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

Dario Guarascio, Jelena Reljic, Giacomo Cucignatto, Giuseppe Celi and Annamaria Simonazzi

No 237, Working Papers in Public Economics from University of Rome La Sapienza, Department of Economics and Law

Abstract: This work analyses the European Union's structural vulnerability vis-à -vis a global economy that is increasingly divided into two opposing blocks with ever more 'weaponized' interdependencies. First, we provide an empirical assessment of EU's vulnerability focusing on four main dimensions – demand, supply, technology and critical raw materials. Second, we provide a comprehensive theoretical framework identifying the major drivers of vulnerability. The latter are associated with the German-centered export-led growth model that has largely shaped the European economy during the last twenty years. Three are the (intertwined) key drivers: demand-repression, fallacious economic policy set-up and core-periphery divide. Finally, we analyse the recent revival of industrial policy in Europe discussing whether and to what extent such policies, particularly those directed at accelerating digitalization and energy transition, might be able to reduce vulnerability.

Keywords: Structural vulnerability; Strategic autonomy; Industrial policy; Core-Periphery (search for similar items in EconPapers)
JEL-codes: F02 F15 F45 F55 (search for similar items in EconPapers)
Pages: 30
Date: 2023-03
New Economics Papers: this item is included in nep-eec and nep-mac
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