The revival of industrial policy in the EU and its potential for the digital transformation of the Greek economy

Industrial policy is back in fashion on the European economic policy agenda. Of course, this is not something completely new. Since the Great Recession of 2008, the European Commission (EC) has openly supported coordinated and complementary policies as an effort to tackle structural deficiencies. However, it was the European Grean Deal[1] that labeled these targeted efforts as industrial strategies, bringing forward sustainable development as the ultimate goal of European economic policy.

In this context, a New Industrial Strategy[2] was devised in 2020 to guide the continent’s green and digital -or twin– transition, with specific policy priorities such as maintaining global competitiveness, achieving climate neutrality by 2050, and shaping Europe’s digital future. This action plan was never truly tested, as the COVID-19 pandemic came to revamp the European economy, leading to a direct update of the EU’s industrial strategy in 2021[3] in a strategic document that still guides EU and member-states’ policymaking efforts. The update placed the EU’s “open strategic autonomy” at the epicenter and proposed a set of actions along three key axes: i) strengthening the resilience of the European Single Market, ii) strengthening of the EU’s strategic autonomy, and iii) accelerating the twin transition. In addition, it highlighted key industrial ecosystems and proposed tailor-made policy toolboxes and industrial alliances to support them. To achieve the ambitious goal set by its updated industrial strategy, the EC directed funds from flagship programs, including inter alia, InvestEU, NextGenerationEU and its Recovery and Resilience Facility (RRF) instrument, the Multiannual Financial Framework (MFF) 2021–2027, and Horizon Europe.

However, the escalation of the Russo-Ukrainian war produced one of the largest energy crises the continent has ever faced. The EU’s response came in the form of the Green Deal Industrial Plan for the Net-Zero Age[4] in 2023, which seeks to ensure that the Green Deal’s ambitious goals remain on track with the recent geopolitical developments. The new industrial plan and its flagship initiatives, such as the Net-Zero Industry Act and the Critical Raw Materials Act, aim to speed up Europe’s progress to climate neutrality by fostering the development of a simplified and predictable regulatory framework, enabling faster access to funds, supporting up-skilling and re-skilling initiatives, and implementing actions that enhance the resilience of the EU’s supply chains through open trade.

These strategic documents caused a chain-reaction in the EU member-states, including Greece. High public-private debt and large fiscal and balance-of-payments deficits -the same problems that led Greece in a decade-long recession (2008-2018)- are still present, rooted in the lack of structural reforms implemented in the country. Following the direction set by the EC, the country presented in 2022 a strategic document titled National Industrial Strategy and Action Plan[5], outlining a vision where the Greek industry can act as the transformative factor of the economy through innovation, international cooperation, and human capital development. The document provided a roadmap of 43 interventions along key strategic areas. Among those areas, the digital transformation of the Greek business economy is a focal point, as the strategy aims to promote the digitalization of industrial firms, the adoption of cutting-edge digital techs, and the upgrading of digital infrastructure.

Greece’s digital transformation in all fronts, both public and private, has been a pressing issue. Coming off from the 2008-2018 economic crisis, the country ranked in the last place (28th) on the Digital Economy and Society Index (DESI) for 2018, with particular problems in digital readiness. Since 2019, Greece has made significant progress in all four pillars of the DESI, including digital skills, digital infrastructure, digital transformation of businesses and, above all, the digitalization of public services during the pandemic.[6] For the public sector, the country devised one of its very first concrete strategy documents, the Bible of the Digital Transformation 2020-2025[7], and pledged significant funds from its Recovery and Resilience Fund (RRF) to its digital transition and to achieving the EU’s ambitious Digital Decade targets. For the private sector, the country published in 2021 a National Strategy for the Digital Transformation of the Greek Industry[8] to address the deficiencies in the country’s business sector digital infrastructure and workforce skills. The document is aligned to the country’s national industrial strategy and provides guidelines, objectives, and an action plan to achieve them.

Both these documents are part of an extensive body of strategic directions, action plans, initiatives, and reforms which constitute the current Greek industrial policy landscape. The timing of these documents is critical. On the one hand, extreme global challenges are already putting the structurally deficient Greek productive model under immense pressure, demanding an immediate strategic response. On the other hand, the EU’s shift towards active engagement and, most importantly, the direct financial stimulation of industrial competitiveness presents an unprecedented opportunity for restructuring the Greek productive model. However, for Greece to meet its transformative potential, the country must be continuously engaged in a path of dynamic policy interventions.

A major challenge for the country is to successfully utilize an unprecedented wealth of EU and state financing tools—including the RRF, the MFF 2021–2027, Horizon Europe, the new development law (Law 4887/2022), and additional funds made available by the various Commission Acts. It is also critical that the pool of financial resources is allocated efficiently and transparently in the Greek economy. For instance, the funds made available by the RRF and the MFF 2021–2027 targeting the digital and green transitions, the re-skilling and upskilling of the Greek labor force, and the development of proper infrastructure across multiple sectors, provide significant transformative potential and can create a horizontal boost for economic and industrial activity. These tools must be put to “good use”, meaning they should seek to benefit everyone and not just selected ecosystems or sectors.

The EU has already transitioned into a decade of industrial policy revival with significant transformative potential for all its members, including Greece. While the country has quickly adjusted to the new status quo with multiple strategic documents that aim to advance its digital and technological capabilities, it must also recognize the fact that strategic planning is not enough. Greece must meet the challenge of implementing its ambitious action plans while constantly monitoring, evaluating and updating (if necessary) its strategic orientation against the volatility of the current global market environment. In this context, the need emerges for a holistic industrial policy approach in the years ahead, in which different strategies related to the industry, the digital transformation, the green transition and other current major challenges are integrated into a unified system of policies that can provide the solid foundations for the pursuit of sustainable growth and competitiveness by the Greek industry in the long term.

 

Note: This article draws from an extensive policy brief entitled “Leveraging EU industrial policy to reshape Greece’s productive model” and can be found here

 

 

 

[1] COM(2019)640

[2] COM(2020)102

[3] COM(2021)350

[4] COM(2023)062

[5] https://www.mindev.gov.gr/wp-content/uploads/2022/09/2.-Εθνική-Στρατηγική-Βιομηχανίας-και-Σχέδιο-Δράσης-National-Industrial-Strategy-and-Action-Plan.pdf

[6] For more information on the country’s DESI 2023 rankings, see here.

[7] https://digitalstrategy.gov.gr/en/

[8] https://www.ggb.gr/el/node/1820

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