The shift in the Green Deal's transition efforts towards strengthening European industry had already begun with the Green Deal Industrial Plan presented in February 2023, when the EU Commission wanted to give an initial response to the U.S. Inflation Reduction Act (IRA) through two crucial legislative proposals, the Net-Zero Industry Act and the Critical Raw Materials Act. Both laws were passed during the last legislative period and are currently being implemented. Now, at a next step, the EU Commission has introduced the Competitiveness Compass at a strategic level. The new strategic framework, which is intended to contribute to innovation, decarbonisation and security of supply, is again based on two policy reports that already attracted a great deal of attention in the second half of 2024: the Letta Report on the European single market and the Draghi Report on competitiveness.

AK Europa has already contributed to the Brussels discussion on industrial policy priorities in the EU at a roundtable with AK President Renate Anderl in May 2024. The key question was how the green and digital transition could be shaped in the interests of employees. The roundtable marked the start of a collaboration between AK and the Austrian Foundation for Development Research (ÖFSE), in the context of which ÖFSE Director Werner Raza prepared a report on a progressive industrial policy agenda for the twin transformation in the EU. The final report will be published shortly after the publication of the Clean Industrial Deal.

This first roundtable was followed by a public event on 4 February 2025, hosted by AK EUROPA and the ÖGB Brussels Office, where high-ranking trade unionists – Judith Kirton-Darling (General Secretary, industriALL Europe), Reinhold Binder (Federal Chair, PRO-GE), Peter Schleinbach (Federal Secretary, PRO-GE), Sophie Dura (political secretary at the EU liaison office, IG Metall) – and MEP Evelyn Regner had focused on the opportunities of a European industrial strategy. And on 10 February 2025, Werner Raza presented the results of his report at another roundtable with experts from interest groups, NGOs, political think tanks, the EU Commission and Austrian ministries.

A progressive European industrial policy. Key points of the ÖFSE report
After years of neglect, industrial policy  is back at the top of the EU policy agenda. To exploit the synergies between green and digital technologies, governments need to play an active role, as the market alone cannot implement the necessary changes in time. Effective industrial policy requires clear objectives, government responsibility and capacities, and the involvement of the private sector and civil society. Dependency on energy and raw material imports, a complex governance structure, a lack of strategic coherence and legitimacy, as well as fragmented financing and an inadequate macro-financial framework are key problems of the European Union’s current approach. Not even important programmes such as the Green Deal and NextGenerationEU have so far been able to change this.

Progressive industrial policy is based on a transformative society characterised by solidarity, which guarantees social security and wide access to public services. A significant aspect is to improve opportunities for participation. This should be promoted not least by Twin Transition Councils (TTC), in which the key stakeholders, from EU institutions to civil society representatives, are represented. In addition, the investment gap identified in the Draghi report must be closed. The European Commission's preferred approach of further developing the capital markets union will be insufficient. Rather, 50 percent of the financing should come from the public sector - through a three-pronged financing structure: an EU transition fund, an increased EU budget from 2028, and more monetary financing from the ECB.

Furthermore, targeted support for energy efficiency, renewable energies and the circular economy, as well as extensive investment in infrastructure, are crucial. The transition requires an improved capacity for innovation and closer cooperation with Global South countries. An ambitious and well-coordinated approach is essential to secure Europe's economic and ecological future.

Roundtable discussion
In addition to the presentation of Werner Raza's progressive industrial policy agenda, the innovation expert Erkki Karo (Tallinn University of Technology, DG GROW Economics Fellow 2025) explored the question as to how innovation systems and state capacity are connected. He explained the importance of good and adaptable bureaucracy. The implementation of political measures requires the effective participation of a large number of actors. This can take years. In the discussion, the relationship between citizen participation and populist forces was discussed, as well as the question of whether social partnership approaches could be weakened as a result. It was made clear here that supplementary citizens' forums should enable greater involvement and counteract populism.

It was also discussed how job losses, for example in the automotive industry, can be handled from the employee perspective. It was agreed that regional development needs had to be promoted urgently, especially in the regions affected by deindustrialisation. A social safety net, retraining opportunities and more resources must be provided beforehand. One specific demand is to expand the existing EU Just Transition Framework, which is supposed to promote a just transition until 2027, but only has an insufficient effect. An extension and an increase in funding are urgently needed.

Future perspectives
While the European Commission focuses on economic performance in the debate on the EU's competitiveness, Draghi emphasises in his report that productivity is based on innovation, which essentially depends on investment in human capital. The roundtable concluded with the Austrian Productivity Board’s definition of competitiveness: Sustainable competitiveness refers to a set of institutions, policies and factors that ensure that an economy remains productive in the long term while ensuring social and environmental sustainability.

The discussion once again highlighted the complexity and diversity of the challenges of the twin transformation. The forthcoming ÖFSE report is a good starting point for ideas as to how these challenges can be met with a progressive agenda. We will soon see whether the EU Commission's Clean Industrial Deal, which is to be presented on 26 February, already addresses some of these issues.

Further information
EU Commission: Compass to regain competitiveness and secure sustainable prosperity
AKEUROPA: Poland takes over the EU Council Presidency. Focus on security
AKEUROPA: The EU's fight for competitiveness. An Interview with Andrew Watt, Director General of the European Trade Union Institute
AKEUROPA: About the Capital Markets Union. A conversation with Finance Watch’s chief economist Thierry Philipponnat
AKEUROPA: Industrial Policy (2021)
Council: EU industrial policy
Council: Speech by President António Costa at the official opening of the Polish presidency of the Council of the European Union
POLITICO: EU’s Clean Industrial Deal to cover 6 themes from energy prices to trade Euractiv: Revolutionary ‘Clean Industrial Deal’ needed for a sustainable and competitive Europe
Project Syndicate: The EU Needs a Strong Clean Industrial Deal
FEPS: A Unified Industrial Strategy for the EU