Europe must change to prosper in a "contest of systems" with China and the United States, according to Annegret Kramp-Karrenbauer, the new leader of Germany's ruling Christian Democrats.

In an interview with POLITICO, Kramp-Karrenbauer sketched out a vision that would mean changing EU competition policy to create "European champion" companies, giving greater weight to industrial policy, and striking a balance between French President Emmanuel Macron's calls for greater EU integration and the more cautious approach of Berlin and other member countries.

"What I see and feel is that the world is reordering itself, that old certainties are falling away. I see the challenge for Europe in setting the standards in this process," said Kramp-Karrenbauer, who was elected in December to succeed Angela Merkel as chair of the Christian Democratic Union (CDU), putting her in pole position to also take over from Merkel as German chancellor.

"I'm not entirely sure that we are aware of this challenge and sufficiently prepared for it," said the 56-year-old former premier of Saarland state, whose low-key style inevitably draws comparisons to Merkel, though her profile is more socially conservative.

Turning to May's European Parliament election, Kramp-Karrenbauer said the CDU aims to contribute to a majority of "constructive European forces" in the EU legislature. Alongside the European People's Party, of which the CDU is a key component, she said that majority could include socialists, liberals, Macron's centrist La République En Marche and possibly Greens — but not populists on the right or left.

"Europe cannot be only the receiver of strategic decisions of others, that is China or the USA. We have to be strong ourselves to shape the global rules" — Annegret Kramp-Karrenbauer

Kramp-Karrenbauer, known as AKK for short, spoke to POLITICO in Brussels on her first visit to the EU capital as CDU leader. The trip was a chance for Kramp-Karrenbauer — a relative newcomer to national and European politics, having spent most of her career in Saarland — to get better acquainted with EU officials and members of the European Parliament.

It was also an opportunity for them to get to know her, after 18 years of Merkel at the helm of the Continent's most important political party. A senior center-right MEP reported strong demand among his colleagues for selfies with the new boss, and there was a long queue for face time at a Brussels reception given for her Tuesday.

The interview took place on the eve of European Competition Commissioner Margrethe Vestager's decision to block a planned merger between Germany's Siemens and Alstom of France that would have created a European rail industry superpower. Advocates of the tie-up, including the French and German governments, argued Europe needs a company that could compete globally in the sector, particularly with China. Opponents said it would squash competition in Europe and create an inefficient behemoth.

Kramp-Karrenbauer made clear she is in the former camp.

"Europe cannot be only the receiver of strategic decisions of others, that is China or the USA. We have to be strong ourselves to shape the global rules. This includes discussions about industrial policy and future technologies. We have to take a very sober look: Today’s competition law is geared to the current situation — but how can it take into account the competitive situation that is developing around us?" she said in the interview, which took place at the EPP's Brussels headquarters.

Asked if the next European Commission, which will take office later this year, should address the issue, Kramp-Karrenbauer replied: "In my view, yes. I believe that we must attach greater importance to the issue of industrial policy in Europe."

Chinese challenge

The CDU leader's comments reflected a frequent complaint from European business leaders that they do not compete with China on a level playing field, with Beijing exercising tight control over foreign investments and giving major state backing to its own firms.

Kramp-Karrenbauer said her stance is not born out of fear of China. "We accept competition. But this competition must be fair, it must respect the rules. And competition is also about size [of companies]," she said.

Asked how Europe could compete better with China, she said: "We need to be at the forefront of technological development again. We have a time-critical window on AI, and there is an opportunity there, especially in terms of application orientation. But we will only get this off the ground with sufficient momentum if we do it on a pan-European basis."

As the new CDU leader, Kramp-Karrenbauer takes up a prominent place in the EPP family of center-right parties. Its leaders have come under fire from opponents and rights activists for keeping the Fidesz party of Hungarian Prime Minister Viktor Orbán in its ranks, despite its strong anti-migrant rhetoric and policies, attacks on EU institutions and crackdown on academic freedom. The European Parliament last year launched disciplinary proceedings against Budapest on the basis that the EU's core values are at risk.

Asked if Orbán could be part of the constructive pro-European majority she hopes will form after the European Parliament election, Kramp-Karrenbauer said the issue presents "a very difficult situation for the EPP."

"The strength of Europe at the end of the day has always been that we stuck together and that demands a great amount — probably even more so than in the past — of discussions, of balancing, of bringing along individual countries" — Annegret Kramp-Karrenbauer

"There are elements of Viktor Orbán’s policies that very much bind us together — for example the concept of the social market economy, of economic policy," she said. "But there are positions of Fidesz, or Viktor Orbán, on issues such as rule of law and academic independence on which, rightly in my view, the relevant procedure has been launched by the European Union."

Kramp-Karrenbauer added: "As long as Fidesz remains a part of the EPP, however difficult that may be, there is a chance to argue over these positions in a dialogue. And we would deprive ourselves of this opportunity if we were to separate."

She said the Greens could be part of a pro-EU alliance in the Parliament but described some of their policies as "very difficult, in terms of the balance between economy and ecology."

Manfred's the man

The CDU leader also offered strong support for the Spitzenkandidat system, under which pan-European parties select a lead candidate in the election who is also their pick for European Commission president. Many EU leaders dislike the system, arguing they should have a free hand in nominating a Commission chief for approval by the Parliament.

The system was used for the first time in the last European Parliament election, resulting in Jean-Claude Juncker becoming Commission president. If it is used again this time, EPP Spitzenkandidat Manfred Weber — from the CDU's Bavarian sister party, the Christian Social Union — would be in pole position as the center-right alliance is widely predicted to come first in the election.

"We followed the Spitzenkandidat concept last time round, and so it would be a step backwards to say that the second time we deviate from the concept," Kramp-Karrenbauer said. "We have established that, and it is the position that I represent as CDU chair and, of course, all the more so because it's Manfred Weber, whom I wholeheartedly support."

On European integration and the Franco-German cooperation that has been at the heart of the project, Kramp-Karrenbauer signaled continuity with Merkel's middle-ground approach of edging cautiously forward rather than making great leaps. She said she supports the concept of a European army but envisages it as national militaries working together rather than being replaced.

Kramp-Karrenbauer, whose home region borders France, also sought to reassure other EU members that greater Franco-German cooperation is not a threat to the bloc as a whole.

"The strength of Europe at the end of the day has always been that we stuck together and that demands a great amount — probably even more so than in the past — of discussions, of balancing, of bringing along individual countries," she said. "And for that it’s important that there is a well-functioning [Franco-German] axis – but it’s just as important to make clear it’s not exclusive."

Despite her recent rise to CDU leader, Kramp-Karrenbauer she said she plans to hold on to at least one tradition from her old life. She will continue to take to the stage in her home region at carnival time in the character of a cleaning woman in the state parliament, to poke fun at politicians. Her only challenge is selecting her material. "So much is happening that I am still collecting ideas," she said.