BRUSSELS — The European Commission has opened an antitrust investigation into whether Google breached EU competition rules by using the content of web publishers, as well as video uploaded to YouTube, for artificial intelligence purposes. The investigation will examine whether Google is distorting competition by imposing unfair terms and conditions on publishers and content creators, or by granting itself privileged access to such content, thus placing rival AI models at a disadvantage, the Commission said on Tuesday. In a statement, the EU executive said it was concerned that Google may have used the content of web publishers to provide generative AI-powered services on its search results pages without appropriate compensation to publishers, and without offering them the possibility to refuse such use of their content. Further, it said that the U.S. search giant may have used video and other content uploaded on YouTube to train Google’s generative AI models without compensating creators and without offering them the possibility to refuse such use of their content. The formal antitrust probe follows Google’s rollout of AI-driven search results, which resulted in a drop in traffic to online news sites. Google was fined nearly €3 billion in September for abusing its dominance in online advertising. It has proposed technical remedies over that penalty, but resisted a call by EU competition chief Teresa Ribera to break itself up.

BRUSSELS — A bid to revive a European football Super League is unlikely to find a sympathetic audience in Brussels despite the court victory the breakaway contest scored last week. A Spanish appeals court called foul on European football’s organizing body, ruling that UEFA had illegally stifled an attempt by a dozen top clubs from Spain, Italy and England to form their own contest. The EU “will continue to advocate for the strengthening of our sport model, our national leagues and grassroot sport,” Glenn Micallef, commissioner for culture and sport, said in a statement to POLITICO reacting to the judgment.  The Maltese commissioner said the EU executive would continue to work with UEFA and LaLiga — the European and Spanish federations found by the Madrid court to have breached EU competition law — in order to ensure that money is redistributed from the top clubs to amateur leagues. In June, the Spanish competition authority opened an antitrust investigation into UEFA’s conduct, a case which observers — including a former advocate general — think should be taken up by the European Commission. “[The Super League] contradicts the principles of the European Sports Model and collapsed in 2021 because it was a bad idea from the start,” said Micallef, noting that it was rejected by fans, players and governments across Europe at the time. The commissioner’s comment follows the European Parliament’s adoption of a resolution in October that stated the legislative body’s opposition to “breakaway competitions.” Both Real Madrid and A22 Sports Management have said that they will seek damages from UEFA following the court ruling. Both Real Madrid and A22 Sports Management have said that they will seek damages from UEFA following the court ruling. | Sven Hoppe/Getty Images Despite the Super League’s collapse in 2021, its backers have continued to try to organize a breakaway competition.  In response to last Wednesday’s judgment, A22 said that it had held extensive discussions with UEFA officials aimed at creating an open, cross-border football competition, but that the Switzerland-based federation “refused to pursue a compromise.” “UEFA is clearly legally obliged to recognise A22’s right to organize competitions on an equal footing with their own,” the firm said in a statement. UEFA has said that it will carefully review the judgment before deciding on further steps.

Listen on * Spotify * Apple Music * Amazon Music From a picturesque mountain resort in Austria, at the European Forum Alpbach, host Sarah Wheaton unpacks fresh threats by the U.S. to hit countries with tariffs over their digital rules — drawing instant reactions from the European Commission’s Sabine Weyand and Nobel laureate Joseph Stiglitz. She then sits down with former Spanish Foreign Minister — now dean of the Paris School of International Affairs at Sciences Po — Arancha González Laya, to ask how Europe can move from “limping along” to setting the pace on trade, tech and alliances.

Canada will rescind a planned digital services tax in order to advance stalled trade talks with the U.S., Ottawa announced on Sunday.  The tax on the revenues produced by Canadian online users, which was due to go into effect on Monday, angered Donald Trump, with the American president calling it “a direct and blatant attack” on the U.S. Trump terminated trade talks with Canada on Friday, blaming the “egregious” tax. Referring to Canada, Trump wrote on Truth Social on Friday: “They are obviously copying the European Union, which has done the same thing, and is currently under discussion with us, also.” After his government folded on the tax, Canadian Prime Minister Mark Carney and the Trump administration agreed to resume trade talks, aiming to reach a deal by July 21, according to Canada’s Department of Finance.  Trump has repeatedly railed against “non-tariff barriers” imposed by other countries — particularly regulations and taxes on the tech industry.  Britain’s digital services tax caught Trump’s attention, though Britain’s trade secretary told POLITICO last week that reducing it is not part of ongoing U.S.-U.K. trade talks. POLITICO and other outlets reported last week that Europe has indicated it’s willing to be flexible on the Digital Markets Act to clinch a trade deal with Washington. But in comments published Monday, EU competition chief Teresa Ribera pushed back.  “We will not compromise … around sovereignty and around regulation on how to work in our own market,” Ribera told The Capitol Forum, per excerpts from an interview seen by POLITICO. With a July 9 deadline looming — and U.S. tariffs set to kick in — major EU players are split over whether to rush a deal or hold firm to secure better terms.

