BERLIN, Germany: Europe's two largest manufacturing economies are urging the European Union to move faster on reforms, warning that delays could erode the bloc's economic strength and global standing amid intensifying competition from the United States and China.

According to a policy paper prepared ahead of an informal EU summit next month, Germany and Italy argue that the EU risks losing competitiveness unless leaders agree on concrete measures to revive growth and attract investment. The document, reviewed by Reuters, positions the two countries as Europe's leading industrial powers and calls for sweeping changes to cut bureaucracy, speed up permitting, and strengthen the single market.

The paper warns that Europe's living standards and sovereignty are under threat as new competitors expand their influence worldwide.

"Continuing on the current path is not an option. Europe must act now," the joint statement said.

The document was drafted for the Leaders' Retreat in Alden Biesen, Belgium, scheduled for February 12. At the meeting, German Chancellor Friedrich Merz and Italian Prime Minister Giorgia Meloni are expected to push for a coordinated EU strategy to support businesses and strengthen the bloc's global competitiveness.

Germany and Italy are urging EU leaders to use both the retreat and the regular European Council meeting in March to agree on specific commitments rather than broad principles, the paper said.

A central focus of the proposal is Europe's internal barriers. Citing figures from the International Monetary Fund, the paper said EU internal obstacles amount to tariffs of up to 44 percent on goods traded within the bloc and more than 110 percent on services trade.

To address this, Germany and Italy called for an "ambitious ease of regulatory burden," including faster approval processes, regular repeal of outdated legislation, and stricter scrutiny of new rules. The paper also proposes systematic reporting to EU leaders on progress in reducing red tape.

The two countries advocated deeper integration across key sectors, including services, energy, capital markets, and digital industries. Among the proposals are the creation of a pan-European stock exchange and revised merger rules to help EU companies scale up and compete more effectively on the global stage.

On trade, the paper urged the EU to accelerate negotiations with partners such as India, Australia, the United Arab Emirates and the Association of Southeast Asian Nations (ASEAN). At the same time, it warned that Europe should be prepared to deploy defensive trade instruments if necessary to protect its industries.

The authors argue that without decisive action, the EU risks falling further behind major rivals, undermining its economic resilience amid growing geopolitical and commercial competition.