Yes—but Europe’s ability to compete is not the same as matching the US and China today. The EU retains major economic, scientific, industrial and market assets, but faces weaker productivity growth, lower R&D intensity, barriers to scaling across its market and high energy costs. Its prospects depend on whether it can turn research and investment into businesses and technologies that grow across the EU while keeping energy affordable and protecting economic security.
What does “Europe” mean in this comparison?
Many of the available official comparisons are about the European Union, not every country on the continent. This article therefore uses “EU” for EU-level figures and policies, and “Europe” for the broader question. Conditions also differ among EU member states; a single bloc-wide figure does not describe every country or industry.
“Can compete” is a question about capacity and choices. “Is matching its rivals” is a question about current results. The evidence points to the first being possible, while showing significant gaps in the second. It does not establish that the EU’s current policy agenda will close them.
Where does the EU lag?
Productivity and frontier technology
The European Commission identifies slowing productivity, demographic challenges, rising energy costs and global competition as pressures on long-term prosperity. The OECD links the EU–US productivity divergence in part to lower spending on intellectual-property products, particularly business research and development (R&D) and information technology. It also says the EU lags the US and increasingly China in frontier-technology innovation, including artificial intelligence.
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These are related but distinct problems: research capacity does not automatically produce commercial products, broad adoption or companies large enough to compete globally. The OECD’s analysis points to particular exposure in the information and communications technology sector.
R&D investment
R&D intensity measures spending as a share of GDP. The European Commission’s 2026 European Macroeconomic Report gives this comparison for 2023:
| Economy | R&D spending as a share of GDP |
|---|---|
| EU | 2.1% |
| China | 2.6% |
| United States | 3.6% |
These are economy-wide R&D-intensity figures, not business-sector-only measures. In a 2024 address to the European Parliament, Mario Draghi said EU companies had spent around USD 270 billion less on R&D than US companies in 2021. That is a comparison for 2021 reported in 2024, not a measure of the current annual gap.
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Scaling across the market
A large population does not automatically create one seamless market for every service or product. The OECD identifies barriers to market integration as a constraint on productivity and says limited integration can deny firms economies of scale available to US and Chinese competitors. The European Commission reported in 2025 that only four of the world’s 50 largest technology companies were based in the EU. That figure signals a challenge in company scale and market dynamism; by itself, it does not measure all European innovation or industrial competitiveness.
What strengths can Europe build on?
The EU has substantial economic, scientific, industrial and market assets, although the cited comparisons do not quantify all of them in one consistent way against the US and China. One measurable asset is the expansion of renewable electricity: renewables supplied 48% of Europe’s electricity demand in 2024, according to the Publications Office of the European Union’s 2025 investment report.
That figure shows progress in the clean-energy transition, not that electricity is uniformly cheap, reliable or sufficient for energy-intensive industry. Energy remains both a competitiveness pressure and a potential source of advantage. The same investment report identifies export growth in selected clean technologies, but that does not establish that the EU leads every clean-technology market.
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Why are the US and China different benchmarks?
The United States
The US comparison is especially useful for understanding productivity, investment in ICT and the ability of companies to scale. The R&D-intensity figures show a substantial US lead over the EU in 2023, while the OECD identifies lower EU spending on business R&D and information technology as contributors to the productivity divergence. These measures describe different aspects of the gap and should not be treated as interchangeable.
China
China is a fast-growing innovation and industrial competitor. Its 2023 R&D intensity was higher than the EU’s in the Commission’s comparison, and the OECD says the EU increasingly lags China in frontier-technology innovation. The evidence here does not provide a single harmonized comparison of all three economies across productivity, manufacturing, energy prices, income and market concentration for the same year. Claims about who leads therefore need to specify the measure and date.
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The European Commission’s 2025 Competitiveness Compass sets out three broad directions: close the innovation gap, align decarbonisation with competitiveness, and strengthen economic security. The Savings and Investments Union is intended to mobilize private savings and improve the flow of investment capital across the EU. These are policy aims, not proof that market fragmentation or investment gaps have already been resolved.
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Progress is better judged by outcomes than announcements. Useful measures include:
- Whether business R&D and adoption of digital technologies increase, alongside productivity growth.
- Whether more European startups scale up and remain in Europe.
- Whether cross-border services and market integration improve enough for firms to grow across the EU.
- Whether energy becomes more affordable and reliable while emissions fall.
- Whether the EU reduces strategic dependencies without sacrificing efficiency unnecessarily.
These measures connect the diagnosis to the result that matters: whether EU firms can innovate, invest and grow at scale while sustaining prosperity through the green and digital transitions.
Can Europe still compete?
Yes, but the case is conditional, not assured. The EU has assets to build on and policy levers aimed at innovation, investment, integration, energy and economic security. It also has documented weaknesses in productivity, R&D intensity, frontier technology and company scale. The available evidence identifies the challenges and intended responses; it does not yet show that the responses will deliver the needed results.
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