BRUSSELS — Germany’s plan to help cover power-hungry firms’ electricity bills crosses a line for anyone who knows the EU’s rulebook on doling out state subsidies to industry. But no-one really believes that Brussels will stand up and prove to be a dealbreaker when facing the might of Berlin. The Germans tend to get their way in the end (even when they concede in an internal memo that they are probably breaking the law.) The scheme would essentially cap electricity prices at a bargain rate for Germany’s energy-intensive companies, with the government paying the rest. For Germany’s new government, that would come at a cost — roughly €10 billion by 2030. For struggling industries, however, it might be a lifesaver. There’s just one hitch: EU rules technically prevent countries from handing industries cash like that. The idea is to stop richer countries like Germany from splashing government cash on companies that smaller and more cash-strapped nations will not be able to do, creating unfair distortions in the EU market. “There is no way Brussels will allow that without a fight,” said Oliver Bretz, who heads boutique firm Euclid Law and advises, among others, Romania’s energy-intensive industry association. Yet the EU is increasingly bending its own rules in a post-pandemic world, anxious to juice its stagnant economy and not fall behind the U.S. and China. And that’s the expectation here, lawyers and economists told POLITICO. The two sides will clash, yes, but everyone would prefer an amicable, negotiated compromise. “Explicit state aid prohibitions by way of decision are rare, even more so now than in the past,” said Ulrich Soltész, an antitrust partner at German law firm Gleiss Lutz. Timing, in other words, is everything. GRUMBLING AT GERMANY Few people, if any, are arguing that Germany’s plan is anything but an industrial subsidy, or “state aid” in EU jargon.  “Subsidizing electricity prices on an ongoing basis will be seen by the Commission as nothing more than operating aid,” Bretz said, referencing the EU’s executive in Brussels, the European Commission. “The Commission hates operating aid as it sees it as allowing inefficient industries to survive.”  Officials could suggest, for example, that Germany support green investments and energy efficiency, “but not just by handing money directly to industry,” he said. | Friedemann Vogel/EPA Even within Germany, there is an awareness of how the plan comes across.  Tomaso Duso, who chairs the German government’s competition advisory body, the Monopolkommission, conceded that “the Commission tends to be more skeptical of operating aid, which might be more distortive of competition if not well designed.” A leaked internal paper from Germany’s economy ministry flags shows officials are aware their plans pose “considerable challenges” under EU law. “The reservations are considerable and the prospects of approval are highly uncertain,” the document says. It’s not just the move’s legality that’s drawing attention — but its impact on EU unity. Smaller countries are worried the subsidies could distort Europe’s single market, which, in theory, provides an open, level playing field for more than two dozen countries, expanding business opportunities for all. That fear is particularly acute given Russia’s warmongering nearby and Donald Trump’s trade war abroad. “We have state aid rules for a reason — otherwise we jeopardize the internal market,” said one EU diplomat, who was granted anonymity to speak candidly. “I don’t think we can afford disunity right now, so hopefully there will be an EU response.” The response is similar to a backlash in 2022, when Berlin announced a €200 billion gas price relief fund as bills skyrocketed following Russia’s all-out invasion of Ukraine.  