Economic Security and the Transformation of European Union Economic Governance: Industrial Policy, Competitiveness, and Strategic Resilience

Abstract

This article analyses the rise of economic security as a new organising principle of European Union economic governance and examines the extent to which this concept is transforming the traditional model of European industrial and market policy. In the context of escalating geopolitical rivalry, the disruption of global supply chains, technological competition, and energy uncertainty, the EU is gradually shifting away from a purely regulatory approach based on market liberalisation and competition enforcement towards a more active and strategically oriented model of intervention. The study employs a qualitative political-economic research design, combining policy and document analysis with case studies of strategic sectors, including advanced technologies, critical raw materials, energy, and trade-investment instruments. The findings demonstrate that economic security is operationalised through coordinated investment, the support of domestic capacities, and the selective protection of strategic industries. This contributes to the mitigation of systemic risks, the strengthening of technological sovereignty, and the enhancement of supply chain resilience. However, these policies simultaneously create tensions between efficiency, fiscal sustainability, and the integrity of the Single Market. The article contributes to the political economy literature by conceptualising economic security as a hybrid model that merges market integration with strategic public coordination and evaluates its implications for the Union’s long-term competitiveness and economic development.

1. Introduction

Over the past decade, the global political economy has been undergoing a period of profound structural transformation, characterised by escalating geopolitical rivalry, the fragmentation of international trade, the disruption of supply chains, and an increasing frequency of economic shocks (Möller, 2025; Lavery, 2024; Casagrande & Dallago, 2024). The model of ‘hyper-globalisation’—predicated on open markets, narrow specialisation, and cost-optimised production—is being increasingly called into question (Rodrik, 2012; Kahler, 2004). Economic interconnectedness, long perceived as a primary driver of efficiency and growth, is simultaneously proving to be a potential source of vulnerability, strategic dependency, and political coercion (Leonard et al., 2019; Chang, 2002). Consequently, governments of advanced economies are reappraising the relationship between the market and the state, placing industrial policy once again at the heart of economic governance (Aggarwal & Reddie, 2020).

In this context, the European Union (EU) represents a particularly significant case. Historically, European integration has been synonymous with a ‘regulatory state’ model, which prioritised liberalisation, rule harmonisation, and competition enforcement over direct intervention in production structures (Majone, 1997; Scharpf, 1999). The role of supranational institutions was primarily to establish the framework conditions for market operations, rather than actively directing capital allocation or supporting specific industries (McNamara, 2024; Fiott, 2023). For a long time, selective industrial policy was deemed potentially inefficient and incompatible with the principles of the Single Market.

However, this model has shifted markedly in recent years. The COVID-19 pandemic, intensifying technological rivalry among major powers, and the energy crisis following the Russian invasion of Ukraine have exposed the extent of the European economy’s external dependencies (Möller, 2025; Fiott, 2023; Kazanský, 2022). Reliance on a limited number of suppliers for semiconductors, critical raw materials, and fossil fuels has emerged as a significant macroeconomic and geopolitical risk. In response, the EU has expanded its policy toolkit beyond traditional market regulation to include coordinated investment in strategic technologies, more flexible state aid rules, industrial alliances, foreign investment screening, and initiatives aimed at strengthening energy and raw-material resilience (Di Carlo & Schmitz, 2023; McNamara, 2024).

These initiatives signal the formation of a new economic policy paradigm, which may be termed ‘economic security’ or ‘strategic sovereignty’ (Kahler, 2004; Leonard et al., 2019; Biscop, 2018). Within this framework, competitiveness is no longer understood solely as a product of market efficiency, but also as a function of resilience, technological capacity, and the ability to manage systemic risks. Economic policy is thus ceasing to be a value-neutral form of market regulation and is becoming an instrument for the active shaping of production structures (Poitiers et al., 2024; Lavery, 2024).

Despite the growing political salience of these changes, their economic analysis remains incomplete. While existing literature documents the rise of industrial interventions, the geopoliticisation of trade policy, and the shift towards strategic autonomy, it often focuses either on institutional and political aspects or on individual sectoral examples. There is still a lack of a comprehensive political-economic framework that systematically explains how the economic security agenda alters the underlying logic of EU economic governance and what implications this transformation may have for productivity, competitiveness, and the structural development of the European economy.

This article seeks to address this gap. Its objective is to analyse economic security as a new organising principle of European industrial and technological policy and to investigate the extent to which this principle transforms the model of economic governance. We argue that the EU is gradually moving away from a purely regulatory approach towards a strategic and development-oriented model, in which supranational institutions actively coordinate investment, support the building of manufacturing capacities, and selectively protect critical sectors.

The primary research question is: to what extent and through which mechanisms does the economic security agenda alter EU economic governance and industrial policy? Three sub-questions arise: (i) what conceptual shifts underpin the transition from liberal market integration to a resilience-oriented approach; (ii) what specific instruments and policies does the EU employ to build strategic capacities; and (iii) what macroeconomic and developmental consequences might these interventions have for productivity and competitiveness?

