It boasts the world’s second biggest economy, a huge consumer market of about 500 million people and prodigious pools of talent and capital, not to mention two of the world’s most important financial centres.
But Europe is struggling to match its great rivals, the US and China, in creating the kind of global firms that increasingly dominate the 21st-century marketplace.
Google, Facebook, Amazon, Tencent, Alibaba, Microsoft … the list of the world’s biggest companies by market capitalisation is striking for how few European firms are on it. After Brexit, Europe will have only 12 of the world’s 100 biggest companies, and none in the top 20.
The worry is that this lack of global “champions” will leave Europe without the scale to face up to competitors in the US and China – and withstand hostile takeover bids in strategic technologies.
The German chancellor, Angela Merkel, hinted at the insecurity that Europe now feels as its historic rivals present unprecedented challenges. In an interview this week for this Europa series on the imminent European elections, she said it was time for Europe to reposition itself.
“They [China, Russia and the US] are forcing us, time and again, to find common positions. That is often difficult, given our different interests.”
And so whatever the composition of the new European commission that emerges from the European elections later this month, the overhaul of European industrial policy will be one of the priorities of the new Brussels executive. After putting the consumer at the heart of European policymaking, the EU now appears poised to make economic sovereignty a strategic focus.
The failure of the merger of Siemens and Alstom in the rail sector, which was opposed by the European competition authority, sent shockwaves through France and Germany.
Under the pretext of protecting the European consumer from the creation of a potential monopoly, Brussels prevented the French and German companies from becoming a world leader in rail, even though their main competitor, the Chinese CRRC, is already twice as big as Alstom and Siemens combined.
“We will have Chinese trains in Europe,” said the French finance minister, Bruno Le Maire. “The European solar panel industry has already been deliberately destroyed by letting in Chinese panels that are heavily subsidised,” he added in an interview with Le Monde. “The competition is not fair and we have no chance of winning.”
EU officials have looked on helplessly as digital giants emerged in the US and China while Europeans failed to produce competitors. Once dominant in mobile technology through the likes of Nokia and Ericsson, Europe has seen its big rivals catch up and overtake.
On the eve of the deployment of 5G, domestic providers are no longer able to compete with the Chinese company Huawei, which has successfully positioned itself in several European markets, including the UK and Germany.
The fear of falling behind, coupled with slowing growth, is pushing Germany to lift one of its taboos. Peter Altmaier, Germany’s minister of economic affairs and energy, has said he is ready to support an industrial policy at European level.
Though Germany’s Mittelstand – the small- and medium-sized businesses that constitute the heart of German industrial power – are not keen on such interventionism, France is, and already there is speculation about the areas where Europe could compete.
The first concrete initiative concerns batteries for electric vehicles. Chinese, Japanese and South Korean manufacturers dominate the scene, but Europe has accelerated its own dependence by imposing standards on the automotive industry that will only be achieved through the electrification of future models.
“If a European sector is not quickly set up, we will miss out on the very strong growth of the market,” warns Patrick Pélata, the president of Meta Consulting and co-author of a report for President Emmanuel Macron on how to build French automotive capacity.
“It seems certain that electrification will permanently penalise the German economy over the next few years,” said Dirk Schumacher, an economist at Natixis, who believes that if nothing is done, Germany’s car sector could lose half a million jobs by 2030.
Aware of the stakes, the German and French governments recently launched an industrial consortium led by France’s Saft (a subsidiary of Total) and PSA, owner of the German carmaker Opel. The partnership, which is ready to invest €5bn (£3.9bn) to €6bn, including €1.2bn in European public aid, aims to start battery production at a first plant in France, then a second in Germany.
Italy, Belgium, Poland, Austria and Finland have expressed interest in the project, which could lead to the creation of two or three consortiums, ranging from mining to making the final product.
Another topic of cooperation could be artificial intelligence. In the field of autonomous cars, the head start gained by firms like Waymo, a subsidiary of Google, is colossal and worrying.
“This is the first time that Germany has not been at the forefront of a major automotive technology and is starting to realise that it will not be a match for Waymo,” says Pélata.
But whether this insecurity is enough to prompt Germany to build a properly European response to Google remains to be seen.