The new subsidy scheme is “worrisome,” added a second EU diplomat, since other countries “don’t have sufficient fiscal capacity to offer such subsidies.” For other capitals, the move also raises the risk of opening Pandora’s box and giving an opening to other countries seen as historically spendthrift. “I would be surprised if Germany can go ahead with this,” quipped an EU government official, “because it would also open the door for France and others.” RETHINKING CASH SPLASH In parallel to Germany, the EU is also reviewing its government aid rulebook. It’s part of European Commission President Ursula von der Leyen’s crusade to inject more life into EU companies, weakening regulations, cutting bureaucracy and directing more government cash toward strategic industries. The shifting ideology was captured in the bloc’s recent Clean Industrial Deal, a plan to supercharge climate-friendly manufacturing and help companies decarbonize. It’s part of European Commission President Ursula von der Leyen’s crusade to inject more life into EU companies. | Oliver Hoslet/EPA In late June, Brussels will present new rules for how it will assess countries’ plans to subsidize industry. The updated guidance is expected to ease government efforts to help renewable energy projects and grow nascent climate-friendly tech industries. Other initiatives are likely to follow.  Yet while the Commission is tinkering at the edges of its subsidy rules, the underlying principles are likely to remain in place.  That’s why people are expecting Brussels to bend, not break, in Germany’s case. “Given that the question of aid to energy-intensive industries has been on the agenda for many years now, this looks unlikely to be the most epic battle between Germany and the Commission,” said Soltész, the antitrust attorney.  At most, the Commission may propose a workaround. Negotiations will likely involve the EU executive suggesting ways for Germany to reach similar results more compatible with the bloc’s rules, said Bretz, the attorney advising industry associations. Officials could suggest, for example, that Germany support green investments and energy efficiency, “but not just by handing money directly to industry,” he said. Meanwhile, the Commission is on standby for Germany to come and talk. “This is a complex issue where the German authorities have to engage closely with the Commission, to ensure full respect of EU rules which ensure competition on the merits between firms based in different Member States,” Commission spokesperson Lea Zuber told POLITICO in a statement. The Commission, she added, is “ready to assist Germany in developing their ideas and designing in a way that complies with the state aid rules and sectoral legislation to avoid distortions in the Single Market.”

Social media giant Meta said that fines handed down by the European Commission Wednesday for violation of its Digital Markets Act are “a multi-billion-dollar tariff ” on Meta and an attempt to “handicap” successful American firms. The Commission slapped tech giants Apple and Meta with penalties for breaching the EU’s new digital rulebook. Apple faces a €500 million fine for breaking the regulation’s rules for app stores, while Meta drew a penalty of €200 million for its “pay or consent” advertising model. “The European Commission is attempting to handicap successful American businesses while allowing Chinese and European companies to operate under different standards,” Meta’s Chief Global Affairs Officer, Joel Kaplan, said in a statement shared shortly after the Commission’s announcement. “This isn’t just about a fine; the Commission forcing us to change our business model effectively imposes a multi-billion-dollar tariff on Meta while requiring us to offer an inferior service,” Kaplan said. The company said it will appeal the decision. His words echo recent statements by the head of the U.S. Federal Trade Commission Andrew Ferguson, who called DMA rules “a tax on American firms.” Apple also reacted to the fines, saying the Commission’s decisions “unfairly” target the company. The decisions “are bad for the privacy and security of our users, bad for products, and force us to give away our technology for free,” spokesperson Emma Wilson said in a statement. Apple will appeal the decision, Wilson said, “and continue engaging with the Commission in service of our European customers.” EU competition chief Teresa Ribera said that the EU has taken “firm but balanced enforcement action against both companies, based on clear and predictable rules.” She added: “All companies operating in the EU must follow our laws and respect European values.” UPDATED: This article has been updated to confirm that Meta will appeal the Commission’s decision.