To answer these questions, the article utilises a qualitative political-economic research design, combining policy analysis, the systematic study of documents, and case studies of strategic sectors. The empirical analysis focuses on advanced technologies, critical raw materials, the energy transition, and trade-investment instruments—areas where the nexus between security and economic performance is most pronounced.

The contribution of this article is threefold. Firstly, it conceptualises economic security as a coherent analytical framework linking industrial capacity, technological sovereignty, and supply chain resilience. Secondly, it systematically maps the instruments through which the EU actively shapes market structures. Thirdly, it evaluates the economic implications of these policies in terms of growth, productivity, and stability.

2. Literature Review and Theoretical Framework

2.1. The EU as a Regulatory State and the Market Integration Paradigm

To adequately understand the European Union’s current pivot towards economic security and active industrial policy, it must be situated within the historical and theoretical context of the long-dominant model of European economic governance (Majone, 1997; McNamara, 2024). Classical literature on European integration characterises the EU primarily as a ‘regulatory state’, whose principal function is not the direct redistribution of resources or the active management of industry, but rather the creation of rules and the oversight of market operations (Majone, 1994, 1997). This concept was most prominently developed by Giandomenico Majone, who argued that European integration relied chiefly on delegating regulatory powers to supranational institutions with the aim of ensuring competition, liberalisation, and efficiency (Majone, 1997).

Similarly, Fritz Scharpf distinguishes between ‘negative integration’, which consists of removing trade barriers and regulations, and ‘positive integration’, which would require the active construction of common policies and redistributive mechanisms (Scharpf, 1999). Historically, European integration has been markedly asymmetrical in favour of negative integration, thereby limiting the scope for coordinated industrial policy at the EU level (Scharpf, 1999; McNamara, 2024). This development is further elucidated by Nicolas Jabko’s analysis, which points out that the Single Market project was legitimised primarily through a discourse of efficiency, competitiveness, and deregulation (Jabko, 2006).

The result was a model in which the European Commission acted predominantly as a guardian of competition rules and state aid control, while selective industrial interventions were perceived as potentially distorting market functions (Majone, 1997; McNamara, 2024). This regulatory and market-oriented framework represents the fundamental baseline from which the current shift towards strategic interventions markedly diverges.

2.2. Industrial Policy, State Capacity, and Geoeconomics

Parallel to the literature on European integration, a tradition emphasising the active role of the state in supporting structural transformation and technological development has evolved within broader political-economic theory (Chang, 2002; Evans, 1995). Approaches inspired by the concept of the ‘developmental state’ suggest that successful industrialisation and innovation dynamics often necessitate coordinated public investment, the strategic direction of resources, and close cooperation between the state and the private sector (Chang, 2002; Evans, 1995). A key term here is ‘embedded autonomy’, conceptualised by Peter Evans, which emphasises the need for a combination of state capacity and linkages with business networks (Evans, 1995).

Similarly, Dani Rodrik and Ha-Joon Chang argue that industrial policy is not an anomaly but a standard component of economic development, particularly during periods of technological change and global competition (Rodrik, 2012; Chang, 2002). Within this framework, the emphasis shifts from passive reliance on market mechanisms to the active shaping of production capacities and innovation ecosystems (Rodrik, 2012; Benner, 2019).

Building upon these approaches is a more recent body of literature on geoeconomics and ‘economic statecraft’ (Aggarwal & Reddie, 2020; Breslin & Nesadurai, 2023). Aggarwal and Reddie point out that, under conditions of strategic rivalry between major powers, economic instruments—including industrial policy, investment restrictions, and technology controls—become an integral part of security strategy (Aggarwal & Reddie, 2020). Economic policy thus acquires an explicitly geopolitical dimension, where efficiency is combined with questions of power, dependencies, and strategic control (Breslin & Nesadurai, 2023; Lavery, 2024).

These theoretical approaches provide a broader conceptual basis for analysing why even traditionally liberal economies, including the EU, are beginning to resort to more active forms of intervention (McNamara, 2024; Di Carlo & Schmitz, 2023).

2.3. The EU’s Pivot Towards Industrial Policy and Economic Security

In recent years, a substantial body of literature has emerged exploring the transformation of EU economic governance and its shift towards a more strategic approach (McNamara, 2024; Lavery, 2024). A significant contribution is provided by the work of Di Carlo and Schmitz, who interpret the European Commission as an actor performing functions akin to a ‘networked developmental state’—meaning it actively mediates investment, coordinates innovation networks, and supports strategic sectors (Di Carlo & Schmitz, 2023).

This interpretation is further developed by Seidl and Schmitz, who discuss a ‘geo-dirigiste turn’ in European industrial policy and a growing emphasis on technological sovereignty. According to their analysis, the EU is gradually moving away from a purely market-oriented model towards the targeted support of key technologies, such as semiconductors, batteries, and digital infrastructure (Seidl & Schmitz, 2024).

