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 170, CIMEO Working Paper Series from Centre for Investigation and Modelling of Experimental Observations (CIMEO)

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.

Keywords: Structural vulnerability; strategic autonomy; industrial policy; core-periphery; European Union; critical raw materials (search for similar items in EconPapers)
JEL-codes: F02 F15 F45 F55 (search for similar items in EconPapers)
Date: 2023-03
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Persistent link: https://EconPapers.repec.org/RePEc:ter:wpaper:00170

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