BRUSSELS ― Crashing markets, tariffs on penguins, recession forecasts and the backflip to end all backflips.  After a breathlessly chaotic week, U.S. President Donald Trump called a temporary truce in his global trade war. We hope you kept up. While much of the world (apart from tariff-battered China, of course) breathed a sigh of relief after Trump hit pause on his most severe economy-shaking levies, it is watching keenly to see if the president remains true to his word. So if you didn’t keep up, here’s how Trump’s tariff U-turn played out, what it meant, why it happened ― and what, crucially, will happen next. (PS: That’s anyone’s guess, quite frankly.) SO WHAT WAS THAT ALL ABOUT? In an abrupt about-face Wednesday, Trump announced a temporary cease-fire in his trade war, with so-called reciprocal tariffs on all countries except China paused for 90 days. The U-turn came after widespread market chaos and diplomatic protests from Berlin to Beijing over his plans to impose punishing worldwide tariffs, ranging from 10 percent to as high as 50 percent.  Though he did not explicitly admit that the financial fallout had prompted him to reverse course, Trump acknowledged Wednesday that the markets had looked “pretty glum” and that people were “getting a little bit yippy.” While he has backed off on most of his planned tariffs for the time being, Trump said in a post on Truth Social that he would retain 10 percent baseline tariffs on countries across the board — which is still higher than almost any tariff regime ever. BANG GO THE MARKETS The money people didn’t take Trump’s initial tariff imposition well, to put it mildly. As the week went on, the S&P 500 index, which tracks the performance of 500 of the largest U.S. publicly traded companies, fell nearly 13 percent. That wiped trillions of dollars off the market value and sent the stock price of iconic brands like Apple and Meta (more on them later in a different context, funnily enough) plummeting. The S&P 500 index, which tracks the performance of 500 of the largest U.S. publicly traded companies, fell nearly 13 percent. | Angela Weiss/AFP via Getty Images Investment bank CEOs began to sound the alarm about an incoming recession, and panic spread at exchanges from London to Paris to Tokyo, which all plunged deep into the red. In the end, though, it was not stocks but U.S. government bonds — the tradeable “I owe you” notes that America uses to finance itself — that changed Trump’s mind.  “I was watching the bond market,” Trump said. “The bond market is very tricky. I was watching it. But if you look at it now, it’s beautiful.” Usually, when stocks go down, the price of government bonds rises. That’s because they’re considered a safe investment in times of market turmoil. But sometimes, when things are really bad (we’ll put it in caps, like a Trump social media post: REALLY BAD), both stocks and bonds sell off at the same time. It happened at the height of Covid, and it happened again in this situation. A meltdown in the $29 trillion U.S. government debt market would have risked a catastrophic financial crisis. It was bonds, after all, that defeated short-lived U.K. Prime Minister Liz Truss, and it was bonds that made Trump sound the retreat.  THE EU STRIKES BACK ― OR DOES IT? After Trump’s “Liberation Day,” European Commission President Ursula von der Leyen reminded Trump that Brussels was “already finalizing a first package of countermeasures in response to tariffs on steel.” On April 7, Commission trade chief Maroš Šefčovič met EU ministers in Luxembourg to discuss the draft list of countermeasures. He emphasized that the bloc’s response was “very gradual, just reacting to steel and aluminum.” With the benefit of hindsight, that looks like a good call. “What’s important here is that Europe reacts in a calm and measured way,” Irish Foreign Minister Simon Harris said at the meeting. “Time is somewhat on our side. We’ve got to actually take this step by step. And that’s what we’re going to do.” Two days later, EU member countries voted almost unanimously to approve retaliatory tariffs on what amounted to almost €21 billion of U.S. exports to Europe, including politically sensitive products like Louisiana-made soybeans.  IS IT ALL ABOUT CHINA? In the same Truth Social post where he announced he was tapping the brakes on global tariffs, Trump also said he would raise already crushingly high penalties on China to 125 percent, accusing them of “ripping off the U.S.A.” By offering a reprieve to the rest of the world while putting the screws to Beijing, Trump appears to have been setting the stage for a more targeted trade war, one that pits the world’s two largest economies against each other. Trump has accused China of “ripping off the U.S.A.” | Patrik Stollarz/AFP via Getty Images Part of Trump’s rationale for easing up on his threatened tariffs was that most countries did not hit back. An exception was China, which had earlier retaliated with tariffs of 84 percent on American goods, a response Trump called disrespectful.  But hours before he backtracked, the EU, which was slugged with a 20 percent tariff on its products, also returned fire by approving retaliatory tariffs ― but only on steel and aluminum. When an Oval Office pool reporter pressed Trump about the EU’s tariffs on Wednesday, he appeared surprised to learn about the payback, ominously calling it “bad timing.” Commerce Secretary Howard Lutnick jumped in quickly to add that the EU had not yet pulled the trigger on its tariffs, which seemed to mollify Trump. So there’s still some confusion over whether the president will ultimately decide to go easier on Brussels. Von der Leyen and the Commission confirmed on Thursday that the EU’s countermeasures will also be put on hold for 90 days — giving both sides of the Atlantic ample time to negotiate. AND THEN THERE’S ENERGY On Tuesday, Trump called on the EU to spend an additional $350 billion on American fossil fuels to address the