Does the EU Need European Champions?
In recent years, a simple mantra has emerged in response to Europe’s anxiety about global competitiveness: “We need European champions.” This phrase is echoed by governments, commissioners, and experts alike, suggesting that fostering a few giants capable of competing with the US and China is the solution. However, framing the debate this way is deceptively simplistic, as different sectors present unique realities and solutions.
Capital-Intensive Industries
Take, for instance, the telecommunications sector. In the US, three national operators each exceed 100 million customers. By contrast, the EU hosts nearly 100 mobile operators, averaging just five million subscribers each. Investment per capita in the US is roughly €230 a year, while in Europe it stands at just €100. This comparatively smaller scale of European operators results in significantly lower investment capacity, jeopardizing the ambitious objectives set by the EU for the Digital Decade.
To tackle scale issues in capital-intensive industries, the European Commission is reforming the Merger Control Guidelines. However, this reform has been limited; the foundational Merger Regulation remains untouched. This presents two critical implications. Firstly, the power to decide the extent of reform lies solely with the Commission, allowing it to draft and interpret the Guidelines without legislative input from the member states. Secondly, these Guidelines, initially intended to assess whether an operation significantly impairs competition, instead tend to focus on short-term price effects— the easiest metrics to measure. Thus, an institutional aversion to risk develops, where speculative benefits in investment or innovation are often ignored in favor of measurable price impacts.
The Fragmentation Issue
This approach results in remedies that prioritize the maintenance of a multitude of operators rather than fostering players with adequate scale. Weak new entrants fragment the market further and hinder financing of the networks that the EU aspires to deploy. In reality, the existing Guidelines already contain elements to better weigh these effects. An urgent formal change should redirect practice in a more progressive way.
Moreover, many mergers in sectors like telecommunications make sense primarily at the national level. It is within individual countries that network duplication occurs, costs are eliminated, and profitability improves. True pan-European champions may emerge later, but first, rational consolidation in national markets must be allowed. Therefore, using the term “European champions” requires caution; the goal isn’t manufacturing continental giants but permitting sensible mergers where real investment takes place.
Financial Sector Challenges
When discussing European champions in the financial sector, the narrative runs into more complex political realities. Political resistance emerges swiftly when a merger threatens to dilute national control over large entities. The case of UniCredit and Commerzbank illustrates this: the mere possibility of the German subsidiary of an Italian bank taking control of a German bank sparked explicit opposition in Berlin, raising concerns over sovereignty regarding loans to SMEs and exports.
Consequently, we witness partial or niche transactions rather than true pan-European mergers. Regulatory frameworks further complicate matters through restrictions on the flow of capital and liquidity among entities within the same group in the EU. According to calculations from the ECB, the confluence of liquidity requirements and national regulations results in approximately €250 billion in liquidity being trapped, reducing the large groups’ ability to manage resources effectively.
Looking Forward
This fragmentation pattern is echoed across the fund markets. Data from EFAMA shows that while a typical US fund manages around €2.7 billion, its EU counterpart handles merely €400 million, reflecting a fragmented European market. This smaller scale leads to higher costs for savers, presenting a stark contrast to US mutual fund fees.
Conclusion
So, does the EU genuinely need European champions? In capital-intensive industries, the challenge lies not in creating giants but in discontinuing a competition policy that systematically penalizes investment. Conversely, in the financial sector, the bottleneck arises not from Brussels, but from member states’ economic nationalism, which compartmentalizes capital, liquidity, and markets to retain political control over banks and savings. Treating the concept of European champions as a catch-all solution masks the underlying differences and creates a misleading sense of simplicity. Europe requires not a slogan but a robust framework of competition, supervision, and a unified market that matches its aspirations.
Judith Arnal is a researcher at the Real Instituto Elcano, Fedea, and CEPS.