Towards a Common European Industrial Policy for Innovation and Tech

In the wake of the EU-US trade deal, and a year after his landmark report urging Europe to invest 800 billion euros in tech and innovation to match the US and China, Mario Draghi has sounded a new alarm. The EU, he argues, must adapt to a world no longer driven by free trade but by “sweeping industrial policies.” Since no European country alone can develop strategic technologies, Europe must regain “unity of action” and build a shared industrial capacity to meet today’s economic and geopolitical challenges.

As EU institutions open talks on their 2028–2034 budget, Draghi’s call could not be more timely. Unveiled in July 2025 by Commission President Von der Leyen, the draft budget includes a “European Competitiveness Fund.” For European companies, this is a positive signal: the EU is ready to back homegrown technologies and provide targeted support for startups and scaleups through more funding and a wider range of financial tools. Yet Draghi’s warning is clear—money alone won’t restore Europe’s competitiveness.

 

This European budget will confront the Member States and the EU with some complex but crucial issues, not least the question of a common industrial policy for innovation and technology. Will the European Union succeed in developing a common industrial policy in these fields? In other words, are Member States prepared to develop common competitive levers – such as certain technologies or innovations – at European rather than national level? Are they ready to accept that the EU prioritizes the development of certain technologies in certain Member States to build truly European champions? Answering these questions seems to us to be an essential prerequisite for the next European budget, if it is to have an effective impact on the European economy. 

Today, the EU has only limited shared competence with the Member States in the field of research and innovation, and industrial policy remains essentially national. This institutional architecture prevents the EU from approaching the development of innovation as a structured and coordinated economic policy on a continental scale, and therefore severely limits the ability to transform the results of European research into growth levers for businesses. This institutional barrier also has a direct impact on the funding resources available at European level. For example, 90% of public R&D funding is managed in an autonomous and uncoordinated way by Member States. 

The Startup and Scaleup strategy recently proposed by the Commission calls for ad hoc, rather than systematic, coordination with Member States: this is a first step, but it may not be enough. For its competitiveness, the EU needs a coordinated and strengthened industrial policy in the field of innovation and technology. 

 

Then there are the questions surrounding the European budget as such: are Member States prepared to increase their net contribution to the EU budget? Can the EU decide to increase its own resources, even if it means creating new EU-wide taxes? Could a common loan offset the need to finance innovation and technology? How can we create a leverage effect with traditional private players? 

 

In the light of future debates on the European budget, and especially on the European Competitiveness Fund, France Digitale proposes a two-stage action plan:

 

Stage 1 – Committing the European Union to a common European industrial policy on innovation and technology

→ Make tech and innovation an economic sector in its own right, in which the EU has genuine competence shared with the Member States.

→ Reverse the logic of redistribution, and allocate funding to the most promising projects. 

→ Enable business consolidation to create European champions 

→ Involve traditional private industrial and financial players, to create leverage effects.

→ Introduce a generalized EU preference in public procurement

 

Step 2- Radically reform the EU budget to better finance innovation 

→ Increase the share of the EU budget dedicated to tech and innovation

→ Change the principle of fund allocation: from geographic redistribution to European champions 

→ Delegate fund management to independent, expert entities

→ Reforming calls for projects: from laboratory to market

→ Adapt financing tools to all stages of growth

→ Target beneficiaries more effectively: support real innovators

→ Reduce bureaucracy and give time back to innovators

→ Don’t fall for the hype when it comes to prioritizing sectors

 

Taking these steps towards greater European integration could mark the end of 25 years of falling behind the United States, and halt our loss of competitiveness on a global scale. But this requires far-reaching, complex reforms with structural implications. Reforms that deserve serious study and public debate. The most important thing is that this debate takes place – and that it is not dismissed on grounds that it would be too ambitious or politically unacceptable. Europe has already shown unity and creativity in times of crisis, adopting unprecedented measures. It’s time to adopt the same boldness to build our technological future.