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Finbarr Bermingham

The ink was barely dry on Mario Draghi’s long-awaited plan to propel Europe’s withering industry into line with Chinese and American rivals on Monday when the bad news began raining in from the Arctic Circle.
In the tiny Swedish town of Skelleftea, Northvolt – the continent’s great hope for narrowing the high-end battery gap with China – announced major cuts to jobs and operations.
The company is looking for a buyer for its energy storage business in Poland and said it would also stop buying cathode materials and start sourcing them from South Korea and China instead.
Northvolt has struggled to scale up to keep on top of its US$55 billion order book. In June, BMW cancelled a €2 billion (US$2.2 billion) order over delays and quality concerns, going with Samsung instead. “Hopes for reducing dependence on China are at risk,” wrote Ronan Murphy at the Centre for European Policy Analysis.
The timing could scarcely have been worse. Ex-European Central Bank chief Draghi’s report was supposed to jump-start an EU-wide industrial revival.

“Super Mario” called for a rethink of the bloc’s broad disdain for industrial policy and asked EU bean-counters to find an extra €800 billion per year to pay for it. He chastised Europe’s bureaucrats for confusing procrastination with progress, and for failing to link decarbonisation efforts with industrial goals.
It was not so much a case of “do or die”, Draghi told journalists in Brussels. “It’s do this, or it’s a slow agony,” he said.
Northvolt’s plight was a stark reminder of the scale of the industrial challenge. By Thursday, the company’s joint venture lithium refinery in Portugal announced delays over project complexity and funding uncertainty.
Over the course of the week, the political obstacles to executing Draghi’s plan also became clear. The esteemed Italian warned of agony, and German politicians were quick to show their masochistic tendencies.
In Berlin, frugal Finance Minister Christian Lindner took just a few hours to reject Draghi’s call for common debt funding for his plan, saying “Germany will not agree to this”.
Two days later, conservative leader Friedrich Merz – tipped to become the next German chancellor – said he would do “everything I can to prevent Europe from going down the path” proposed by the former Italian prime minister.
Draghi called for a “genuine EU ‘foreign economic policy’ to retain our freedom – a so-called statecraft”.
This would require unity among its 27 members on China policy, and a willingness to impose tariffs on imports where industries are still worth protecting, such as electric vehicles. In instances where European businesses can no longer compete, such as solar, Draghi backed open markets.
Chinese officials lambasted Draghi for “zero-sum thinking”. “If EU sees China as a competitor and even a rival, it will always find challenges,” wrote top foreign ministry official for Europe Wang Lutong on X.
But he need not have worried: in a city near Shanghai, Spanish Prime Minister Pedro Sanchez demonstrated that when it comes to China, unity is far from guaranteed. Previously a strong backer of EU tariffs on Chinese-made EVs, he performed a dramatic pivot on Wednesday, two days after meeting President Xi Jinping in Beijing.
“I have to be blunt and frank with you that we need to reconsider – all of us, not only member states but also the [European] Commission,” Sanchez said during a visit to Kunshan, in eastern China.
“We don’t need another war, in this case a trade war,” Sanchez said when asked about Spain’s plan for a key vote of member states expected later this month.


Arthur Leichthammer, a policy fellow for geoeconomics at the Jacques Delors Centre in Berlin, called the EU’s messaging “a massive own goal for its trade and foreign economic policy”.
“It signals that, with the right incentives, it is possible to pick apart capitals one by one this late in the game, regardless of your previous policy position,” he said.
EU insiders see the EV probe as an acid test for the very issues raised in Draghi’s report. If the commission is overruled by its member states following an intense lobbying campaign from Beijing, future acts to protect European industries will be difficult to execute.
The bloc’s de-risking plans would arguably be doomed before they even began.
One Brussels official said the vote would set the tone for European Commission President Ursula von der Leyen’s second term and that “EU credibility was on the line”.
The roller-coaster week left analysts scratching their heads.
Tobias Gehrke, a senior policy fellow covering geoeconomics at the European Council on Foreign Relations, said he was “definitely not optimistic”.
Gehrke pointed to the “inability of our defence industry to build the kind of capacities needed in the long term” to support Ukraine.
“It’s hard to argue that any field matters more, and I feel like we’re failing. So it doesn’t inspire hope that for these more commercial sectors where we need to build a real industrial policy that’s linked to our trade policy, that’s influenced by what China does … all of that is even more difficult, the arguments are more abstract,” he said.
Other observers felt that while the pushback was strong, global events will eventually force Europe into gear.
“It will take some time for the message to fully sink in, and for the proper analysis of all proposals – but the EU does not have much choice really,” said Romana Vlahutin, a senior EU diplomat and currently a distinguished fellow for geostrategy at the German Marshall Fund.
“As Draghi said: it’s either radical change or slow agony. The incoming commission will be one of the most consequential in the history of the EU, and for the first time there will be far more push from the so-called new member states – Poland in particular.”


Germany lobbies fellow EU members to vote against tariffs on Chinese EVs

How will Michel Barnier influence France’s China policy – and is he supposed to?

China’s low-priced EVs reign in Spain, make gains in Europe’s lanes

Mario Draghi has a plan for Europe to avoid ‘slow agony’. Can it work?

China-EU relations

In Skelleftea, Swedish EV battery maker Northvolt is scaling back operations – a stark reminder of the challenge Europe faces. Photo: AFP

Mario Draghi called on the EU to invest €800 billion extra a year to make the bloc more competitive. Photo: Bloomberg

‘Super Mario’ Draghi calls for €800 billion to ensure EU competes with US and China

Former European Central Bank chief Mario Draghi has painted a gloomy picture of Europe’s prospects if it does not act urgently to turbo-boost productivity, in his final report on the future of EU competitiveness. Photo: EPA-EFE 

Mario Draghi and European Commission President Ursula von der Leyen at a press conference on Draghi’s report on EU competitiveness, presented in Brussels on Monday. Photo: Reuters 

Spain and Germany urge rethink on EU tariffs on Chinese-made electric vehicles

Pedro Sanchez and Xi Jinping pictured during their meeting in Beijing on Monday. Photo: AP

Lei Zhang, founder and chairman of Envision Energy, shows Sanchez an e-formula car during the Spanish leader’s visit to the group’s headquarters in Shanghai. Photo: EPA-EFE

China trade officials visit Brussels seeking deal to nix European Union’s EV tariffs

Zeekr electric vehicles by Chinese carmaker Geely Automobile Holdings bound for shipment to Europe in Taicang, Jiangsu province, China, in August. Photo: Bloomberg

Chinese President Xi Jinping (right) and Spanish Prime Minister Pedro Sanchez are pictured before their meeting in Beijing on Monday. Photo: AFP

Mario Draghi, a former Italian prime minister, on Monday called on the EU to invest more than US$886 billion a year to make the bloc more competitive economically vis-à-vis China and the US. Photo: Bloomberg

EU proposes lower tariffs on Chinese-made electric vehicles after input from car makers

EU member states will have to vote on the plan in the coming weeks. Source: Bloomberg

News

China

Diplomacy

Report was supposed to jump-start an industrial revival, but there are political obstacles and it will require unity on China policy


Report was supposed to jump-start an industrial revival, but there are political obstacles and it will require unity on China policy.


European Union

Electric & new energy vehicles