imbalance in transatlantic trade — equivalent to more than the entire annual U.S. oil output at current rates. European diplomats and officials have made repeated trips to Washington in recent months, looking to take the White House up on the offer by agreeing to buy more gas to avert a trade war. Officials involved in the talks told POLITICO that they had been left frustrated by the administration’s apparent disinterest in actually agreeing a deal. In an interview last week, Czech Foreign Minister Jan Lipavský said Trump’s team had “political” reasons to want to impose tariffs, and that “negotiation[s] before ‘Liberation Day’ [were] not able to change it.” Now, given a 90-day reprieve from Trump’s formidable trade barriers, the bloc is doubling down on efforts to secure an agreement to buy more gas. IT HAS AN IMPACT ON THE EU’S OTHER WORK The trade conflict has cut across other critical policy areas.  The European Commission is delaying decisions to fine American tech giants under its digital antitrust rules, which has prompted speculation that the EU executive is holding fire in a bid to navigate trade tensions. The EU is delaying decisons to fine tech giants such as Apple. | Justin Sullivan/Getty Images Penalties against Apple and Meta, which owns Facebook and Whatsapp, would have been certain to trigger a major backlash from the U.S. administration and its allies in Congress. Brussels had been expected to issue decisions in three year-long investigations into breaches of the bloc’s signature Digital Markets Act as soon as the end of March, a deadline that EU competition chief Teresa Ribera said she was committed to early this year.  That has now passed and fines haven’t yet been imposed. A MERCI FROM PARIS Would a thank-you note to Donald Trump show weakness, Europe wonders?   If not, French President Emmanuel Macron should consider sending one to his “good friend” at 1600 Pennsylvania Avenue. France can ill afford a trade war as it confronts a maelstrom of crises that have exposed fundamental cracks in the 66-year-old Fifth Republic ― the name for the country’s current system of government. But the chaos at home doesn’t mean that Macron, who has never been afraid to take a high-stakes gamble, isn’t ready to fight fire with fire. As one of the loudest voices in Europe pushing for a united and more muscular response to trade threats, meekly returning to Washington wouldn’t have been the French president’s M.O.  In the hours that followed “Liberation Day,” Macron gathered stakeholders at the Elysée Palace to discuss the situation and then publicly called on all companies within the EU to stop investing in the U.S. “until we have clarified things.”  Even with some of the tariffs now delayed, Macron is likely to continue preaching the gospel of unity in Brussels as his government works to shape a deal more to France’s liking (take a look at what happened with American bourbon). For now, though, it’s crisis averted. So, Emmanuel, looks like it might be time to send a bottle of your finest grand cru to the White House (even if its current occupant is a teetotaler) and get a handle on the immediate challenges facing your country. But don’t forget to set a 90-day reminder on your phone, because that trade war still looms on the horizon.  THE BRITS WANT TO ‘COOLLY NEGOTIATE’ In London, Prime Minister Keir Starmer — who has studiously avoided criticizing Trump since the U.S. president took office — started the week by warning that the era of globalization had come to an end, vowing to shield British industry from the impact of tariffs and talking up prospective trade agreements with countries such as India and Australia. Starmer’s center-left government — spared the worst of the reciprocal tariffs but hit by hikes in auto and steel levies, as well as the universal 10 percent rate — has been frantically trying to land an economic agreement with Washington. The PM hinted Tuesday that he was even willing to shear off the rough edges of British tech legislation to get there. Keir Starmer is playing it cool, avoiding any criticism of Trump. | WPA pool photo by Kirsty Wigglesworth/Getty Images While Trump’s U-turn has been welcomed in London, a spokesperson for Starmer’s office said Wednesday night that a trade war remains in “nobody’s interest,” and vowed that the government would “coolly and calmly negotiate” over the remaining tariffs. One government figure, granted anonymity to speak about a sensitive area of policy, told POLITICO the key focus of negotiation, at least in the short term, will be the steep sectoral tariffs on steel and automobiles.  There is some optimism about Britain’s prospects of getting a deal on the sectoral tariffs — but those hopes could easily be dashed given Trump’s propensity to change his mind. POOR GERMANY DIDN’T EVEN HAVE A GOVERNMENT! Trump’s on-again, off-again global trade war put great pressure on Germany’s incoming conservative chancellor, Friedrich Merz, to rapidly form a government capable of helping forge a European response. One of Merz’s core election promises to voters was to revitalize Germany’s struggling economy, which has contracted for two years in a row. But Trump’s tariff threats pose a particular risk to Germany’s export-oriented economy, potentially neutralizing many of Merz’s economic initiatives even before he’s had a chance to implement them. Merz now advocates a carrot-and-stick approach when it comes to Trump, supporting tough countermeasures on new tariffs while also pushing for a free-trade agreement with the U.S. “We are determined to fight back, and you can see from this example that [European] unity helps,” Merz said in a German television interview. But, he added, “the best thing we can do is all join together in transatlantic trade and impose 0 percent tariffs and then the problem will be solved.” Gabriel Gavin, Andrew McDonald, James Angelos, Matt Honeycombe-Foster, Koen Verhelst and Joshua Berlinger contributed to this report.

