It's incorrect to assert that the ban on big mergers is the main obstacle to the formation of European industrial giants.
Fostering Competitive European Giants: The Role of Merger Control, According to Enrico Letta and Mario Draghi
Enrico Letta and Mario Draghi, two influential figures, have advocated for strategies to bolster European competitiveness and digital sovereignty. Their recent reports and policy papers put forth arguments on merger control and the creation of so-called "European champions."
These champions, they suggest, could help reduce European dependency on foreign technologies and foster home-grown innovation. Critics have pointed fingers at overly restrictive competition policy for hindering the emergence of such European giants over the past three and a half decades.
One of the salient examples is the European Commission's 2019 ban on the merger between Alstom and Siemens' railway activities. This ban serves as a symbol of the obstacles faced by European companies seeking to consolidate and compete globally.
The size of companies, it has been argued, can play a significant role in their competitiveness. Large companies can leverage economies of scale and network effects to gain an edge. However, it is essential that large size does not result in the formation of dominant positions that could ultimately be harmful.
Numerous economic studies have shown a link between company performance (in terms of innovation, productivity, exports, etc.) and the degree of competition faced domestically.
In their reports, Letta and Draghi recommend rebalancing a fragmented European regulatory environment and streamlining merger control to enable the formation of larger, more competitive European firms. Such changes could position these firms to better compete in the global market, especially in key sectors like digital infrastructure, AI, and energy.
Both individuals also emphasize the need for a unified, principle-based approach to digital policy that leverages the EU's internal market, skilled workforce, and research institutions. The ultimate goal is to overcome European technology dependencies, foster the rise of domestic players, and secure economic and geopolitical advantages.
In essence, Letta and Draghi propose that a more strategic use of merger control could support the consolidation of European firms, particularly in key sectors, to help them innovate, compete globally, and reduce dependence on non-European technology providers. This approach is seen as crucial for Europe's long-term competitiveness and geopolitical resilience.
Business consolidation through mergers is suggested by Letta and Draghi as a strategy to create European champions, reducing dependency on foreign technologies and fostering home-grown innovation in sectors like digital infrastructure, AI, and energy. A more competitive European business landscape, achieved through rebalancing and streamlining merger control, could provide a foundation for these companies to compete effectively on the global stage.
