Turning Europe towards competitiveness – just words or actions?

This article was published on 17 September 2026. on the “Rzeczpospolita” diary portal.

From Draghi's study to the fresh logic of economical policy

Mario Draghi's study on the future of European competitiveness became a mention point for the European Commission's current policy. His most crucial diagnosis went beyond simply saying that Europe is not investing enough. The problem is deeper – the Union has a immense market, advanced household savings, good human capital and a developed industrial base, but cannot effectively combine these resources.

The Commission's answer was presented in January 2025. A competitiveness compass to set the EU's economical policy direction for the full word of office by 2029. It has 3 key objectives: to reduce the innovation gap, to combine decarbonisation with competitiveness and to increase economical safety and resilience of Europe. They are accompanied by efforts to reduce bureaucracy, deepen the single market, integrate capital markets and better coordinate national policies.

The list of priorities is not peculiarly groundbreaking in itself. It is actual that there has been a change of head with her. More and more often, the Commission accepts that regulation is not only an instrument for achieving European objectives, but besides involves the cost of competitiveness that needs to be taken into account. Hence, Omnibus packages limiting part of reporting obligations, regulatory reviews, action for faster permits, or the concept of "28th regime" of company law. An crucial part of the CSRD and CSDDD changes were adopted in February 2026, while further packages are at different stages of the legislative process.

Europe's problem is not so much a deficiency of resources as its inability to effectively combine and usage them to scale action. The EU is beginning to see that a return to competitiveness will gotta mean not only fresh support programmes, but besides designation that the costs they impose on European companies should be taken into account erstwhile creating fresh regulations.

It seems that this is no longer just a rhetorical change, but a real desire to change competition rules. However, it should be taken into account that a large part of the improvement remains ahead of us.

Indeed a common marketplace – possibly the biggest improvement

The paradox of the European economy is that the EU has a marketplace of around 450 million consumers, but a company wishing to operate across the Union inactive faces a scope of different legal, tax, administrative and regulatory systems.

In February 2026, EU leaders agreed that deepening the Single marketplace should become 1 of the most crucial tools for improving competitiveness. During the informal summit in Alden Biesen, political consent emerged, among others, to velocity up work on the '28th regime', to reduce regulatory barriers and to increase business consolidation opportunities in certain strategical sectors. Importantly, the leaders besides agreed unanimously to further simplify EU regulations.

The most visible example of this change is the EU Inc task presented in March 2026. It provides for the creation of a voluntary, uniform form of company operating under the same rules throughout the Union. alternatively of adapting the structure of the company to 27 national systems, the company could make operations across borders within a single set of rules.

The importance of this improvement may be greater than suggested by the method nature of company law. 1 of Europe's weaknesses remains the difficulty of scaling businesses. The US has a much more integrated capital and interior market. At the time of the decision on cross-border expansion, the European company inactive has to face the additional costs that this entails.

A akin logic is expressed by the Union of Savings and Investments. Around EUR 10 trillion of European households' savings stay on bank deposits. The EU does not endure from deficiency of capital. The problem is that a large part of these funds do not go to European capital markets and do not finance the improvement of companies. The deepening of the capital marketplace is intended to let the financing of European companies in the next stages of improvement – from venture capital To the stock market. In 2025, the European Council recognised the construction of a deeper capital marketplace as an urgent matter.

Europe's top untapped possible lies in the inactive unfinished single market. The Union has a immense base of consumers and savings, but businesses inactive face legal, taxation and regulatory barriers that hinder expansion and scaling. However, a real deepening of the marketplace means entering areas where associate States would gotta accept much greater harmonisation.

However, this is where 1 of the most hard lines of political conflict will run. It is easy to agree that Europe needs a larger capital market. It is much harder to accept the consequences – greater harmonisation of bankruptcy law, supervisory systems, taxes and the functioning of national financial institutions.

Consent on diagnosis, challenge of conflicting interests

At the general level, the scope of the European consensus is amazingly wide today. At the February 2026 Competitiveness Council, ministers pointed out almost the same problems: excessive administrative burdens, advanced energy prices, ETS costs, dependence on critical natural materials and barriers within the single market. Many demanded a fast transition from strategy to action.

At the same time, the consensus begins to weaken erstwhile 1 moves from diagnosis to circumstantial instruments.

France is traditionally more prone to active industrial policy, European preferences in public procurement and the protection of strategical sectors. Emmanuel Macron has already openly said that Europe's current economical model has exhausted – Russia has ceased to be a origin of inexpensive energy, China's export marketplace has become a major competitor of European manufacture and the United States has begun to usage customs and aggressive industrial policy besides towards allies.

