The European Central Bank is hatching a plan to boost the use of the euro around the world, hoping to turn the world’s faltering confidence in U.S. political and financial leadership to Europe’s advantage. Liquidity lines — agreements to lend at short notice to other central banks — have long been a standard part of the crisis-fighting toolkits of central banks, but the ECB is now thinking of repurposing them to further Europe’s political aims, four central bank officials told POLITICO. One aim of the plan is to absorb any shocks if the U.S. — which has backstopped the global financial system with dollars for decades — suddenly decides not to, or attaches unacceptable conditions to its support. The other goal is to underpin its foreign trade more actively and, ultimately, grab some of the benefits that the U.S. has historically enjoyed from controlling the world’s reserve currency. Officials were granted anonymity because the discussions are private. Bruegel fellow Francesco Papadia, who was previously director-general for the ECB’s market operations, told POLITICO that such efforts are sensible and reflect an increasing willingness among European authorities to see the euro used more widely around the world. WHAT’S A LIQUIDITY LINE? Central banks typically use two types of facilities to lend to each other: either by swapping one currency for another (swap lines) or by providing funds against collateral denominated in the lender’s currency (repo lines). The ECB currently maintains standing, unlimited swap lines with the U.S. Federal Reserve, the Bank of Canada, the Bank of England, the Swiss National Bank, and the Bank of Japan, as well as standing but capped lines with the Danish and Swedish central banks. It also operates a facility with the People’s Bank of China, capped in both volume and duration. Other central banks seeking euro liquidity must rely on repo lines known as EUREP, under which they can borrow limited amounts of euros for a limited period against high-quality euro-denominated collateral. At present, only Hungary, Romania, Albania, Andorra, San Marino, North Macedonia, Montenegro and Kosovo have such lines in place. But these active lines have sat untouched since Jan. 2, 2024 — and even at the height of the Covid crisis, their use peaked at a mere €3.6 billion. For the eurozone’s international partners, the knowledge that they can access the euro in times of stress is valuable in itself, helping to pre-empt self-fulfilling fears of financial instability. But some say that if structured generously enough, the facilities can also reduce concerns about exchange rate fluctuations or liquidity shortages. Such details may sound academic, but the availability of liquidity lines has real impacts on business: A Romanian carmaker whose bank has trouble securing euros may fail to make payments to a supplier in Germany, disrupting its production and raising its costs.  “The knowledge that foreign commercial banks can borrow in euros while being assured that they have access to euro liquidity [as a backstop] encourages the use of the euro,” one ECB rate-setter explained.  French central bank chief François Villeroy de Galhau suggested that Europe could at least take a leaf out of China’s book, noting that the Eurosystem “can make euro invoicing more attractive” by expanding the provision of euro liquidity lines. | Kirill Kudryavtsev/Getty Images “Liquidity lines, in particular EUREP, should be flexible, simple and easy to activate,” he argued. One option, he said, would be to extend them to more countries. Another could be to make EUREP a standing facility — removing any doubts about whether, and under what conditions, euro access would be granted. Papadia added that the ECB could also ease access to EUREP by cutting its cost, boosting available volumes or extending the timeframe for use. NOT JUST AN ACADEMIC QUESTION French central bank chief François Villeroy de Galhau suggested in a recent speech that Europe could at least take a leaf out of China’s book, noting that the Eurosystem “can make euro invoicing more attractive” by expanding the provision of euro liquidity lines. China has established around 40 swap lines with trading partners worldwide to underpin its burgeoning foreign trade, especially with poorer and less stable countries. By contrast, the ECB — a historically cautious animal — “is not marketing the euro to the same extent that the Chinese market the renminbi,” according to Papadia.  