In a speech given about a week ago, the highly respected Italian president, Sergio Mattarella, addressed the demanding challenges that Europe faces, largely due to Russian warmongering, but without forgetting between the lines, subliminally mentioning the new North American position.
Europe finds itself in an uncomfortable position today. Between an aggressive Russia, which sees European fragmentation as a geostrategic advantage, and a United States that is increasingly intransigent in defending its own industrial and technological interests, the continent has already realized that the idea of a neutral, cooperative global market based on multilateralism is a chimera.
Much has been said about the impact on the European economy, but not so much about the effects on a micro level. The point is that for companies – where wealth is effectively generated – that change is not a vaguely abstract thing of a political nature. On the contrary, it is, in a very concrete way, existential because it is your survival that is at stake.
For decades, Europe subcontracted defense to the US, progressively deindustrialized in favor of China and became increasingly dependent on energy sources from Russia. In this world, European business success was based on the search for maximum efficiency, production relocation and integration into long, cheap and just-in-time global value chains.
This model worked while geopolitics remained on a secondary level – today, unfortunately for us Europeans, it has become a weakness. Energy, semiconductors, data, critical software and raw materials such as rare earths are no longer simple factors of production, becoming true instruments of power.
In this context, the worst option for European companies is to pretend that nothing has changed – or, at the limit, that everything boils down to a restructuring of the armaments industry. It’s just that neutrality is over. Pure efficiency, without redundancies, went from virtue to risk. Which means that decisions about investments, supply chains and technology are now strategic options with strong political correlations.
This does not mean closing Europe or betting on self-sufficiency, which will always be illusory. For companies, it means reducing dependencies, diversifying markets and suppliers, and accepting some additional cost as “insurance” against unforeseen geopolitical shocks. It means, above all, investing in our own capabilities – technological, industrial and energy – even when this may hurt in the short term.
Another recurring mistake is to continue thinking about national markets. No relevant European company can today compete alone against American or Chinese giants. The scale must be continental. Mergers, cross-border partnerships and a true logic of a European domestic market are no longer issues exclusively for competitiveness, becoming conditions for survival.
Finally, companies need to abandon their defensive posture towards institutions. The European Union is a field of dispute. Whoever defines technical standards, digital rules or environmental criteria shapes entire markets and conditions the development of entire industries (let alone car manufacturers). If European companies do not take on this role, others will. And, last but not least, Brussels should be less bureaucratic, less prone to excessive regulations that only harm business activity and scare away investment.
The world to come will be more fragmented, more protectionist and less predictable. At the time of the so-called Cold War, European companies moved in a bipolar world: they had a “hot back” with American support that greatly helped to deal with Soviet hostility and where China counted for little from an economic point of view.
Currently, the war is doubly cold for Europe: hostility from the East is compounded by aggressiveness from the other side of the Atlantic. In addition, an increasingly significant part of the world begins to fall under Chinese control. The question is not whether European companies prefer this world – it is whether they are prepared for it. Between ingenuity and survival, the choice should be obvious.