Poland is besides moving towards a more active industrial policy, although at the same time it points out that the mechanisms of "European preference" do not lead to a concentration of benefits in the largest Western economies. Warsaw supports, among others, the acceleration of industrial investments and the thought of "EU Inc.", but in working on the Industrial Accelerator Act, it stresses the request to keep a level playing field for individual associate States.

This direction became even more circumstantial on 9 September 2026 erstwhile the Commission presented the fresh Public Procurement Act. It is intended to simplify EU public procurement rules and introduce criteria of European preference, while strengthening the importance of security, resilience and innovation. Europe's preference is so beginning to shift from political request to concrete legislative proposals.

However, the northern countries and any of the smaller economies stay more attached to the conventional open marketplace and competition model. Their concern is understandable: "European autonomy" can become a euphemism to subsidise large companies by countries with the largest fiscal space.

The European compromise will so likely combine 2 seemingly contradictory approaches: greater protection of strategical sectors from unfair external competition and at the same time expanding competition within the European marketplace itself.

Germany changes its calculation

However, the most crucial political change may be the evolution of Germany's position.

For 2 decades the German economical model has been based to a crucial degree on a peculiar configuration: comparatively inexpensive energy, a strong industrial base and increasing exports of capital goods and cars to China. Therefore, Berlin belonged to the capitals most cautious of politics, which could lead to a more serious economical conflict with Beijing.

EU countries are increasingly agreeing on what weakens European competitiveness, but it is much harder to agree on remedies. The dispute begins where questions arise about who is to be protected, who is the most gainful and who will bear the top cost of change. The common nonsubjective does not so remove the differences of interest but shifts them to the level of circumstantial economical policy instruments.

This calculation is beginning to change due to the fact that the structure of German-Chinese economical relations is changing.

In 2025 German exports to China decreased by 9.7%, to EUR 81.3 billion, while Chinese imports increased by 8.8%, to EUR 170.6 billion. The German trade deficit with China increased to EUR 89.3 billion.

Even more meaningful is 2026. In the first 7 months German exports to China fell by 12.7% y/y, to EUR 42.1 billion, while imports increased by 8.8%, to EUR 107.3 billion. In July alone, exports to China decreased by 9.5% further compared to June.

Germany's problem so changes its character. In the past, the fundamental question was – how can political tensions prevent German manufacture from accessing the large Chinese market? Now, the question is more and more often: how to prevent Chinese manufacture from taking over German producers in Europe and worldwide? It's a fundamental change.

Germany's changing relation with China can be applicable to European economical policy as a whole. Beijing remains an crucial trading partner, but it is increasingly becoming a competitor of German and European industry. As a result, Berlin moves distant from the question of how to defend access to the Chinese market, to ask how to defend the European industrial base from the increasing advantage of Chinese producers.

China remains Germany's largest trading partner and more than 5,000 German companies operate there. Berlin so has no interest in economical separation from Beijing. Friedrich Merz came to China in February 2026 with a thirty-member business delegation and stressed the importance of further trade and cooperation. At the same time, much stronger than earlier German Chancellors, he spoke of trade imbalances, subsidies distorting competition, the request for greater access for European companies to the Chinese marketplace and the request for hazard mitigation policies.

This change should not be considered as an announcement. decoupling. In fact, Merz points out that identifying hazard mitigation with disconnection from China would be a mistake. However, the hierarchy of business has changed. A strong European manufacture and a more competitive Europe are beginning to be regarded in Berlin as a condition for an effective policy towards China alternatively than as a mark in conflict with German export interests.

Bringing Germany and France closer, but differences stay

This is besides evident in French-German relations.

France has long advocated European industrial policy, strategical autonomy and more active protection of the common market. Germany has traditionally put more emphasis on free trade, competition and access to external markets for its businesses.

Under Merza the positions began to approach.

In February 2026, the Chancellor spoke about the request for a extremist simplification in regulation, deepening the single marketplace and restoring Europe's ability to compete with the US and China. In July Berlin and Paris, they jointly declared the request for further simplification, acceleration of Omnibus packages and a deeper improvement of the European regulatory environment, and the adoption of EU Inc. by the end of 2026 considered it 1 of the key elements of the agenda.

There is so a fresh French-German compromise.

France is moving Europe towards industrial policy and the protection of strategical capacities, Germany is increasingly demanding deregulation, deepening the interior market, capital integration and more regulatory efficiency.

Bringing the positions of Germany and France closer opens the door to a fresh European economical compromise. The French emphasis on industrial policy and the protection of strategical capacity can be combined with the German request for deregulation, deepening the common marketplace and capital integration. specified synthesis would mean less barriers within the Union, but a greater ability to defend the European marketplace from external disturbances.