Another policymaker told POLITICO that while there is a broad consensus that liquidity lines should be made more widely available, the Governing Council had not yet hashed out the details. Austrian National Bank Governor Martin Kocher told POLITICO in a recent interview that there has been “no deeper discussion” on the Council, adding that he sees no reason to promote euro liquidity lines actively. “I’m not arguing that you should incentivize or create a demand. Rather, if there is demand, we should be prepared for it,” he said, acknowledging that “preparation is very important.” He noted that erratic U.S. policies could force the euro “to take on a stronger role in the international sphere” — both as a reserve currency and in transactions. According to a Reuters report earlier this month, similar concerns among central banks worldwide have sparked a debate over creating an alternative to Federal Reserve funding backstops by pooling their own dollar reserves. The ECB declined to comment for this article. RISK AVERSION AND OTHER OBSTACLES  However, swap lines in particular don’t come without risks. “The main risk is that the country would use a swap and then would not be able to return the drawn euros,” said Papadia. “And then you will be left with foreign currency you don’t really know what to do with.” That is exactly the kind of trap some economists warn the U.S. is stumbling into with its $20 billion swap line to Argentina. “The United States doesn’t really want Argentina’s currency,” the Council on Foreign Relations’ Brad Setser wrote in a blog post. “It expects to be repaid in dollars, so it would be a massive failure if the swap was never unwound and the U.S. Treasury was left holding a slug of pesos.” Austrian National Bank Governor Martin Kocher said there has been “no deeper discussion” on the Council, adding that he sees no reason to promote euro liquidity lines actively. | Heinz-Peter Bader/Getty Images Such thinking, another central bank official said, will incline the ECB to focus first on reforming the EUREP lines, which have always been its preferred tool. The trouble with that, however, is that EUREP use may be limited by a lack of safe assets denominated in euros to serve as collateral. Papadia noted that the Fed’s network of liquidity lines works because “the Fed has the U.S.  Treasury as a kind of partner in granting these swaps.” So long as Europe fails to create a joint debt instrument, this may put a natural cap on such lines.  Even with a safe asset, focusing on liquidity lines first could be putting the cart before the horse, said Gianluca Benigno, professor of economics at the University of Lausanne and former head of the New York Fed’s international research department. Europe’s diminishing geopolitical relevance means that the ECB is unlikely to see much demand — deliberately engineered or not — for its liquidity outside Europe without much broader changes, Benigno told POLITICO. Liquidity lines can be used to advance your goals if you already have power — but they can’t create it. For that, he argued, Europe first needs a clear political vision for its role in the global economy, alongside a Capital Markets Union and the creation of a common European safe asset — issues that only politicians can address.

Enrico Letta is president of the Jacques Delors Institute and a former prime minister of Italy. Pascal Lamy is vice-president of the Paris Peace Forum and a former European commissioner for Trade. Kolinda Grabar-Kitarović is co-chair of the Global Preparedness Monitoring Board and a former president of Croatia. They are all members of the Governing Board of the new Jacques Delors Friends of Europe Foundation. For too long, the European project has been treated like an à la carte menu. Leaders cherry-pick advantages, blame Brussels for the compromises they’ve accepted, and leave citizens to bear the consequences of watered-down decisions and years-long delays. This habit of the political dodge, of agreeing in public and unraveling at home, has dented public trust, and it must stop. By 2028, Europe must complete the single market — not in slogans but in the concrete areas that shape everyday life, like energy, telecommunications, savings and investments, and the free circulation of knowledge and innovation. A real single market in these fields will deliver tangible benefits for citizens: Harmonized energy markets mean cross-border trade of electricity and gas, stabilized supplies and lower bills when markets work properly. Unified telecoms will reduce roaming and domestic price monopolies, improve service and widen access. Integrated capital markets will give savers better returns, channel funds to growing firms and make loans cheaper for small businesses. And