Similarly, McNamara interprets these developments as a form of ‘geopolitical market-making’, through which the EU builds its own political authority and capacity to shape global markets (McNamara, 2024). Lavery, meanwhile, points to a process of ‘selective fortification’, whereby the European economy seeks to protect itself from new forms of international competition without fully withdrawing from the global stage (Lavery, 2024). An important role is also played by the ‘Brussels Effect’, as described by Anu Bradford, which highlights the EU’s ability to assert regulatory standards globally (Bradford, 2020).

From an economic security perspective, this picture is complemented by Dür, Mateo, and Visart, who demonstrate that geopolitical objectives in the EU are intertwined with commercial and business interests, thereby shaping the specific form of the adopted policies (Dür et al., 2025).

2.4. Strategic Autonomy and the Security Dimension

Economic security is also closely linked to broader debates regarding strategic autonomy and the EU’s position as a geopolitical actor (Biscop, 2018; Riddervold & Rieker, 2024). Political-strategic documents and analyses point to the growing necessity of strengthening internal capacities in the fields of defence, energy, and critical infrastructure (Håkansson, 2025; Fiott, 2023). In his analysis of the global environment, Möller emphasises the increased risks of fragmentation and instability, which require a more realistic and ambitious EU approach to security (Möller, 2025). Similarly, reports authored by Enrico Letta and Mario Draghi argue that the Single Market, investment, and technological capacity are indispensable prerequisites for long-term prosperity and security (Letta, 2024; Draghi, 2024).

Academic studies by authors such as Sven Biscop, Daniel Fiott, Calle Håkansson, and Tim Rühlig demonstrate that geopolitical factors are increasingly shaping EU economic decisions (Biscop, 2018; Fiott, 2023; Håkansson, 2025; Rühlig, 2022). Within this context, the defence industry is primarily understood as a high-tech innovation ecosystem with significant spillover effects into civilian sectors, as documented by the analyses of Jan Joel Andersson and Malena Britz (Andersson & Britz, 2025). Contributions by Ivančík et al. complete this picture by highlighting the link between defence industrial integration, strategic autonomy, and sustainable growth (Ivančík & Andrassy, 2025; Ivančík & Majchút, 2026).

2.5. Research Gap and Analytical Framework

Although the existing literature provides rich descriptions of institutional change, geopolitical pressures, and the rise of new industrial instruments, it does not offer a unified political-economic explanation of how the economic security agenda restructures the underlying logic of capital allocation and market governance in the European Union. Existing studies typically analyse strategic autonomy, geoeconomic competition, or sector-specific interventions in isolation, without systematically linking them to broader transformations in economic governance and development strategy.

This article advances the debate in three specific ways. First, it conceptualises economic security not merely as a geopolitical or discursive shift, but as a structured framework that reshapes investment coordination, production ecosystems, and the allocation of strategic resources. Second, it operationalises this framework through four analytically distinct yet interconnected pillars—(1) industrial capacity, (2) technological capability, (3) energy and raw material resilience, and (4) trade and investment protection—thereby enabling a systematic comparison across sectors. Third, it explicitly links these pillars to macroeconomic implications for productivity, cost structures, systemic risk management, and long-term competitiveness.

By integrating institutional change with explicit economic mechanisms of capital allocation, risk internalisation, and production restructuring, the proposed framework moves beyond descriptive accounts of strategic autonomy and geoeconomic discourse. It provides an analytical model that identifies the causal pathways through which geopolitical pressures translate into concrete policy instruments and, subsequently, into structural economic effects. In doing so, the framework enables a systematic assessment of how economic security reshapes productivity dynamics, investment coordination, and the balance between efficiency and resilience. Rather than merely cataloguing new policy tools, the model conceptualises economic security as a transformation in the logic of EU economic governance—from a predominantly regulatory state into a strategically coordinated, market-shaping actor. In contrast to much of the existing work on strategic autonomy and the geoeconomic turn, which primarily maps institutional innovation and geopolitical discourse, the framework advanced here explicitly models how these developments reconfigure the underlying economic logic of EU governance by specifying the channels through which security considerations alter patterns of capital allocation, productivity dynamics, and structural development.

3. Materials and Methods

3.1. Research Design and Analytical Approach

The objective of this study is to systematically examine the extent to which, and through which mechanisms, the economic security agenda is transforming the model of EU economic governance and industrial policy. The phenomenon under investigation involves complex institutional processes, multi-level decision-making, and the interplay of political and economic factors that cannot be adequately captured through isolated quantitative indicators. For this reason, the article employs a qualitative political-economic research design based on a combination of comparative policy analysis, systematic document analysis, and case studies of strategic sectors.

