Directionality, Resilience and Investment: Renewed European Industrial Approach

The author is Deputy Director-General in the European Commission. She draws in this paper from her extensive hands-on experience in industry policy design which is complemented with literature review. EU industry operates in a fundamentally different environment than five or ten years ago. European industrial policy approach up to now has been largely non-directional and decentralised: the EU’s competition-first ethos has privileged horizontal over sector-specific measures, and much of Europe’s industrial policy is not only implemented but also designed at national or regional level. This model is increasingly ill-suited to a global economy where a level playing field cannot be assumed and Europe’s competitiveness has slipped. Overreliance on decentralised market forces has left the EU poorly prepared for winner-takes-all dynamics. While market mechanisms should continue to govern most sectors, for strategically important challenges, stronger EU-level coordination and directional action are needed. The paper offers pointers for industry strategy recalibration around three focal axes: directionality, resilience and investments. The paper calls for upgrading and leveraging Europe’s existing industrial strengths to ensure EU industries remain or become indispensable actors in global value chains. It contends that Europe must move beyond incremental steps by enabling high-risk, high-reward strategic leaps in selected technologies. The aim is to foster globally competitive firms, encourage relocation of supply chains and invigorate manufacturing, particularly within cleantech sectors. Some adjustments in competition and trade policies are suggested to strengthen Europe’s industrial and tech capacities. By aligning strategic autonomy, sustainability, and competitiveness—forming a cohesive policy triangle—Europe can reduce dependency on external entities and enhance its role in global supply chains. A further alignment of Member States policies with the European level can propel Europe forward in its pursuit of prosperity. The new approach also calls for improving implementation capabilities both at European as well as national levels. A better mix of forward-looking policy design centralisation and embedded autonomous bottom-up decision making is desired. Increased investments in industrial projects and infrastructure need to happen and public finance is essential in reducing risks and creating markets.