VON DER LEYEN’S MISSION: STOP EUROPE’S ‘SLOW AGONY’ OF DECLINE The European Commission president has pledged to boost the EU’s ability to compete with the U.S. and China. By CARLO MARTUSCELLI and BARBARA MOENS in Brussels Illustration by Deanne Cheuk for POLITICO When Americans visit Europe, it’s usually to gawk at the monuments of the past: the classical ruins of Italy and Greece, the Enlightenment-era wonders of Paris and Vienna; the trenches and memorials of the continent’s two world wars. When Europeans visit the United States, the trip’s highlight is often a glimpse of the future. Shortly after Paolo Belcastro, a Vienna-based software industry employee, booked a taxi via Waymo in San Francisco, a sleek black Jaguar pulled up to the curb with nobody at the wheel. A flashing screen on the roof signaled to Belcastro and his friend that they should get in, and then the car pulled out into traffic — all without a driver. Belcastro said he enjoyed being able to speak freely, without worrying about being overheard. “I was really surprised by the quality of the experience,” he said. “The driving was perfect, literally.” The trip was also a reminder of how far behind his homeland can be when it comes to cutting-edge technology like autonomous taxis. “I suspect it’s going to be a while before any country in Europe allows a company like Waymo to run self-driving cars,” said Belcastro. “That’s the frustrating part.” That contrast, between the old world and new, hasn’t escaped policymakers in Europe. Warnings that the continent is turning into “an open-air museum” reached a fever pitch this summer with the publication of a report by Mario Draghi, the former head of the European Central Bank (ECB), urging policymakers to take action — and quickly. Europe must become more competitive, Draghi warned, or it will suffer the “slow agony” of decline. Standing at Draghi’s side as he presented his recommendations was Ursula von der Leyen, the president of the European Commission who has promised to boost the European Union’s ability to compete with rivals like the U.S. and China during her second term, which started on Dec. 1.  The question is whether she’ll be able to deliver — especially as Europe’s traditional ally, the United States, is expected to levy painful tariffs under its incoming president, Donald Trump. “This is what people will write about in the history books: Did she manage to hold firm against Russia? And did she stop Europe’s economic decline?” said an EU diplomat. “All the rest are details.”  DIGITAL DIVERGENCE Europe has long lagged the U.S. in economic performance, but recently worries have grown that it’s falling further behind.  The gap across the Atlantic grows wider with each new digital technology. Artificial intelligence is a case in point: Almost all big platforms — the so-called foundation models — are American.  In his distressed black T-shirt, Berlin-based Andreas Klinger, a 40-something-year-old startup founder and serial tech investor, looks more like a DJ than a typical denizen of the Brussels bubble. But as one of the founders of the pressure group EU Inc he’s made it his mission to warn that Europe needs to change its way of doing business quickly, or risk becoming obsolete. The lure of Silicon Valley is only growing, Klinger warned. When he was first finding his feet in the world of tech startups, European founders waited for their companies to gather momentum before thinking about decamping to the U.S.  “Now, founders in their early 20s, they want to move to the U.S. before they even have the idea for a company,” said Klinger, who is campaigning to lower the regulatory burden on European startups and whose group has attracted big names like Markus Villig, the founder of ride-hailing app Bolt and Paul Graham, a founding member of the famed venture capital firm Y Combinator. Beyond the tech sector, things aren’t looking much prettier. In the U.S., the economy has grown by about 2 percent a year since the Covid pandemic. The EU has averaged about half that. In its recent World Economic Outlook, the International Monetary Fund projects that the U.S. economy will grow by 2.8 percent this year, versus 0.8 percent for the eurozone.  Thanks to the Russian invasion of Ukraine, power prices for industry are now double what they are in the U.S.  Steel production on the continent is the lowest it’s ever been on record, said Eurofer, the association that represents the energy-intensive industry.  In Germany, Europe’s manufacturing powerhouse, the economy is stuck in a protracted slump as rising energy costs combine with unprecedented competition from China, especially in the realm of electric cars. Volkswagen, a carmaker synonymous with the German industry, recently announced the planned closure of three of its factories in its home market, an unprecedented step in its 89-year history. Thousands more layoffs have been announced by home appliances company Bosch and car-parts maker Schaeffler. Michael Jackson is an American tech investor who lives in Paris. He has a self-admittedly “amazing” quality of life in Europe. But he’s skeptical that it will ever close the technological gap with the U.S.   “If you’re looking at a lot of European policies … they’re not playing to win. They’re trying to not get blown out,” he said.  