February 12, 2026 - 7:00am
The debate around political integration has always left Europe trailing behind its rivals. Large economies on the continent have always feared that a closer Europe would leave them politically and economically weaker. Now, those same states are regretting their hostility. Those which rejected the chance to move beyond the confederal structures set up in the Treaty of Lisbon of 2007 did not see immediate consequences, but this decade has brought about a reckoning.
That is the backdrop for today’s European Union summit, where leaders from across the continent will discuss reforms to the single market to make the bloc more competitive. In a world where the European economy is stagnating behind rivals such as the US and China, leaders are hoping that structural changes to how the bloc functions could be the key to gaining an upper hand. In all likelihood, the meeting will result in Europe spinning in circles as leaders rehash previous futile discussions about competitiveness. The European economy requires wide-scale integration to even imagine getting back in the race. Ahead of today’s summit, we shouldn’t hold our breath.
The agenda for the meeting is already clear. German leaders will insist that the priority should be to simplify digital laws and to deregulate, integrating the single market while changing energy policy. On the other hand, Emmanuel Macron will push forward “Made in Europe” policies to protect domestic industries. This, he argues, is the only way for the continent to protect itself from a flood of Chinese imports, including cars and machine tools. The French President also wants public-sector investments flooding into defence, green tech, AI and quantum computing, funded by eurobonds.
While these do reflect a chance for change, they don’t match up to the scale of the problem that the EU faces. Macron’s idea that Europe can catch up with the US and China on AI through public-sector funding misunderstands the forces behind 21st-century tech investment. AI and quantum computing are private-sector technologies driven by capital markets, both in the US and China. There is not a big gap between the EU and the US in terms of public-sector investment in research and development. The main difference is in the private sector.
Macron’s agenda is reflective of Europe’s broad misunderstanding of these technologies. AI is not a modern diesel engine, and quantum computers are not like semiconductors — a technology that was heavily funded by the US military. AI has skyrocketed not in the fiscally-constrained public sector but through a private sector devoted to producing cutting-edge tech to return shareholder value. Even the world’s top universities are struggling. It’s becoming clear that in the world of “Big Data”, the most valuable research takes place in companies which own the data.
Germany’s solutions at today’s summit are equally wrong, if not more so. Macron at least recognises that Europeans face an existential problem, but there is no such recognition in Berlin. Europe’s digital laws are a clear, self-inflicted own goal in a world looking to attract tech innovation, but they are less of a cause of the continent’s industrial decline than a symptom.
Ultimately, Europe in its current, confederal state has no serious chance of solving these problems. The individual member states themselves, including Germany, are too small to generate private-sector investments on the scale of American and Chinese Big Tech and compete in the era of AI-based manufacturing. This could only happen at the level of a European-wide capital market. But even if this were agreed, it would not be effective unless the national bank monopolies were broken and there was cross-border integration of the sector. Berlin might want the EU to roll back its toxic digital legislation, but Germany has a long track record of sabotaging policies that could damage its corporatist banking structure.
Germany and France aim to increase competition by adopting solutions from a bygone era. Simple ideas of deregulation and public investment won’t be able to match the output of their rivals. So even if EU leaders were to agree on a compromise with elements of each, they would still fail. AI and quantum are creatures not of 20th-century inventors and engineers, but of 21st-century financiers.
This is an edited version of an article which first appeared in the Eurointelligence newsletter.
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