Euro market (at least until the 90s) was very predominantly a market with sub 2L, inline 4 engines, with the 2l being already the upper end of the midsize segment.
Anything over 2l/180 inches would have been full size / midsize luxury.
Germany was a bit specific, but even there you had small displacements. The low-end Mercedes C series (or BMW 5 series) were the bulk of the Euro market, with the higher end engines made almost exclusively for the US market (and also the numerous US military present in Germany at the time, which also explain why there is somewhat of a market for Camaros and Mustangs)
The main reasons were the taxes. France and Italy had a “luxury tax”, which implied a steep increase for anything over 2000 cc - which is the reason why you’ll find, for instance, a domestic-market only “Ferrari 208 GTB”, for instance, with a turbocharged 2 liters V8 (!) instead of the 3 liters V8 of the Ferrari 308.
You’ll also find somewhat the same specifics in Japan, with not only the famed Kei Cars but also a lot of sub-2000 cars, intended for domestic market, with the larger displacements targeted specifically for the US.
With the 80’s deregulation, most of the tax incentives to go small disappeared, and you had a blossoming of V6 in the high ends in France and Italy, as well as a developpment of the V8 and even V12 in German cars, from the late 80s up to the late 00s (where we entered the downsizing era)