EU leaders to brainstorm how to compete with US, China at castle 'retreat'

By Julia Payne and Philip Blenkinsop

ALDEN BIESEN, Belgium, Feb 12 (Reuters) - European Union leaders are due to hold frank discussions in a Belgian castle on Thursday on how to ensure the bloc is not left trailing the United States and China economically or squeezed by tariffs and export curbs by its global rivals.

The bloc is contending with Donald Trump's trade war and Chinese restrictions on exports of critical minerals at a time when it needs greater wealth to decarbonise and digitise its economy and strengthen its defences against Russia.

EU growth has persistently lagged that of the United States and China and EU productivity and innovation in fields such as AI has fallen short.

DRAGHI REPORT BLUEPRINT

European Council President Antonio Costa will host leaders for a brainstorming "retreat" at the 16th-century Alden Biesen castle, in eastern Belgium, to discuss what action to take.

Former Italian prime ministers Mario Draghi and Enrico Letta, authors of two influential reports in 2024 on the EU's competitiveness challenge and its single market, have been invited to share their views.

The Draghi report has been taken up as a blueprint the EU should follow, but the European Policy Innovation Council think tank says only 15% of its recommendations have so far been implemented, although around 50% were either partially implemented or in progress.

The retreat is due to focus on the EU's ambitious trade diversification agenda and on streamlining regulations that businesses lambast.

Another focus will be deepening the EU's single market. Letta said his key message to leaders would be to commit to a deadline of completing the now-fragmented single market by 2028.

"I think that is the only way to respond to Trump and to external pressures that the European Union is under from China, Russia and the U.S. in different ways," he told Reuters.

'SITUATION DIRE, OUTCOME NOT INEVITABLE'

European Commission President Ursula von der Leyen said on Wednesday she wanted leaders to commit to a clear timetable at their next summit in March.

A day before the retreat, industry CEOs met in the port city of Antwerp and some 900 companies signed a declaration calling for bold and urgent action. "While the situation is dire, the outcome is not inevitable," it read.

Andrea Renda, director of research at think tank CEPS, said Europe could still compete with China and the U.S. with more coordination and pragmatism. It had skills, capital, innovative start-ups and a quality of life to attract top talent, he said.

"What is missing, besides deep capital markets integration, is the prioritisation of funding in areas of excellence, rather than spreading resources too thin across the territory of the Union," he said.