high level grouPS

A Clean Industrial Deal strategy will not succeed without parallel changes in the institutional set-up and the functioning of the EU, says the report on competitiveness by Mario Draghi as well as others. The problem is that the EU governance system dates from the 1950s and responds to the economic and social context and  to the needs of that time. It was successful until the turn of the century because the methods responded to the objectives. Its operational methods are no longer suited for the present contextual conditions.

Since centuries, techno-economic systems determine political-institutional systems, within a given geographic, climatic, societal context. The liberal-democratic governance system in Europe was based on the nation state and the industrial economy. None has already absorbed the consequences of the shift from a resource intensive industrial economy towards a research & technology driven circular and climate neutral economy with complex global interdependencies. The governance toolbox of  member states and EU institutions in a European single market and global economy has gradually become desynchronised with the (emerging) techno-economic system and the challenges which it brings. The equilibrium has been lost due to inertia typical of political-institutional systems. This is the root cause of Europe’s declining competitiveness and its wide impact.

The EU’s competitors deal with this problem in different ways: the USA by focussing on market forces, China by focussing on central steering. The EU finds itself in a weakened position because of a  repartition of competences not adapted to the economic transition challenges, and because of its   governance system, lacking adaptation to these shifts. The situation has worsened by the transition management failures of the Green Deal. The governance of a complex transition from a resource intensive economic system to a climate neutral and circular one with global interdependencies cannot be the same as for correcting market failures in a stable economic system.

After five years of Green Deal policy, it is now proven that different governance methods are required in order to achieve these objectives and to avoid unnecessary transition costs and to restore economic health and social acquiescence. How to do this, with the confines of the current Treaties, is a key challenge for the current mandate.