Methodologically, this study is designed as an explanatory case study of a single complex case—the European Union—aimed at identifying and tracing causal mechanisms linking exogenous shocks and geopolitical pressures to concrete policy instruments and their economic consequences. The analytical strategy follows a structured process-tracing logic consisting of three sequential steps: (1) the identification of an external or systemic trigger (e.g., supply chain disruption, geopolitical conflict, technological dependency), (2) the analysis of the corresponding institutional and policy response at the EU level, and (3) the assessment of the economic mechanisms through which these interventions affect capital allocation, cost structures, investment coordination, and systemic risk exposure.

This approach is particularly suitable for analysing recent and evolving policy transformations where long-term econometric evaluation is not yet feasible. Rather than testing narrowly defined hypotheses, the study systematically reconstructs causal pathways across multiple sectors to demonstrate how the economic security agenda reshapes the logic of EU economic governance.

The analytical logic of the research is grounded in the perspective of the political economy of states and markets, in which the EU is understood not only as a regulator but also as an active actor capable of shaping market structures, coordinating investment, and directing capital allocation. The research therefore focuses on mapping specific policy instruments, their functional logic, and their anticipated macroeconomic implications for productivity, competitiveness, and economic resilience.

3.2. Data Sources and Information Triangulation

The empirical analysis is based on the systematic triangulation of multiple data types to enhance the validity and reliability of the findings. The combination of diverse sources allows for a comparison between declared policy objectives and real economic trends, thereby minimising the risk of a one-sided interpretation.

Four primary categories of sources were utilised: First are official EU strategic and legislative documents, including communications, regulations, directives, action plans, and policy strategies from the European Commission, the Council, and the European Parliament concerning industrial policy, technological sovereignty, the energy transition, trade, and investment. These documents enable the identification of specific instruments, priorities, and allocation mechanisms of economic policy.

Second are expert reports and analytical materials produced by research and advisory institutions, such as the European Policy Centre, which provide a broader geopolitical and macroeconomic context for the policies under study.

Third are statistical and macroeconomic data from Eurostat, OECD, and World Bank databases, including indicators of trade dependency, investment, research and development (R&D) expenditure, energy balances, and the structure of industrial production. These data serve for empirical contextualisation and allow for an assessment of whether the adopted policies respond to measurable structural weaknesses in the economy.

Fourth is the academic literature providing theoretical frameworks and interpretive tools for the analysis of the observed changes.

The triangulation of these sources allows for the linking of normative policy goals with their economic consequences, enhancing the transparency and replicability of the chosen analytical procedure.

In practical terms, all documents were subjected to qualitative content analysis based on a predominantly deductive coding scheme derived from the four analytical pillars of the framework (industrial capacity, technological capability, energy and raw material resilience, and trade-investment protection). Within each pillar, we identified recurrent references to structural vulnerabilities, policy instruments, and anticipated economic effects, which were coded into comparable categories across sectors. This procedure made it possible to systematically trace how similar types of shocks and dependencies are addressed through different instruments, and to what extent they are associated with convergent or divergent economic mechanisms.

3.3. Selection of Case Studies

To operationalise the concept of economic security, a purposive sampling method was used to identify sectors where the nexus between economic policy, technological capacity, and strategic resilience is most pronounced. The selection was based on three criteria: (i) a high share of value-added or economic productivity, (ii) the existence of demonstrable external dependencies or strategic risks, and (iii) active intervention by EU institutions.

Based on these criteria, four main analytical domains were identified: advanced technologies and semiconductors, critical raw materials and supply chains, energy security and decarbonisation, and trade-investment protection. These domains represent key nodes in modern value chains and have a fundamental impact on the competitiveness of the entire economy.

This selection allows for a comparative assessment of whether the logic of economic security is applied consistently across different sectors and helps to identify common patterns of policy behaviour.

For each of the four domains, the empirical material was organised into structured case narratives following a common analytical template. The narratives reconstruct a three-step causal sequence: (1) the identification of a specific structural dependence or vulnerability, (2) the mapping of the corresponding EU-level policy and institutional response, and (3) the analysis of the economic mechanisms through which this response is expected to affect investment coordination, cost structures, and systemic risk exposure. By applying the same sequence to all domains, the case studies serve not merely an illustrative purpose, but enable systematic cross-case comparison and mechanism-tracing, in line with established approaches in qualitative political economy.

3.4. Operationalisation and Analytical Framework

The concept of economic security is operationalised through four pillars: industrial capacity, technological capability, energy and raw material resilience, and the protection of trade and investment flows. Each pillar is analysed in terms of (i) the policy instruments used, (ii) their mechanisms of action, and (iii) the expected economic consequences. For each pillar, the analysis explicitly traces the sequence from identified structural vulnerability to institutional response and subsequently to measurable or observable economic effects, thereby ensuring consistency in the reconstruction of causal mechanisms across sectors.

This analytical procedure systematically links political interventions to their functional economic logic and assesses their potential impact on productivity, cost structures, innovation dynamics, and supply chain resilience. By maintaining a uniform causal structure across all four pillars, the study enhances internal coherence and methodological transparency.