removing barriers to research and data flows will allow students, scientists and entrepreneurs to collaborate and scale up without coming up against national borders. In short: more choice, lower costs, better opportunities and faster innovation. Alongside these priorities, Europe must also adopt what Enrico Letta and others call the “28th regime” — a mechanism that allows individuals and businesses to operate under uniform EU standards when national rules obstruct progress. Voluntary pioneers shouldn’t be hostage to vetoes from lone capitals. Where national foot-dragging denies benefits to citizens elsewhere, European law should offer an alternate path to deliver those benefits. This is about fairness and security. The fragmented status quo leaves households overpaying for energy, students facing unequal digital access and entrepreneurs boxed into tiny domestic markets. It also weakens Europe geopolitically: Fragmented energy systems increase vulnerability to hostile suppliers; disjointed capital markets amplify financial shocks; and splintered telecoms and digital rules hamper our ability to control critical infrastructure and data flows. Deadlines force choices and sharpen political will — without them, the default remains delay. Europe’s leaders thus need to set a clear, nonnegotiable deadline to complete the single market in energy, telecoms, capital and knowledge by 2028. And here are the concrete steps they must take: First, they must institutionalize the fifth freedom — the free circulation of knowledge and innovation — by removing regulatory barriers to research collaboration, data exchange, university partnerships and mobility for knowledge workers. Next, they need to adopt EU-wide rules where national governments block progress. Activating the 28th-regime concept will allow willing member countries and their citizens to benefit, even if one or two vetoers refuse to move. Then, break energy silos by fast-tracking cross-border interconnectors, harmonizing grid and wholesale market rules, and prioritizing joint procurement to prevent costly duplication. Also, unify telecoms by eliminating burdensome national licensing, promoting Pan-European operators, and creating a regulatory environment that rewards competition and coverage. Europe’s leaders thus need to set a clear, nonnegotiable deadline to complete the single market in energy, telecoms, capital and knowledge by 2028. | Thierry Monasse/Getty Images Finally, complete the capital markets union through the Savings and Investments Union, linking finance to the real economy and fostering investments in the common goods that Europe needs, such as innovation and digital, security, and the fight against climate change. Completing the single market must also go hand in hand with security and resilience. If Europe is to spend billions on defense, those investments must translate to more than trophies for national procurement agencies. We need a single market for defense, with interoperable equipment, joint procurement, shared standards and industrial cooperation. Defense purchases need to build common capabilities — not 27 bespoke systems that can’t communicate with each other. Societal resilience matters too. Authoritarian and malign actors weaponize disinformation, exploit social divisions and erode trust in institutions. Fighting disinformation is as much about strengthening communities as it is about policing platforms, and Europe must invest in civic resilience. We must also be clear-eyed about enlargement. Ukraine’s and Moldova’s resilience have shown democratic determination in the face of Russian aggression, and their efforts should inspire concrete progress. Former European Commission President Jacques Delors called enlargement “our duty” — and he was right. Widening the single market to include the Western Balkans, Ukraine and Moldova, while rigorously enforcing rule of law and democratic standards, is not charity. It’s a strategic investment in Europe’s security and prosperity. Europe now faces a stark choice: Inertia on the one hand, meaning fragmented markets, stranded talent, fragile societies and rising illiberalism; or integration on the other — a single market that lowers costs, boosts competitiveness, enhances security and renews citizens’ trust. The 2028 deadline shouldn’t be seen as a slogan. It’s a contract with Europeans who want results, not reassurances. And leaders must treat it as such. Delors said Europe needs a soul. Today, it needs delivery. Let’s strengthen our defenses and societies, meet our duty to our neighbors and finish the job. Let’s do it by 2028.

