
Speaking alongside him the European Commission, president Ursula von der Leyen, promised an action plan to boost Europe’s single market by March, including further “simplification”, reducing regulation at EU and national level; a new regime of company law to boost startups known as EU Inc, as well as plans to integrate Europe’s fragmented capital markets and cut energy prices. “The pressure and the sense of urgency is enormous and that can move mountains,” she said when asked about EU leaders’ ability to deliver on complex plans that threaten vested interests.
The question of Europe’s declining competitiveness has long troubled the EU but gained new urgency when painful vulnerabilities were revealed by the sudden loss of Russian gas in 2022, Donald Trump’s trade wars and China’s pursuit of economic dominance through huge state subsidies.
Against this backdrop, the EU is open to the once-taboo policy of European preference, namely favouring European companies in strategic sectors such as clean tech. Long promoted by France, “Buy European” could mean imposing requirements on governments to prioritise locally manufactured goods in public contracts.
Later this month, the EU executive will publish an Industrial Accelerator Act, which is expected to set targets for European content in a range of strategic products, such as solar panels and electric vehicles.
In a show of unity, France’s Emmanuel Macron and Germany’s Friedrich Merz arrived together at the 16th-century Belgian castle. “We share this sense of urgency that Europe must take action,” Macron said.
Merz said: “We want to make this European Union faster, we want to make it better, and above all we want to ensure that we have competitive industry in Europe.”
But the two leaders have struck different tones on European preference. Macron told European newspapers this week that European preference should be focused on certain strategic sectors, such as clean technologies, chemicals, steel, automotive and defence, “otherwise Europeans will be swept aside”.
He described European preference as “a defensive measure” and essential because “we are facing unfair competitors who no longer respect the rules of the World Trade Organization”.
Merz, however, said “Made in Europe” rules may be too narrow and he favoured “Made with Europe” rules that favoured trading partners. He is championing a more aggressive deregulation agenda and trade deals.
Ireland’s prime minister, Michéal Martin, said: “We must protect the open free trade ethos of the European Union in my view. And so there will be debates around that.”
Merz and the Italian prime minister, Giorgia Meloni, skirted the issue in a recent joint paper but found common ground on “legislative self-restraint”, or less EU regulation. Both would like the EU’s deregulation agenda to go further.
In another sign of the vitality of the Berlin-Rome partnership, Italy, Germany and Belgium co-hosted a pre-summit gathering of 19 member states. The Italian prime minister’s office, the Palazzo Chigi, said the group discussed initiatives needed to “relaunch Europe’s industry”, including a review of the emissions trading system, the EU’s carbon pricing system.
The flourishing German-Italian partnership has raised questions about the health of the Franco-German relationship, the traditional motor of the European project. Despite a rapprochement in Franco-German relations since Merz’s election, Paris and Berlin diverge on key economic questions.
Merz and Macron also disagree on the EU’s long-sought trade deal with Mercosur. While the German leader has called for speedy entry into force of the agreement with South American countries, Macron dismissed it as “a bad deal”.
Von der Leyen has also sounded a cautious note about “Buy European”. Speaking in the European parliament on Wednesday, she said European preference was “a necessary instrument” in strategic sectors. “But I want to be clear – it is a fine line to walk,” she said, adding that every proposal must be “underpinned by robust economic analysis and be in line with our international obligations”.
The Buy European question is only one part of a sprawling summit agenda at Alden Biesen in Limburg, an estate founded in the 13th century by Teutonic knights. Leaders discussed deregulation, fragmented capital markets that constrain green and digital investment, and barriers in the European single market that hamper trade.
Von der Leyen told MEPs there was “too much gold-plating” – extra layers of national regulation that made life harder for business. As an example, she said a truck in Belgium was allowed to weigh 44 tonnes but could carry only 40 tonnes if it crossed into France.
The leaders heard from Mario Draghi and Enrico Letta, two former Italian prime ministers who produced agenda-setting reports on the economy. Draghi said last week that the current economic world order was “dead” and Europe risked becoming “subordinated, divided and deindustrialised at once”.
He said Europe needed to move from “confederation to federation”, adding that veto power for individual member states in key policies made countries “vulnerable to being picked off one by one”.
Acknowledging the EU’s difficulties in taking decisions, von der Leyen said she was open to moving ahead with passing laws on integrating the EU’s capital markets in a smaller formation, if there was no agreement at 27.
“We have to make progress and tear down the barriers that prevent us from being a true global giant,” she said, referencing plans for integrating the European financial system.