3.5. Research Limitations

The chosen qualitative approach does not permit the precise quantification of the causal effects of individual policies, and the findings are primarily interpretive in nature. Therefore, the study does not seek to estimate precise investment multipliers or econometrically test causal relationships. Instead, its aim is to identify structural trends and mechanisms of change.

Nevertheless, the combination of multiple data sources, information triangulation, and comparative sectoral analysis provides a sufficiently robust basis for formulating general conclusions regarding the trajectory of EU economic policy.

4. Results

This section presents the empirical findings of the analysis and systematically evaluates the mechanisms through which the economic security agenda is reflected in the structure of the Union’s economic policy, as well as the economic consequences generated by these interventions. Given the qualitative and interpretive research design, the results presented in the following subsections take the form of analytically reconstructed findings rather than raw descriptive data. Empirical evidence from policy documents, statistical indicators, and expert analyses is therefore integrated with theory-informed interpretation in order to trace the causal pathways linking structural vulnerabilities, institutional responses, and their economic implications.

The results are organised according to the four analytical pillars identified in the methodology: industrial capacity, technological capability, energy and raw material resilience, and the protection of trade and investment. This framework allows not only for a description of the instruments adopted but, more importantly, for an assessment of their impact on productivity, capital allocation, cost structures, and the overall resilience of the European economy. Across all domains, a common pattern emerges: the EU is gradually transitioning from the passive regulation of markets to their active shaping. Policies are increasingly oriented towards managing strategic risks, supporting domestic capacities, and internalising external vulnerabilities that were left to global market mechanisms under the previous model.

This structural transformation is also reflected in several measurable indicators of strategic dependency within the EU economy - for more details, see

Table 1. Selected indicators of EU structural dependencies and policy response.

Domain	Indicator	Approximate Pre-2020 Level	Post-2020 Policy Response
Semiconductors	EU share of global semiconductor production	~9–10%	EU Chips Act, IPCEI Microelectronics
Critical Raw Materials	Import dependency for rare earths	>90%	Critical Raw Materials Act
Energy	Energy import dependency (overall EU)	~60%	REPowerEU, diversification strategy
State Aid	State aid as % of GDP (COVID peak)	Significant increase after 2020	Temporary Crisis Framework, IPCEI expansion

Source: Eurostat (2024); European Commission (2023); International Energy Agency (2023); OECD (2024).

.

4.1. From a Regulatory State to an Economic Security Paradigm

The first fundamental finding is that the observed changes do not represent isolated sectoral measures but signal a broader transformation of the very logic of economic governance. The traditional model of maximising efficiency through liberalisation and globalised specialisation is being supplemented by a model that explicitly accounts for the risk of supply disruptions, geopolitical uncertainty, and strategic dependencies (Kahler, 2004; Leonard et al., 2019).

From an economic perspective, this represents a shift from static efficiency to dynamic resilience (Rodrik, 2012; Casagrande & Dallago, 2024). While the previous paradigm optimised costs through the global concentration of production, the new strategy consciously accepts certain additional costs in exchange for a reduction in systemic risk (Lavery, 2024; Poitiers et al., 2024). The diversification of suppliers, the building of redundant capacities, and the localisation of production within the EU thus function as a form of insurance against macroeconomic shocks (Kahler, 2004; Leonard et al., 2019).

Documents and recommendations produced by Möller et al., as well as the reports by Enrico Letta and Mario Draghi, explicitly link the competitiveness of the Single Market to the need for large-scale investment in strategic capacities (Letta, 2024; Draghi, 2024; Möller, 2025). Economic security thus becomes a legitimising framework for a more active role for the public sector in the allocation of resources.

4.2. Strengthening Industrial Capacity and Production Ecosystems

In the field of industrial policy, the analysis identifies a significant increase in targeted interventions aimed at building domestic production ecosystems (Di Carlo & Schmitz, 2023; Seidl & Schmitz, 2024). Mechanisms such as Important Projects of Common European Interest (IPCEI), industrial alliances, and more flexible state aid rules allow for the mobilisation of both public and private investment into capital-intensive and technologically complex sectors (McNamara, 2024; Di Carlo & Schmitz, 2023).

From an analytical perspective, this interventionist logic can be interpreted through market failure theory. Geopolitical risk, supply chain disruptions, and technological dependencies represent negative externalities that individual firms cannot fully internalise within their investment decisions. Economic security thus functions as a mechanism for the collective internalisation of these systemic risks through public coordination and joint investment. Without such coordination, market outcomes would lead to underinvestment in strategic capacities, even though their existence would enhance stability, productivity, and the resilience of economic growth from an economy-wide perspective.

From an economic standpoint, these instruments have three primary effects:

Firstly, they reduce coordination failures (Chang, 2002; Rodrik, 2012). Large-scale projects in areas such as batteries, hydrogen, or advanced materials often require simultaneous investment from multiple actors. Public coordination thus reduces transaction costs and the risk of underinvestment.