EINDHOVEN, The Netherlands — The European Union’s rules on artificial intelligence are driving tech workers and companies to Silicon Valley, a top executive from the Dutch chipmaking giant ASML has said. “Why is it so difficult to get AI done in Europe? Simply because we started with regulating, to keep AI under the thumb,” ASML’s Chief Financial Officer Roger Dassen told an event in Eindhoven on Monday evening. “Someone who has a talent for artificial intelligence, the first thing they do with their hard-earned money … is buying a ticket to Silicon Valley,” Dassen said. The comments — made during a campaign event for Dutch center-right party Christian Democratic Appeal ahead of national elections Oct. 29 — are another shot across the bow of the EU’s embattled artificial intelligence law. ASML, Europe’s leading tech company by market cap, has been campaigning to pause the parts of the law that are not yet implemented. In July, the company’s executives signed onto a letter from 46 companies calling for a two-year pause. The company in September became the largest shareholder of French AI company Mistral with a €1.3 billion investment, strengthening the influence of ASML when it comes to the EU’s handling of AI companies. Dassen also complained about the lack of protection that Europe’s most prominent companies are receiving amid ongoing geopolitical turbulence. “You should ask the Airbuses, the Nokias, the ASMLs … whether they feel protected by Europe at all times in this huge struggle of power that takes place between the United States and China. “The answer won’t always be yes,” he said. In recent years the Netherlands has faced sustained pressure from the U.S. to block some of ASML’s sales of the most advanced chip-making machines to China. Last week, ASML’s top lobbyist, Frank Heemskerk, told POLITICO’s Competitive Europe summit in Brussels that “it’s not always easy” to meet EU politicians. “It’s easier to get a meeting in the White House with a senior official than to get a meeting with a commissioner,” he added, quoting a previous company executive. Dassen also urged Europe to finish work on a capital markets union — the economic policy effort to create a single market for capital across the EU — to improve startups’ access to funding. “We are very good at startups, we’re worthless at scale-ups,” he said.

HOW DONALD TRUMP BECAME PRESIDENT OF EUROPE The U.S. president describes himself as the European Union’s de facto leader. Is he wrong? By NICHOLAS VINOCUR Illustration by Justin Metz for POLITICO European federalists, rejoice! The European Union finally has a bona fide president. The only problem: He lives at 1600 Pennsylvania Avenue in Washington, D.C., aka the White House. U.S. President Donald Trump claimed the title during one of his recent off-the-cuff Oval Office banter sessions, asserting that EU leaders refer to him as “the president of Europe.”  The comment provoked knowing snickers in Brussels, where officials assured POLITICO that nobody they knew ever referred to Trump that way. But it also captured an embarrassing reality: EU leaders have effectively offered POTUS a seat at the head of their table. From the NATO summit in June, when Trump revealed a text message in which NATO Secretary General Mark Rutte called him “daddy,” to the EU-U.S. trade accord signed in Scotland where EU leaders consented to a deal so lopsided in Washington’s favor it resembled a surrender, it looks like Trump has a point. Never since the creation of the EU has a U.S. president wielded such direct influence over European affairs. And never have the leaders of the EU’s 27 countries appeared so willing — desperate even — to hold up a U.S. president as a figure of authority to be praised, cajoled, lobbied, courted, but never openly contradicted. In off-the-record briefings, EU officials frame their deference to Trump as a necessary ploy to keep him engaged in European security and Ukraine’s future. But there’s no indication that, having supposedly done what it takes to keep the U.S. on side, Europe’s leaders are now trying to reassert their authority. On the contrary, EU leaders now appear to be offering Trump a role in their affairs even when he hasn’t asked for it. A case in point: When a group of leaders traveled to Washington this summer to urge Trump to apply pressure to Russian President Vladimir Putin (he ignored them), they also asked him to prevail on his “friend,” Hungarian Prime Minister Viktor Orbán, to lift his block on Ukraine’s eventual membership to the EU, per a Bloomberg report. Trump duly picked up the phone. And while there’s no suggestion Orbán changed his tune on Ukraine, the fact that EU leaders felt compelled to ask the U.S. president to unstick one of their internal conflicts only further secured his status as a de