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In 2024, Europe’s focus was supposed to return from fighting crises – Russia’s aggression, energy costs, inflation – to tackling medium-term challenges. But crises cannot just be switched off: while inflation is back to normal, the defence of Ukraine remains the number-one concern in the short term. Nevertheless, strategic reflection on the medium term did happen, in spades: in the , the and Bruegel’s own Memos to the European Union leadership. Has the leadership listened? And is the result a coherent strategy for 2025 and beyond?

The answer is yes and no. The influence of the Draghi report in particular has been massive, judging from European Commission President Ursula von der Leyen’s to the incoming commissioners, and our initial conversations with them. This is good news. But it does not yet amount to a coherent strategy. First, Draghi’s report – indeed, all reports taken together – left important questions unanswered. Second, successful action in line with the three reports requires a high degree of political unity, which may not happen, with Trump’s return adding a further complication.

On the first point, all three reports argued that reconciling productivity growth with successful decarbonisation requires ambitious single market reforms, with much greater policy and investment coordination at EU level. There is also consensus that EU-level industrial policy needs to be part of the mix.

But there is no consensus on how far industrial policy should go, and whether the EU should follow the Biden administration in subordinating trade policy to industrial policy. The Draghi report goes furthest, arguing for local content requirements to help EU industry, and state support for both new sectors (clean tech) and old ones (energy-intensive industry). But neither Draghi nor the Commission mission letters say how state support can be calibrated to facilitate efficient relocation of energy-intensive production inside and possibly outside the EU. 

On the second point – unity – all three reports argue that the EU needs to overcome political red lines when it comes to common investment funding. The Commission, understandably, is loath to commit to this line. But this has a high cost: accepting that most funding for industrial policy will come from member states, requiring a softening of state-aid rules. 

The EU leadership thus faces the triple challenge of executing reforms that are clear but remain difficult politically, while fighting for higher and more efficient EU-level spending and formulating industrial policies (including on defence) that minimise fiscal waste and avoid single-market fragmentation. On boosting EU spending, I fear the leadership will not fight hard enough. On industrial policy, I worry about a lack of ideas, and about wasteful national-level spending as the fallback. The first few months of 2025 will be critical for forming these ideas, before the decision-making battles take over.

For 2024 round-up, listen to the final episode of the Sound of economics, Vote, protect, prepare: 2024 in review, and explore Bruegel's 12 highlights of the year.

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