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For about two years now, one of the top topics in EU policymaking has been “competitiveness” and how to achieve this. Last week’s extraordinary EU summit moved that debate one step forward by elevating “coalitions of the willing” to the official method: if it’s too hard for all member states to agree, smaller groups will be encouraged to go ahead. As someone who has advocated precisely this for years, I can only applaud — though I will keep a keen eye on whether the principle is actually put into practice.

Agreement (sort of) on methods is not, however, agreement on means. As Marco Buti and Marcello Messori point out in a rather trenchant note, the last European Council did not make much headway on resolving political differences over what policies to actually adopt to reach the common goals. And some recent initiatives — I see a lot of complaints about an emerging German-Italian-Belgian understanding — even take us further away from that. I think one reason for this is that political and business leaders’ analysis of the problems they are trying to solve is marred by a number of confusions. Today’s column sets out four of them.

First, the past year or two have been marked by constant loud demands for deregulation. But also by an acknowledgment that predictability and a stable regulatory environment are assets in a world where the other two big global economies are run by wilful autocrats. What is usually passed by in silence is the contradiction between these two. As a consequence, the deregulatory drive is causing harm to businesses that had made investments on the basis of stable regulations.

To put in place a market- and price-shaping regulation only to remove it for the sake of special interests, once it begins to have the desired effect, is foolish. Doing so is much worse for business overall than it would be to stick with the announced policy.

A case in point: Volvo’s objections to the watering down of the 2035 end to sales of fossil-fuelled cars. Another: fertiliser producers’ outcry against a last-minute insertion in the rules for new carbon tariffs (the carbon border adjustment mechanism) to give the European Commission the power to suspend them in the case of unspecified emergencies — presumably to placate farmers unwilling to pay more. Bigger than either of these two mistakes would be what is now, incredibly enough, apparently being seriously proposed by some EU heads of government: a watering down of the EU’s highly successful emissions trading system. On his own, the Czech prime minister’s desire to destroy the carbon emissions market by capping the price may be no more than an irritant, but it is deeply irresponsible for the leaders of Germany and Italy to be flirting with volatile policymaking in a market that is fundamental for European industry.

A second confusion is between the burden of regulation and the locus of regulation. There are, of course, many good cases for lightening the compliance burden on companies. But those who call for that tend to call for the EU to loosen its across-the-bloc regulations. Yet that would lead to the opposite of what is ostensibly desired, because the worst burden on European companies and the biggest obstacle to their scaling up are regulatory differences between EU states. When somebody wants both the EU to regulate less and to make the EU single market less fragmented, it proves that they have not thought things through. The Antwerp Declaration by European industrials, for example, a solid document in many ways that set off the lobbying for regulatory simplification, does not fully resolve this contradiction.

The fact is that more can be less: a lesser regulatory burden requires more EU-level regulation, precisely to sweep away national regulatory differences that prevent business expansion across the single market. There are two concrete policy approaches at hand that would both do a lot of good. One, forcefully argued by Enrico Letta in his 2024 report on the single market, is to pass only regulations (which apply directly and identically in all 27 member states) and not directives (which only have force through national “transposition” legislation that makes each country’s version different) for all new legislation from here onwards, and ideally to convert old directives into regulations wherever possible.

The other, also in the Letta report and in the parallel report by Mario Draghi, is to introduce a “28th regime” for corporate law, allowing incorporation at the EU level under simple rules with immediate licence to operate across the bloc. The European Commission has promised a proposal next month, which will have to pass two tests. One is that it actually takes the form of a regulation rather than a directive. This should go without saying. But I notice that very senior people are making a point of calling for it publicly — as the European Central Bank’s Isabel Schnabel did in an op-ed for the FT last week, for example. That suggests, incredibly enough, that the regulation vs directive question is not fully settled. The other is that the proposed corporate code is as good as it can be. The start-up founders behind the “EU-Inc” campaign have set out an excellent blueprint. The researchers at Bruegel, too, have analysed what must characterise a successful “Regime 0” as they name it.

Third, there is the “Made in Europe” debate, nicely set out by my colleagues in a Big Read two weeks ago (with more recent detail here). It’s not fair, however, to call this a “confusion”: it is a plain political disagreement on how much to use public policy to reserve a share of the huge domestic EU market for EU producers in certain strategic goods. The vehicle for this will be the forthcoming Industrial Accelerator Act.

The disagreement pits traditional interventionists such as France — and many companies producing, say, battery components in Europe — against traditional free traders, and companies most worried about their existing foreign markets and supply chains. (Bruegel researchers have a good paper on the case for being less restrictive and giving equal treatment to friendly third countries in a “Made with Europe” approach.) The Commission itself is split, so much so that there are rumours the proposal may miss the (already postponed) promised publication day next week.

I will only make two points here, as this debate deserves a dedicated column. One is that the tempting “maximising economic wellbeing versus security” trade-off doesn’t quite work because there are large, if unknowable, costs to dependence on others (even friendly others). So the question is not whether to have any European preference but how strict it should be. In particular, I find it hard to object to European preference when taxpayer money is at stake — whether through public procurement or subsidies. Reserving public subsidy for acknowledged policy imperatives is justified both economically and politically and can mostly be designed to work legally. My second observation is that the domestic political conflict will undoubtedly be resolved since the concrete form the policy will take is as percentage thresholds for production content by origin. In other words, something where it is eminently possible to split the difference.

The fourth and final confusion is over what is going on in the European industrial landscape. There is a lot of angst — sometimes overdone — over the supposed lack of “competitiveness” (which should more correctly be cast as a challenge of productivity). This is particularly strong in and about the industrial sector. But as I wrote a few months ago, much of European industry is in fine fettle (see chart below). It is German industry whose performance is uniquely awful. And even there, the value added of manufacturing has held up better than production volumes.

We should not take a restructuring of German industry as necessarily an unambiguously bad thing even for Germany, let alone as telling a story of how European industry is performing overall. Above all, an important lesson to remember for both industrialists and the politicians they lobby is not to mistake creative destruction for “lack of competitiveness”.

Other readables

● The world needs Europe as an alternative model to the US and China, writes Dani Rodrik.

● Bank of Finland researchers establish that the Russian economy slowed down sharply in 2025.

● New research finds that wage growth does not have much effect on inflation — but (expected) inflation does.

● I have argued that the EU must offer euro liquidity to many more countries, so I am very pleased that the ECB is working to do just that.

● Come for the beautiful visualisation of China’s high-speed rail network, stay for the analysis of what it does to the world’s largest human migration.