facto European powerbroker. “He may never be Europe’s president, but he can be its godfather,” said one EU diplomat who, like others in this piece, was granted anonymity to speak candidly. “The appropriate analogy is more criminal. We’re dealing with a mafia boss exerting extortionate influence over the businesses he purports to protect.” “BRUSSELS EFFECT” It was not long ago that the EU could describe itself credibly as a trade behemoth and a “regulatory superpower” able to command respect thanks to its vast consumer market and legal reach. EU leaders boasted of a “Brussels effect” that bent the behavior of corporations or foreign governments to European legal standards, even if they weren’t members of the bloc. Anthony Gardner, a former U.S. ambassador to the EU, recalls that when Washington was negotiating a trade deal with the EU known as the Transatlantic Trade and Investment Partnership in the 2010s, the U.S. considered Europe to be an equal peer. “Since the founding of the EEC [European Economic Community], America’s position was that we want a strong Europe,” said Gardner. “And we had lots of disagreements with the EU, particularly on trade. But the way to deal with those is not through bullying.” One sign of the EU’s confidence was its willingness to take on the U.S.’s biggest companies, as it did in 2001 when the European Commission blocked a planned $42 billion acquisition of Honeywell by General Electric. That was the beginning of more than a decade of assertive competition policy, with the bloc’s heavyweight officials like former antitrust czar Margrethe Vestager grandstanding in front of the world’s press and threatening to break up Google on antitrust grounds, or forcing Apple to pay back an eye-watering €13 billion over its tax arrangements in Ireland. Compare that to last week, when the Commission was expected to fine Google for its search advertising practices. The decision was at first delayed at the request of EU Trade Commissioner Maroš Šefčovič, then quietly publicized via a press release and an explanatory video on Friday afternoon that did not feature the commissioner in charge, Teresa Ribera. (Neither move prevented Trump from announcing in a Truth Social post that his “Administration will NOT allow these discriminatory actions to stand.”) “I’ve never seen anything like this in my entire career at the Commission,” said a senior Commission official. “Trump is inside the machine at this point.” Since Trump’s reelection, EU leaders have been exceptionally careful in how they speak about the U.S. president, with two options seemingly available: Silence, or praise. “At this moment, Estonia and many European countries support what Trump is doing,” Estonian President Alar Karis said in a recent POLITICO interview, referring to the U.S. president’s efforts to push Putin toward a peace with Ukraine. Never mind the fact that the Pentagon recently axed security funding for countries like his and is expected to follow up by reducing U.S. troop numbers there too. It became fashionable among the cognoscenti ahead of the NATO summit in June to claim that the U.S. president had done Europe a favor by casting doubt on his commitment to the military alliance. Only by Trump’s cold kiss, the thinking went, would this Sleeping Beauty of a continent ever “wake up.” As for Mark Rutte’s “Daddy” comment — humiliatingly leaked from a private text message exchange by Trump himself — it was a clever ploy to appeal to the U.S. president’s ego. Unfortunately for EU leaders, the pretense that Trump somehow has Europe’s interests in mind and was merely doling out “tough love” was dispelled just a few months later when European Commission President Ursula von der Leyen signed the EU-U.S. trade deal in Turnberry, Scotland. This time, there was no disguising the true nature of what had transpired between Europe and the U.S.  The wolfish grins of Trump White House bigwigs Stephen Miller and Howard Lutnick on the official signing photograph told the whole story: Trump had laid down brutal, humiliating terms. Europe had effectively surrendered. Many in Brussels interpreted the deal in the same way.  “You won’t hear me use that word [negotiation]” to describe what transpired between Europe and the U.S., veteran EU trade negotiator Sabine Weyand told a recent panel. BLAME GAME As EU officials settle in for la rentrée, the shock of these past few months has led to finger-pointing: Does the blame for this double whammy of subjugation lie with the European Commission, or with the EU’s 27 heads of state and government? It’s tempting to point to the Commission, which, after all, has an exclusive mandate to negotiate trade deals on behalf of all EU countries. In the days leading up to Turnberry, von der Leyen and her top trade official, Šefčovič, could theoretically have taken a page from China’s playbook and struck back at the U.S. threat of 15 percent tariffs with tariffs of their own. Indeed, the EU’s trade arsenal is fully stocked with the means to do so, not least via the Anti-Coercion Instrument designed for precisely such situations. But to heap all the blame on the doorstep of the Berlaymont isn’t fair, argues Gardner, the former U.S. ambassador to the EU. The real architects of Europe’s summer of humiliation are the leaders who prevailed on the Commission to go along with Trump’s demands, whatever the cost. “What I am saying is that the member states have shown a lack of solidarity at a crucial moment,” said Gardner. The consequences of this collective failure, he warns, may reverberate for years, if not decades: “The first message here is that the most effective way for big trading blocs to win over Europe is to ruthlessly use leverage to divide the European Union. The second message, which maybe wasn’t fully taken into account: Member states may be asking themselves: What is the EU good for if it can’t provide a shield on trade?” The same goes for regulation: Trump’s repeated threates of tariffs if the bloc dares to test his patience reveal the limits of EU sovereignty when it comes to the so-called “Brussels effect.” And that leaves the bloc in desperate need of a new narrative about its role on the world stage. The reasons why EU leaders decided to fold, rather than fight, are plain to see. They were laid bare in a recent speech by António Costa, who as president of the European Council convenes the EU leaders in their summits. “Escalating tensions with a key ally over tariffs, while our eastern border is under threat, would have been an imprudent risk,” Costa said. But none of this answers the question: What now?  If Europe has already ceded so much to Trump, is the entire bloc condemned to vassalhood or, as some commentators have prophesied, a “century of humiliation” on par with the fate of the Qing dynasty following China’s Opium Wars with Britain? Possibly — though a century seems like a long time.  Among the steaming heaps of garbage, there are a few green shoots. To wit: The fact that polls indicate that the average European wants a tougher, more sovereign Europe and blames leaders rather than “the EU” for failing to deliver faster on benchmarks like a “European Defense Union.” Europe’s current leaders (with a few exceptions, such as Denmark’s Mette Frederiksen) may be united in their embrace of Trump as Europe’s Godfather. But there is one Cassandra-like figure who refuses to let them off the hook for failing to deliver a more sovereign EU — former Italian prime minister and European Central Bank chief Mario Draghi. Author of the “Draghi Report,” a tome of recommendations on how Europe can pull itself back up by the bootstraps, the 78-year-old is refusing to go quietly into retirement. On the contrary, in one speech after another, he’s reminding EU leaders that they were the ones to ask for the report they are now ignoring. Speaking in Rimini, Italy, last month, Europe’s Cassandra summed up the challenge facing the Old World: In the past, he said, “the EU could act primarily as a regulator and arbiter, avoiding the harder question of political integration.” “To face today’s challenges, the European Union must transform itself from a spectator — or at best a supporting actor — into a protagonist.”

Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He tweets at @Mij_Europe. In January, the European Commission unveiled a sweeping new strategy to help the EU remain competitive. It was a move that underscored growing worries over the widening innovation and productivity gaps between Europe and its global rivals, and was in direct response to intensifying global competition, stagnant growth, weak demographics and new headwinds from high energy costs, security risks and trade policies. But while political progress to date suggests the EU is still falling far short in closing its competitiveness gap with the U.S. and China, it’s also wrong to conclude that the entire “Draghi” agenda is blocked. Indeed, there are bright spots to be found, including the EU’s efforts to cut red tape, the improving outlook for European defense funding and the consolidation of the bloc’s defense-industrial base. In other areas of the agenda, however — such as deepening banking and capital markets integration or improving the continent’s tech ecosystem — progress remains lackluster. So, let’s take a closer look. First, the biggest advances made so far are in the area of defense. Brussels has now relaxed its fiscal rules to allow countries to spend 6 percent of GDP over 4 years on defense, and for this not to count against their deficits. EU leaders have also agreed to a €150 billion loan facility