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Between a rock and a hard place. Long-term drivers of EU structural vulnerability

Author

Listed:
  • Dario Guarascio
  • Jelena Reljic
  • Giacomo Cucignatto
  • Giuseppe Celi
  • Annamaria Simonazzi

Abstract

This paper analyses the European Union's structural vulnerability in a global economy increasingly divided into opposing blocs and characterized by weaponized interdependencies. It provides an empirical assessment of EU vulnerability along four dimensions: demand, supply, technology, and critical raw materials. It then develops a theoretical framework identifying the main drivers of vulnerability, associated with the German-centered export-led growth model that has shaped the European economy over the last two decades. Three intertwined drivers are emphasized: demand repression, a fallacious economic policy set-up, and the core-periphery divide. Finally, the paper discusses the recent revival of industrial policy in Europe and assesses whether policies aimed at accelerating digitalization and the energy transition can reduce structural vulnerability.

Suggested Citation

  • Dario Guarascio & Jelena Reljic & Giacomo Cucignatto & Giuseppe Celi & Annamaria Simonazzi, 2023. "Between a rock and a hard place. Long-term drivers of EU structural vulnerability," CIMEO Working Paper Series 170, Centre for Investigation and Modelling of Experimental Observations (CIMEO).
    • Handle: RePEc:ter:wpaper:00170
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    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • F15 - International Economics - - Trade - - - Economic Integration
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • F55 - International Economics - - International Relations, National Security, and International Political Economy - - - International Institutional Arrangements

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