Industrial policy

Europe can die. This was the warning issued by Macron in his second Sorbonne speech. However, it is not only Europe that can die, but also its industry. So far, Europe is falling behind in the race for future markets such as green and digital technologies and biotechnology, and is instead becoming strategically dependent. The European Union must use the next legislature to build an industrial policy worth its name, even if this means a historic turn.

Five years after the European Green Deal was launched, Europe's economic strength and security are at stake. What lies ahead for the German and European economy? A conversation with Sandra Parthie and Roderick Kefferpütz.

This paper has argued that an active industrial policy that is context appropriate, coherent, and adaptable can be utilised to address this challenge. Nevertheless, one must acknowledge that the necessary green transition on the EU level comes with transition costs, challenges, and opportunities that affect distinct people, firms, and countries very differently, and hence bears the threat of rising inequalities, both within and among countries. Central to the success of a green transition is, therefore, the EU’s adequate reaction to this fact. This reaction can then enable and facilitate a green transformation that really leaves no one behind.

This paper questions the extent to which standard market-fixing and macroeconomic expansionary measures will be able to direct and shape new industrial ecosystems in economies across the Atlantic. Moreover, it advances a strategic industrial policy approach for deep industrial restructuring, followed by a discussion on specific industrial policy instruments and how conditionalities and policy alignments are central to balancing risks and rewards in the process of green transition.