DRAGHI’S PRESCRIPTION When it comes to kick-starting the European economy, the closest thing von der Leyen has to a manual is Draghi’s report, which he presented in September. The former ECB chief’s analysis zoomed in on the technology gap. One of the main reasons why the U.S. grew faster than Europe in previous decades was larger improvements in productivity. Those in turn were largely driven by its dominance in digital technology.  Draghi’s proposed solution is a revamp of the EU’s financial sector so that startups can scale up quickly, without having to go to the U.S. to raise money or getting bought up by rivals. He suggests combining that with a push for more public and private money into research. To stem the tide of deindustrialization, Draghi wants a reboot of the power sector. European manufacturers pay about twice as much for electricity as their counterparts in the U.S. Draghi also proposes shaking up the EU’s competition policy to facilitate the emergence of so-called European champions — companies powerful enough to take on their competitors across the globe.  It’s one thing to propose, however. It’s another to deliver. “The pretense is we’re going to try to do as much as possible,” said Jeromin Zettelmeyer, director of the Brussels-based economics think tank Bruegel. “But how it will pan out and whether the result will still be consistent is unclear.” To see the limitations of Brussels policymaking, one needs to look no further than the EU’s Chips Act, one of the marquee pieces of legislation of von der Leyen’s first term. The act — intended to encourage European production of microchips — set out an ambitious goal of doubling semiconductor production to 20 percent of the world’s total by 2030.  Longtime EU watchers could be forgiven for having a sense of déjà vu. A decade ago, the Commission set for itself the same target — only the deadline was 2020. Already, the effort is stumbling into fierce headwinds. In September, the U.S. chipmaker Intel reversed course on a planned factory in Germany. Weeks later, another tech company, Wolfspeed, also announced it was halting plans for a €3 billion factory in the country. JAPANIFICATION The biggest question regarding proposals is just how the EU intends to pay for it. The former ECB chief has called for a massive boost in investment of public and private funds, on the order of 4 to 5 percent of the bloc’s gross domestic product. Together with the EU’s other commitments, that’s not the type of money that’s easily found under the couch cushions. (The EU’s budget has traditionally tracked at about 1 percent of the bloc’s GDP.) “We clearly need financing for investments, for the Green Deal, for defense, et cetera,” said a senior EU diplomat who was granted anonymity to speak candidly. “That money is currently not foreseen, and on top of that, demography isn’t looking good, debt is rising, productivity is not great.” Some have urged EU countries to band together to borrow money like they did during the pandemic. That’s unlikely to be met with approval in Germany, where fear of indebtedness is baked into the country’s politics.  Europe must become more competitive, Draghi warned, or it will suffer the “slow agony” of decline. | Nicolas Tucat/AFP via Getty Images The man most likely to become its next chancellor after elections in February, the center-right politician Friedrich Merz, has said he’s against more joint borrowing. Von der Leyen, a former conservative German minister, also hasn’t signaled support for this option. Other proposals, like redirecting funds from areas like agriculture, which accounts for a third of the bloc’s budget, are likely to run into similar vetoes. “Where should we find the money?” fumed a second EU official. “The battlefields are always the same, and it’s really hard to get out of the trenches.” What von der Leyen and her fellow policymakers may discover is that the best indication of Europe’s future doesn’t lie to the west with the U.S.’ robot taxis, venture capitalists and energy-rich manufacturers. A better example might be found in the Far East, where Japan has never fully recovered from a devastating real estate crisis in the 1980s. Once at the technological frontier, the country saw itself gradually fall into the periphery. GDP grew by less than 1 percent for years, while real income barely budged.  And yet, life went on — and comfortably so. Japan’s cultural importance has only grown since its heyday in the 1980s — thanks these days to the popularity of Japanese content on TikTok and Instagram. Meanwhile, a weak yen has brought a record influx of visitors to the archipelago nation. And even if Japan, Inc. isn’t the awe-inspiring economic juggernaut of yore, it remains at the forefront of key sectors, like robotics. In Europe, one of the fastest-growing economies is Spain. It owes that distinction not to AI or microchips but to playa and paella. Last summer, the number of tourists, including some 850,000 Americans, visiting the country hit a record high. Even as officials in Brussels scramble to turn around the bloc’s economy, Europeans might be just as content to do what they do best: sit back, take a deep breath and enjoy what they’ve got.