that will enable member countries with less fiscal space to benefit from cheaper Commission borrowing from capital markets, which will then be passed onto them as loans. The EU has taken formal steps to encourage joint procurement of defense equipment and to prioritize local suppliers as well. And there was, of course, a big fiscal move from Germany, which ditched its debt brake, allowing for unlimited borrowing outside the regular budget beyond 1 percent of GDP, as well as the €500 billion special vehicle meant for infrastructure. The problem, however, is that a very large number of member countries don’t have the fiscal room to ramp up defense spending — certainly not to reach the 5 percent target — unless the EU agrees to more common financing, as it did with Covid-19 and the NextGenerationEU facility. And this depends on Germany leveraging its economy to the benefit of Europe. If Europe really is going to deliver Pan-European defense public goods — such as integrated air defense; a European satellite, intelligence and drone program; and other so-called “European strategic enablers” — it’s going to need common borrowing to do it. Meanwhile, another key priority in Brussels has been reducing administrative barriers for businesses, and EU governments are likely to make significant gains in this area. The Commission has already presented two draft “omnibus” packages to cut red tape, focusing on sustainability, corporate due diligence and investment. The aim? Reducing the regulatory burden without altering the overall direction of sustainability policies. More such bills are now expected on defense, digital, mid-caps and sustainable finance. And the Commission has also adopted a “one in, one out” principle for new administrative requirements, aiming to help further reduce the regulatory burden. This imperative is as political as it is economic, as this agenda is essential to keeping center-right parties on board in both the European Parliament and the European Council. The EU has taken formal steps to encourage joint procurement of defense equipment and to prioritize local suppliers as well. | Oliver Hoslet/EPA Unfortunately, however, this is where much of the good news ends. When it comes to efforts on integrating capital markets, for example — which is a big agenda item — the political obstacles remain formidable. Even though the Commission has presented its latest strategy for greater integration of the EU’s banking sector and capital markets, member countries continue to resist the harmonization of corporate and foreclosure laws, tax regimes, pension systems, and market supervision and infrastructure. And when it comes to the EU’s tech and digital ecosystem — another big ticket item — the bloc still continues to face structural barriers in closing the gap with Silicon Valley, which retains its advantage with European startups hungry for funding and talent. This situation is unlikely to be addressed without the closer integration of EU capital markets. And while the Commission unveiled an ambitious “AI continent” strategy in April, substantive legislative initiatives will take time. Overall, tech is essential to the wider strategy’s success, yet it still accounts for most of Europe’s productivity gap with the U.S., and progress has been too slow. There are other things EU leaders can do in the meantime, however. For example, with the U.S. and the EU now striking a deal on tariffs, Washington’s haphazard approach should revitalize the bloc’s wider trade agenda. The EU-Canada trade deal is a great start in this direction. But the agreement is still in what’s known as “provisional implementation,” which 10 EU member countries have to ratify. And without full ratification, the investment parts of the deal can’t take effect. If successful, the EU-Latin America trade deal, Mercosur, would be an even bigger prize here. Currently, France remains the deal’s biggest antagonist since the country has concerns over agricultural “dumping.” However, Brussels is now trying to negotiate safeguards to satisfy the political concern in Paris that a deal done over French President Emmanuel Macron’s head would invite the far right to power in 2027. Finally, another test on trade will be Brussels’s ability to finalize deals with countries in the Gulf and Asia-Pacific — including India and Australia. The hope with these deals isn’t just to unlock greater market access but also to secure supply chains, while looking to revamp Europe’s industries. U.S. President Donald Trump’s return to the White House has created the potential for a real economic revival in the EU — and the answers are all in Draghi’s report. But even though some progress is being made, EU leaders still need to do more to grasp the nettle and really bolster the continent’s growth prospects.

