EU leaders are expected to diverge on whether “Buy European” is an answer to Europe’s waning economic fortunes, 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 will gather on Thursday for a brainstorming session on how Europe can regain its economic competitiveness vis-a-vis the US and China, at a time of economic threats and political turbulence.

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 via huge state subsidies.

Against this backdrop, the EU is considering 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.

The French president, Emmanuel 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”.

A group of northern European countries that champion free trade have fired a warning shot against the idea. A joint paper from the Nordics, Baltics and the Netherlands stated that European preference “could risk adding another layer of complex regulation” and push away investment.

Sweden’s prime minister, Ulf Kristersson, said he was wary of any protectionist agenda. “The basic idea of trying to protect European business, if that is the purpose of Buy European, to try to avoid trading with or partner with other countries, then I’m very sceptical,” he told the Financial Times.

The German chancellor, Friedrich Merz, and 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.

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 is sceptical about the Buy European concept, favouring a more aggressive deregulation agenda and trade deals. 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”.

The European Commission president, Ursula von der Leyen, 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 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 taking place at Alden Biesen in Limburg, an estate founded in the 13th century by Teutonic knights. Leaders will also discuss deregulation, fragmented capital markets that constrain green and digital investment, as well as 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 make 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 when it crosses into France.

The leaders will hear from Mario Draghi and Enrico Letta, two former Italian prime ministers, who produced agenda-setting reports on the economy. Draghi warned 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.