Brussels is advancing new merger guidelines aimed at easing restrictions on corporate consolidations across Europe in a bid to bolster the continent’s competitiveness against the United States and China. The European Union’s renewed focus on encouraging the creation of “European champions” reflects concerns over the region’s slower economic growth and the fragmentation of key strategic sectors.

The push comes amid growing recognition that Europe has fallen behind the US and China in economic expansion and technological innovation. Between 2012 and 2022, the EU’s average real GDP growth rate of approximately 1.3 to 1.5 percent trailed the US’s 2.2 percent and China’s 5 percent. While the US leverages a dominant tech sector and robust trade policies, China invests heavily in industrial growth and raw materials, challenging traditional European strengths in industries such as automotive, renewables, and chemicals.

French and German governments have urged Brussels to rethink its approach to merger control and facilitate larger, cross-border consolidations that can generate scale economies necessary to compete globally. The European Commission’s new guidelines, unveiled in April, emphasize maintaining scale, innovation, and resilience in examining mergers to help European firms grow stronger.

Despite political declarations supporting European champions, significant obstacles remain. National regulators, politicians, and public concerns continue to hinder major cross-border mergers. Experts highlight the absence of a true single market across many sectors, with divergent national rules on taxation, labor, and corporate governance posing challenges to integration. Some argue that while goods move relatively freely across the EU’s 450 million consumers, businesses face complex regulatory barriers that fragment operations and limit the benefits of consolidation.

Politics is a key impediment, as member states often prioritize preserving national champions and local jobs over pan-European deals. For instance, Germany has opposed a proposed takeover of Commerzbank by Italy’s UniCredit, reflecting concerns about headquarters relocation and job losses. Industry insiders note that fears around local economic impacts can stall or prevent mergers even when broader economic benefits are projected.

Within the European Commission, views on reform are mixed. While President Ursula von der Leyen has called for more openness to creating European champions, senior competition officials, including competition chief Teresa Ribera, caution against expecting a dramatic shift, noting the significant structural issues still impeding consolidation efforts.

Market participants surveyed by financial and legal advisors acknowledge the need for more permissive antitrust policies but express skepticism over the political will to approve major mergers. Moreover, some caution that mergers and acquisitions frequently fail to deliver expected value due to overvaluation, inadequate due diligence, and integration challenges.

Despite these hurdles, several large-scale deals are progressing. Finnish company Kone’s planned €29.4 billion acquisition of Germany’s TK Elevator would create the world’s largest elevator manufacturer and will test the new regulatory approach. Meanwhile, a proposed space sector merger involving Airbus, Thales, and Leonardo aims to strengthen European competitiveness against industry leaders like SpaceX.

However, deeper consolidation in sectors such as telecommunications and defense remains elusive. Industry voices warn that continued fragmentation risks leaving Europe behind in the global economic race. They call for regulators to permit greater consolidation, focusing on high-value sectors like luxury goods, engineering, and medical technology to solidify Europe’s position.

Ultimately, Brussels faces a delicate balancing act between fostering larger European firms capable of global competition and managing national interests that resist ceding economic control. The outcome will shape the trajectory of the EU’s corporate landscape amid intensifying global rivalry.