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Industrial policy in the EU: new opportunities, old risks?

Author

Listed:
  • Langfield, Sam
  • Momferatou, Daphne
  • Setzer, Ralph

Abstract

Motivated by the renewed use of industrial policy, this article examines the conditions under which sector-specific interventions can support productivity, competitiveness, and economic resilience. While industrial policy may be justified where market failures or dependencies are well-identified, selective intervention entails risks of distortion through rent-seeking and resource misallocation. These risks are particularly relevant in the EU, where uncoordinated industrial policy is implemented in a multi-country Single Market with heterogeneous institutions and bank-based financial structures. In this setting, industrial policy can be effective only with credible governance and complementary structural reforms. JEL Classification: F13, H25, L52, O25

Suggested Citation

  • Langfield, Sam & Momferatou, Daphne & Setzer, Ralph, 2026. "Industrial policy in the EU: new opportunities, old risks?," Economic Bulletin Articles, European Central Bank, vol. 7.
    • Handle: RePEc:ecb:ecbart:2026:0007:
    Note: 1905193
    as

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    Keywords

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    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • H25 - Public Economics - - Taxation, Subsidies, and Revenue - - - Business Taxes and Subsidies
    • L52 - Industrial Organization - - Regulation and Industrial Policy - - - Industrial Policy; Sectoral Planning Methods
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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