By David Barwick – FRANKFURT (Econostream) – European Central Bank Governing Council member Pierre Wunsch on Monday said Europe was naive if it continued to apply open-market and state-aid rules designed for a global economy that no longer existed.

Wunsch, who heads the National Bank of Belgium, told the Financial Times in an interview that EU policymakers were still pursuing goals shaped by a rules-based order even as the United States and China had moved toward protectionism and state-directed economic policy.

“This world is gone,” he said.

Europe had to ask how it could follow rules when others did not, Wunsch said.

The previous approach of free trade and tight limits on industrial policy had been broadly successful, but had left Europe lagging in innovation, he said.

Wunsch singled out energy-intensive industries as an area where Europe faced structurally higher costs while still wanting to preserve domestic production.

“You’re just not competitive, that's it,” he said.

The EU had failed to internalize how far the global economy had moved away from a level playing field, according to Wunsch.

Chinese subsidies and U.S. protectionist policies had reshaped the landscape, and Europe could not keep offering the same answers as before, he said.

In a recent National Bank of Belgium paper, Wunsch argued that Brussels was avoiding difficult trade-offs between climate ambition, competitiveness and openness.

Europe needed a political discussion rather than grand narratives that pretended all objectives could be achieved simultaneously, he said.

Wunsch also warned that Europe was falling further behind in areas such as artificial intelligence and robotics and risked losing influence over global standards.

The region was trying to regulate technologies it did not master, he said.

Wunsch said Europe’s deeper constraint was political, with democracies increasingly unable to make choices.