If both approaches can be combined, a much more coherent European economical strategy could appear than before – little interior regulation, but a greater ability to defend the marketplace from external disturbances.

Trump and China have changed European political economy

Accelerating change in the EU is hard to separate from US policies.

Donald Trump's return caused Europe to no longer presume the sustainability of the earlier transatlantic model. The US is at the same time a political ally and an industrial competitor (a country ready to usage customs and economical policy tools besides towards existing allies).

The EU-US trade agreement of 2025 has partially stabilised relations but does not mean a return to the earlier model: most EU exports to the US presently have a 15% tariff ceiling and any trade in steel and aluminium has higher rates.

However, the transformation of China may be even more important.

For many years, Europe has utilized the improvement of the Chinese economy as a supplier of cars, machines, chemicals or luxury goods. present China is competing with Europe in an expanding number of sectors, and the surplus production of the mediate States is increasingly targeting the European market.

This provokes a change in the position of many European countries, not just Germany. It's just that after many years, the profit and cost account in trade relations with China began to look different.

The European return to a more active economical policy is mostly a consequence to changing external conditions. The United States remains an ally, but it is increasingly utilizing customs and industrial policy to defend its own interests, while China, with an crucial outlet market, has become a competitor for Europe in a increasing number of sectors. Therefore, the model of openness to date has ceased to bring as clear benefits as before.

From strategy to Action

The Commission adopted the Competitiveness Compasse, Clean Industrial Deal, the Single marketplace Strategy, the Simplification Programme and the Saving and Investment Union, and presented in 2026, among others, the EU Inc., the Industrial Accelerator Act, the European Innovation Act and the fresh Public Procurement Act. any of the deregulation packages have already entered into force – including major changes to CSRD and CSDDD and simplification of the AI rules – while another key reforms are inactive in the legislative process.

However, the scale of the effects to date remains limited. In the yearly Single marketplace and Competitiveness study 2026, the Commission indicated that out of the 29 key indicators 6 had clearly improved, 6 had worsened and15 remained substantially unchanged (for 2 there was no comparative reading yet). The integration of the single marketplace itself has achieved this plateau. According to the independent Draghi Observatory and Implementation Index, only 60 of the 383 monitored recommendations of Draghi's study (15.7%) were full implemented in July 2026, and 41.3%, including partially implemented ones.

The June 2026 European Council reiterated its call for faster work on the Single Market, energy prices, simplification of regulation, industrial reconstruction, dependence simplification and mobilisation of investments.

The specified fact that, nearly 2 years after the publication of Draghi's report, European leaders proceed to request "acceleration" of work shows clearly 1 of the key weaknesses of the European system.

To the top extent, this is due to the fact that fundamental reforms require associate States to restrict their area of prerogatives.

The main reforms of competitiveness require associate States to accept the real consequences of integration: less national exceptions, greater harmonisation of capital markets, deeper energy interdependence and consolidation of businesses across borders. It is precisely the readiness to compromises that will find whether the current return will stay a declaration of whether it will become a real change in the economical model.

A truly single marketplace means less national exceptions. A real capital union means greater harmonisation. The single energy marketplace means greater infrastructure interdependence. European industrial consolidation means agreeing to start businesses whose decision centres are not always in their own country.

The ability to compromise in these spaces will find the future of the full competitiveness agenda.

Fundamental change in optics in Europe

The biggest change in the last 2 years is not circumstantial funds or individual legislation. It is simply a change in European political economy.

More and more countries conclude that the current model has stopped working.

Germany must no longer presume a lasting increase in exports to China. France cannot finance European autonomy without stronger economical growth. Central European countries request fresh industrial investment and technological security. Northern countries see that even liberal trade policy requires partners who follow akin rules.

As a result, there is simply a space of common interest that has been missing for years. Europe sees that it must become more competitive if it wants to stay open. This is simply a crucial change in relation to an earlier dispute between free marketplace supporters and supporters of strategical autonomy. Under fresh conditions, both objectives are increasingly complementary.

The top threat remains the European tendency to replace reforms with further strategical documents. If the current agenda ends primarily with additional subsidies, European preferences and fresh funds, without real deepening the capital market, reducing energy costs, simplifying regulation and removing interior barriers, the improvement of competitiveness will be limited.

However, if associate States agree to the real consequences of the 1 Europe, 1 marketplace idea, the current return may be the most crucial change in European economical policy since the creation of the single market.

For the first time in many years, the competitiveness problem has not only been well-named, but has besides become an crucial challenge recognised by most EU countries.

This is why the current effort to change the approach to global competition may be more likely to win than erstwhile European strategies.