Secondly, they stimulate positive externalities and technological spillovers (Casagrande & Dallago, 2024). The concentration of production, research, and suppliers within a single ecosystem promotes the dissemination of knowledge, productivity growth, and the creation of higher value-added.

Thirdly, they diversify the EU’s production base, thereby reducing reliance on external suppliers and the risk of supply chain disruptions (Kahler, 2004; Leonard et al., 2019).

These effects suggest that industrial policy, in the context of economic security, serves not only to protect existing industries but also to actively drive structural transformation towards more technologically intensive segments of the economy with higher value-added.

4.3. Technological Sovereignty and Digital Transformation

The technological domain represents the most prominent example of the nexus between economic security and long-term productivity growth (Crespi et al., 2021). The EU currently accounts for less than 10% of global semiconductor manufacturing capacity, while depending heavily on Asian producers for advanced chip fabrication (OECD, 2024; European Commission, 2023; European Union, 2023). This structural imbalance has been identified as a strategic bottleneck with direct implications for automotive, defence, and digital industries. Semiconductors, artificial intelligence, and cloud infrastructure function as ‘general-purpose technologies’, the availability of which determines the efficiency of a wide spectrum of industries.

Initiatives supporting domestic capacities in chips and digital technologies should not, therefore, be interpreted merely as security measures (Bauer & Erixon, 2020; Sabayová & Červená, 2023). Their economic significance lies primarily in mitigating the risk of technological ‘bottlenecks’ that could constrain the innovation dynamics of the entire economy (Crespi et al., 2021).

Establishing a minimum domestic production capacity thus enhances strategic control over key inputs while simultaneously fostering local investment in research and development (R&D). This may result in higher absorption capacity among European firms, faster dissemination of innovations, and higher long-term productivity. Consequently, technological sovereignty appears to be a complement to global integration rather than an alternative to it: the objective is not autarky, but the reduction of risk concentration (Rühlig, 2022; Bauer & Erixon, 2020).

4.4. Energy and Raw Material Resilience

Energy security represents an area where economic consequences are most immediate. Prior to 2022, the European Union relied on imports for approximately 60% of its total energy consumption (Eurostat, 2024), with particularly high dependency on Russian natural gas in several Member States, including Slovakia and Hungary (International Energy Agency, 2023). The sharp price increases following the Russian invasion of Ukraine demonstrated the macroeconomic costs of concentrated supply structures, including rising industrial input costs and declining real household incomes.

Policies aimed at diversifying energy supplies and accelerating renewable energy deployment therefore carry not only environmental but also measurable macroeconomic stabilisation effects. More stable and predictable energy prices reduce cost volatility for firms, encourage investment, and improve production planning (Dirma et al., 2024; Okunevičiūtė Neverauskienė et al., 2025a).

In the case of several critical raw materials, European dependency is even more pronounced; for example, over 90% of rare earth elements used in the EU are imported from China, creating significant supply chain vulnerabilities for clean technologies and advanced manufacturing (European Commission, 2023). Measures aimed at diversifying sources of supply and strengthening domestic processing capacity therefore reduce the risk of sudden production disruptions in strategic sectors such as batteries, renewable technologies, and advanced manufacturing (Okunevičiūtė Neverauskienė et al., 2025b).

Reducing external dependencies thus contributes to greater production stability and lower systemic risks (Karda & Kavan, 2023; Kaššaj & Peráček, 2024). Energy and raw material policy is therefore becoming an integral component of industrial strategy and a significant determinant of long-term competitiveness.

4.5. Trade and Investment Protection

Foreign investment screening instruments and trade-defence mechanisms reflect an effort to minimise the negative externalities associated with uncontrolled capital flows (Riddervold & Rieker, 2024). The acquisition of strategic assets or the transfer of sensitive technologies can have long-term consequences for innovation capacity and supply chain security (Biscop, 2018; Rühlig, 2022).

From an economic perspective, these instruments represent a form of risk management. Their aim is not to restrict trade as such, but to selectively reduce exposure to systemic vulnerabilities (Pisani-Ferry et al., 2019). This approach allows for the retention of most of the benefits of openness while simultaneously decreasing potential losses. The result is a model of ‘selective protection’, which differs from blanket protectionism and seeks a balance between security and efficiency.

4.6. Synthesis of Results

A comparative analysis of all four pillars confirms a consistent trend: the European Union is gradually abandoning a model that primarily optimised market conditions through liberalisation and regulation, moving instead towards an approach in which public institutions more actively shape the very structure of the economy. Across the examined areas, similar mechanisms repeatedly emerge: coordinated investment, support for domestic manufacturing capacities, the diversification of supply chains, and the selective protection of strategic industries. These interventions signal a shift from passive market oversight to the active coordination of economic development.

From an economic standpoint, this evolution entails the integration of the objectives of efficiency, growth, and stability into a unified economic policy framework. Economic security thus appears as a new coordinating principle that responds to the systemic risks of a globalised economy by building resilience and technological capacity. The result is the formation of a hybrid model of an open yet strategically managed market economy, which combines the advantages of international integration with active public coordination of key sectors.