BRUSSELS — As Europe prepares to enter a new technology race, the hurdles it faces to beat out the U.S. and China are all too familiar. After rapidly falling behind in the global rush to artificial intelligence, Brussels has a fresh chance at an economic success story in the emerging field of quantum technology. But in a new strategy to be released Wednesday, the EU will warn that promising homegrown quantum tech risks being snatched up to make money abroad as the bloc continues to lag in turning research into “real-market opportunities,” according to a draft seen by POLITICO. “Europe attracts only five percent of the global private quantum funding, compared to over 50 percent captured by the U.S. and 40 percent by China,” the undated draft read. Governments and technology companies — most notably in the U.S. — are plowing billions into the quantum wave, which would be revolutionary because quantum computers would surpass the problem-solving capacities of current computers by vast orders of magnitude, revolutionizing industries from communications to drug development. Europe is the global leader in the number of scientific publications on the technology. “Europe has been falling behind [when it] comes to the technology in many sectors. This sector is something where we are several years ahead of other countries,” said Juha Vartiainen, co-founder of the Finnish quantum computing company IQM. But in the race to commercialize that research, Europe risks falling behind quickly, ranking only third in patents filed, behind the U.S. and China. To many, it’s déjà vu. Europe is generally best in class in the research that precedes revolutionary technologies, as it was in artificial intelligence. But the U.S. and China leapfrogged the continent in building the companies to deploy mass-market applications. A major point of debate is whether Europe will give its quantum industry free rein. Quantum computers are considered sensitive technology since they are expected to break the digital encryption that protects data and communications from being surveilled and stolen — making the technology a matter of national security. Several European governments have already imposed export restrictions. CASH FLOW PROBLEMS U.S. tech giant IBM recently announced it expects to have the first workable quantum computer by 2029 — adding urgency to the timeline for Europe to get its house in order. For decades, Europe has failed to overcome its fragmented financial market and pool funding on the scale that the U.S. and China can provide. Efforts to overcome the barriers to investment through a bloc-wide capital markets union have yielded no significant outcomes. U.S. tech giant IBM recently announced it expects to have the first workable quantum computer by 2029 — adding urgency to the timeline for Europe to get its house in order. | Anna Szilagyi/EPA The strategy notes significantly more investment will be needed to roll out reliable technology that is widely adopted by several industries. “Raising a scale-up in Europe is super difficult, because we lack the European instruments, the European venture capital … large enough to support that,” said Enrique Lizaso, CEO of Spanish software company Multiverse Computing, which is crossing quantum-inspired software applications with artificial intelligence. Multiverse last month raised €189 million in a funding round that included both U.S.-based and European investors. Lizaso said that if Europe wants to help scale its companies it must be prepared to invest €100 million per company, “which is what you’re going to have from the U.S.” According to IQM’s Vartiainen, “we would need to have funding levels which are significantly larger than they have been so far.” In an interview Tuesday, the EU’s tech commissioner Henna Virkkunen said that Brussels and the capitals have jointly funded quantum technology with €11 billion. “Now it’s important, because we are quite fragmented, that we are putting different dots together,” she said. PICKING WINNERS Both Brussels and EU capitals have rolled out public funding plans to complement private funding, but the industry fears these are insufficient and lack focus. Europe’s approach has been to be “technology-neutral” and fund several strands of quantum technology, Vartiainen said, but spreading out funding can dilute its impact. Europe should follow the U.S. example of unlocking larger investments for focused “challenges,” he said. Under a program led by the U.S. government’s DARPA defense research agency, 18 companies have been selected as part of a larger bid to come up with an error-free quantum computer by 2033. Those companies could reportedly tap up to $300 million if they pass all the stages. The EU’s draft strategy promises to launch “two grand challenges” between 2025 and 2027, with one focused on quantum computing and another on quantum navigation systems in “critical environments.” Another way for governments to support companies to commercialize the technology would be if they are the primary buyers of technology, which then lowers the bar for the industry to follow suit. Some industry voices have warned that the EU’s approach to regulating AI offers a cautionary tale. | Etienne Laurent/EPA The draft strategy said the Commission would “support innovation-oriented procurement schemes,” but didn’t offer much detail on how it would do so. Companies are adamant on what they don’t want from Brussels: regulation and restrictions on quantum technology, like restrictions on the export of the technology. Some industry voices have warned that the EU’s approach to regulating AI offers a cautionary tale. Worried about the potential harms of the technology, the EU rolled out the world’s first AI rulebook, only to quickly backtrack to focus on AI innovation and commercial success. “We cannot afford to regulate what is not yet mature,” said Cecilia Bonefeld-Dahl, director general of DigitalEurope, one of Brussels’ leading tech lobbies. “Otherwise, Europe risks losing the quantum race.”