The European Commission’s competitiveness adviser Mario Draghi wants the bloc to slash telecom regulation and relax merger rules — but its national governments just aren’t buying it. Capitals are pushing back on key recommendations made by Draghi — the former Italian prime minister who authored a flagship report underpinning the new European Commission’s plans for growth and global competition — according to a document to be signed off by digital ministers on Friday and obtained by POLITICO. Draghi recommended that regulators ease off to allow European telecom providers to size up and deliver the investments to upgrade the bloc’s networks, as it faces fierce competition in a global race with the United States and China to innovate and control key technologies. The call took up cries for help from bigger operators who’ve been warned off buying their rivals. It also echoed many ideas previously floated by the European Commission. But it is now running into a reality check from national governments. “There is a lack of analytical material to back some of the conclusions that are made in the white paper and the Draghi report,” one EU diplomat said ahead of the meeting of ministers this week, citing consolidation in the telecom industry, usually understood as allowing operators to merge with national rivals. Countries are skeptical that reducing the number of telecom players will unlock more money for Europe’s infrastructure. They also fear it could lead to higher prices for consumers, an issue raised by competition experts such as former EU competition czar Margrethe Vestager. Some of Draghi’s premises are “questionable,” according to Tonko Obuljen, Croatia’s chief telecom regulator and chair of the EU’s group of national telecom regulators, BEREC. “Many European countries are actually doing better than the U.S.,” he said, citing quality of services and affordability. “We would plead for analyzing before jumping to some conclusions. And of course, for proving the facts on which the proposals are based,” he added. Some capitals are also worried their own national champions might be the target of a takeover by a bigger European rival. “Operators of all sizes should have business opportunities in the single market and be able to benefit from and contribute to effective competition,” the document reads. BACK OFF, MARIO Draghi didn’t exactly win over governments with a call for member countries to cede some ground on spectrum, which is the bandwidth of airwaves over which mobile data travels. Dubbed a “cash cow,” licenses for operators to use the airwaves are sold by governments for billions of euros. Draghi’s report called for harmonizing licensing rules and timelines, giving a bigger watchdog role to the EU executive. Mario Draghi recommended that regulators ease off to allow European telecom providers to size up and deliver the investments to upgrade the bloc’s networks. | Sean Gallup/Getty Images That idea, too, got the cold shoulder from capitals. “Spectrum harmonization is not the favorite topic of member countries,” said Katalin Molnár, the ambassador for Hungary, who currently chairs talks between EU governments. The national capitals in their document insisted that managing radio frequencies is “a key public policy tool,” stressing “the sustained significance of Member States’ national competencies in that regard.” In short: Governments are telling Draghi and the Commission to butt out. They also push back against the idea of cross-border telecom providers operating under their home-country rules — the “country of origin” principle — over worries this would clash with their national prerogatives, again, and open the door to “forum shopping” to let them choose the most favorable national regime. With a future Digital Networks Act looming as a potential plan to boost 5G and fiber rollout, the Commission will need to present rock-solid evidence to win over EU governments. “Any future legislative proposal requires a solid impact assessment” and be based “on evidence,” the member governments warned.