5. Discussion

The results presented in the preceding section point to a systematic and structural transformation of EU economic governance (Andruseac, 2015; Mardanov, 2023). The observed changes should not be interpreted as a mere collection of isolated sectoral measures, nor as a temporary reaction to a series of crises; rather, they represent a deeper paradigmatic shift in the understanding of the relationship between the market, the state, and security (Andruseac, 2015; Ilik & Adamczyk, 2017). While the previous model of European integration was primarily predicated on liberalisation, deregulation, and competition enforcement, current policy increasingly emphasises the active construction of domestic capacities, the management of strategic dependencies, and the strengthening of resilience against external shocks (Rehak et al., 2024).

This discussion interprets these findings across three interconnected dimensions: (i) the theoretical implications for the model of European economic governance, (ii) the economic consequences for growth and competitiveness, and (iii) the tensions and limitations associated with the new paradigm of economic security.

5.1. Reinterpreting EU Economic Governance in an Economic Security Paradigm

From a theoretical perspective, the results suggest that the traditional image of the EU as a predominantly regulatory state is increasingly insufficient. Classical interpretations emphasised the role of supranational institutions in establishing market rules, removing barriers, and ensuring competition. However, empirical analysis demonstrates that current practice extends beyond the boundaries of pure regulation.

The EU is increasingly moving beyond its traditional role as a market regulator towards a more strategic role in shaping economic structures and coordinating investment (Abels & Bieling, 2024). Through targeted investment, the coordination of production ecosystems, support for research, and the selective protection of strategic sectors, it actively influences the very structure of production and the trajectory of technological development (Csernatoni, 2019; Rodil-Marzábal & Campos-Romero, 2021). This represents a shift from a logic of ‘market-making’ to a logic of ‘market-shaping’.

This evolution brings the EU closer to models described in the literature as a developmental or networked state, in which public institutions play a coordinating and strategic role in the allocation of resources. At the same time, this does not constitute a return to centralised planning or protectionism. Rather, a hybrid model is emerging that combines the openness of the Single Market with targeted interventions in areas of high systemic importance.

The findings of this study thus extend existing literature by demonstrating that the EU’s geopolitical turn is not merely a discursive change but is accompanied by a concrete transformation of economic policy instruments and a growing supranational state capacity.

5.2. Economic Security as a Source of Growth, Not Merely Protection

The second significant implication is the need to reappraise the economic significance of the concept of economic security itself. Political debates often frame these policies as defensive or protectionist measures; however, the analysis suggests that their function is substantially broader and that they possess a significant pro-growth dimension.

Investments in semiconductors, digital technologies, energy infrastructure, and critical raw materials take the form of long-term development strategies (Csernatoni, 2019; Bellanova et al., 2022). These areas represent key inputs for most modern industries, and their availability directly affects the productivity of the entire economy. From this perspective, economic security entails not only risk reduction but also the promotion of innovation, technological spillover effects, and structural transformation towards higher value-added sectors (Khalatur et al., 2022).

From the standpoint of economic theory, these policies can be interpreted as investments in general-purpose inputs, the insufficient availability of which would create bottlenecks constraining productivity growth across the entire economy. Strengthening strategic capacities thus reduces the probability of negative shocks, enhances the predictability of the investment environment, and encourages long-term private investment. Consequently, economic security contributes to growth not only indirectly through stability but also directly through increased efficiency, innovation capacity, and the faster diffusion of technologies.

It can therefore be understood as a form of strategic industrialisation of advanced economies, aimed at ensuring long-term competitiveness in an environment of increasing global rivalry. Economic security thus appears not as an alternative to economic growth, but as one of its key prerequisites under conditions of heightened uncertainty and systemic risks.

5.3. Tensions Between Efficiency and Resilience

Simultaneously, however, the results highlight several trade-offs inherent in the new paradigm. The most prominent is the tension between efficiency and resilience (Rehak et al., 2024, 2025). Building redundant capacities, localising production, or diversifying suppliers can increase costs compared with fully globalised supply chains optimised for minimum prices. Economic security policies may, therefore, reduce price competitiveness in the short term or increase the fiscal burden.

A second issue concerns the risk of Single Market fragmentation and uneven fiscal capacity across member states. Large-scale subsidies and more flexible state aid rules may disproportionately benefit fiscally stronger economies, potentially distorting the level playing field within the internal market. Without effective coordination at the EU level, this dynamic could trigger a subsidy race and lead to inefficient resource allocation.

Moreover, the expansion of strategic industrial policy raises concerns regarding the potential influence of powerful sectoral interests on public investment decisions. If industrial alliances and subsidy schemes become excessively influenced by incumbent firms, there is a risk of policy capture and the financing of projects with limited long-term economic viability. Such dynamics could lead to the creation of so-called “white elephant” investments—large-scale projects that absorb substantial public resources without delivering proportional productivity or innovation gains (Rodrik, 2012; Chang, 2002).

