ABSTRACT
Europe’s economies have experienced a serious divergence in industrial production, innovation capacity and investment patterns. After documenting recent trends, the chapter investigates the current policies of the EU and argues that a new Europe-wide industrial and investment policy is needed. A policy mobilising 2% of Europe’s GDP (about EUR260 billion) for a decade is proposed, offering greater national policy space with a ‘golden rule’ for public investment. Resources should be concentrated in weaker regions and weaker countries. Actions should include public investment programmes, public enterprises, support for private firms, mission-oriented innovation programmes and other policy tools. Key fields to be targeted should include environmental sustainability; appropriate ICT applications; health and public services. The aim is to encourage innovative and efficient new economic activities employing high-skill, high-wage labour. Resources should come from ECB-supported operations of the EIB, as is happening in the case of EFSI, but a Public Investment Bank would be needed in the medium term. European industrial policy should be implemented at the national and regional levels, with bottom-up efforts, reinventing the governance of public-interest economic activities and organising a political and social consensus on rebuilding European economies.