A third tension involves the balance between openness and protection. An excessive expansion of investment screening and trade-defence measures could weaken the benefits of international integration, upon which the European economy has long been built. A key challenge, therefore, remains finding the optimal degree of intervention that mitigates risks without undermining the advantages of openness.

These compromises suggest that economic security is not a cost-free strategy but requires a constant balancing of conflicting objectives.

5.4. Broader Implications for European Integration and the Global Economy

Finally, the findings have broader implications for the future of European integration. Joint investments, the coordination of industrial policies, and the development of strategic capacities strengthen the interconnectedness of member states and create pressure for further rule harmonisation (Lavery, 2024; Poitiers et al., 2024; Letta, 2024; Draghi, 2024). Economic security may thus become a new engine of integration, much like the Single Market or the monetary union were in the past.

At the same time, the political sensitivity of economic decisions is increasing. The selection of ‘strategic’ sectors and the allocation of public resources heighten the degree of politicisation and place greater demands on transparency and democratic legitimacy (Srebalová & Peráček, 2022; Gregušová et al., 2022). The success of the new strategy will therefore depend not only on economic efficiency but also on institutional quality and the ability to ensure a fair distribution of benefits and costs.

5.5. Synthesis of Discussion

Overall, the discussion demonstrates that the European Union is not rejecting an open market economy but is strategically reformulating it. Instead of pure liberalisation, it advocates a model that combines market mechanisms with active public coordination and the selective protection of critical capacities. The observed shift does not represent a departure from integration but rather its institutional deepening through new industrial and technological policy instruments. This hybrid approach can be understood as a pragmatic adaptation to conditions of increasing geopolitical uncertainty, the fragmentation of global chains, and intense technological rivalry.

In this context, economic security appears as a new coordinating framework for European economic governance. It does not signify a revolutionary abandonment of the existing model but its evolutionary transformation, in which prosperity is increasingly intertwined with the ability to manage systemic risks, build strategic capacities, and actively shape market structures. Economic security thus merges the objectives of competitiveness, stability, and sovereignty into a unified political-economic project.

6. Conclusions

This study has analysed the rise of economic security as a new organisational principle of EU economic governance and examined the extent to which this concept transforms the traditional model of European industrial and market policy. The point of departure was the premise that the combination of geopolitical rivalry, the fragmentation of global value chains, technological competition, and energy uncertainty is fundamentally altering the conditions under which the open European economy operates, leading to a reappraisal of the relationship between market efficiency and strategic sovereignty.

The analysis shows that EU economic governance is increasingly characterised by the combination of market integration with targeted strategic interventions in key sectors, reflecting the broader shift discussed in the literature on economic security and industrial policy. Industrial policy instruments, support for technological capacities, the diversification of supply chains, the strengthening of energy resilience, and the implementation of trade and investment protection mechanisms together form a coherent framework in which competitiveness, security, and long-term development become interconnected objectives.

Based on these findings, three primary conclusions can be formulated.

First, economic security represents a conceptual shift in the understanding of EU economic policy: efficiency is no longer assessed solely in terms of cost minimisation, but also in terms of resilience, stability, and the capacity to withstand external shocks.

Second, the EU is increasingly assuming the role of an active coordinator and shaper of markets, thereby expanding its function beyond the traditional regulatory state towards that of a strategic and development-oriented actor.

Third, this shift brings not only potential benefits in the form of higher productivity, technological spillover effects, and the reduction of systemic risks, but also significant trade-offs between efficiency, fiscal sustainability, and the maintenance of a level playing field for competition.

Theoretically, this article contributes to the literature on the political economy of European integration by broadening the interpretation of the EU from a regulatory state model towards a model of a strategic actor that actively shapes market structures and resource allocation. Empirically, it offers a systematic and comparative analysis of economic security instruments across multiple sectoral domains, demonstrating that these policies possess not only a security dimension but also a profound structural and developmental one.

From a policy perspective, the results suggest that the success of the European strategy will depend on the ability to find a balance between openness and protection, between market competition and public coordination, and between national and supranational interests. Crucial to this will be ensuring the effective coordination of state aid, sufficient fiscal capacity for strategic investments, and the preservation of the integrity of the Single Market.

The study also has certain limitations. Given the qualitative nature of the analysis, it does not provide quantitative estimates of the causal effects of individual measures. Future research could, therefore, complement this with econometric impact assessments of specific policies, comparative studies with other major economies, or a more detailed analysis of the distributional and regional effects of economic security.

In conclusion, it can be stated that economic security is becoming a new pillar of the European integration project. In conditions of increasing geopolitical uncertainty, openness alone is no longer sufficient to ensure prosperity. The ability to build strategic capacities, manage risks, and actively shape markets is becoming as vital as traditional instruments of liberalisation. Economic security, therefore, does not represent a departure from the European model, but its evolution towards a more resilient, technologically advanced, and strategically sovereign economy.