Plan B for Europe A Complement Strategy for European Energy Efficiency, Industrial Resilience, and Economic Security
EU Reality Check
Strategic Failures & European Socioeconomic Development (2000–2024)
All references and footnotes can be found in the full PDF report available here: https://www.globari.org/plan-b-for-europe
The current structure and nature of the European Union still largely reflect the economic and political assumptions of the turn of the millennium. Its key institutional framework mirrors the optimism of the late 1990s and early 2000s. At that time, the world in which the EU was expected to thrive was one of secure and unrestricted movement of goods, people, and capital among mostly cooperative states, with international Islamic terrorism being the primary global security concern. This environment provided cheaper production inputs, better access to external markets, and, from a European perspective, seemingly reduced concerns over defence and its associated costs. Managed migration was intended to supply the necessary workforce—both sufficiently skilled and "affordable"—to play a crucial role in labor-intensive industrial sectors.
The EU’s ambitious and commendable climate goals appeared achievable, or at least realistic, as energy-intensive industries were gradually relocating out of Europe, with minimal social or economic repercussions at the time. These losses were offset by European companies’ rapid access to Eastern European and other global markets, as well as by cheap production inputs. The Lisbon Strategy—and to a large extent most EU strategic documents until the COVID-19 pandemic—was based on the assumption that this trajectory would remain unchanged.
For at least a decade, it has been evident that this projection no longer aligns with reality. Yet, EU strategies continue to operate as if this new reality has not been acknowledged. Today, the anti-globalist narrative has become a mainstream political force and a legitimate challenger in serious political contests, rather than a fringe movement of anti-systemic ideologies. Despite its commitment to multilateralism, the EU risks becoming a passive observer as the global multilateral framework is dismantled in real-time.
Europe’s current position is marked by a troubling deadlock. While it has successfully reduced its energy dependence on Russia, this achievement has been counterbalanced by growing reliance on alternative suppliers such as the United States, Qatar, and Australia, as well as on providers of green and digital technologies—sectors in which the EU is no longer globally competitive. The once-praised European Single Market, previously considered the cornerstone of future economic strength, remains incomplete and burdened by excessive regulation, regional disparities, and stagnating productivity.
Member states such as the Czech Republic, Slovakia, Hungary, and parts of Germany now find themselves caught in the crossfire of global trends, including digitalization, the green transition, and geoeconomic competition. The EU’s fundamental promise of reducing interregional inequalities remains unfulfilled. While economic hubs like Paris, Munich, Amsterdam, Prague, and Warsaw are advancing rapidly, many other regions are stagnating, and peripheral areas are falling behind.
To substantiate this claim, we will evaluate progress in key areas that have appeared in EU strategic documents since the Lisbon Strategy (2000): competitiveness, social cohesion, and environmental sustainability, along with external vulnerable dependencies, which became a focus after the COVID-19 pandemic.
Europe in Crisis:
Lost Competitiveness, Import Dependencies, & Inequalities
Parallels and Limitations of Mario Draghi’s Vision and the Structural Problems of European Policies
The following sections are based on long-term, comprehensive data research conducted by the GARI institute, which has been presented and continuously updated since approximately 2018. These findings—and the associated warnings—align in many ways with the European diagnosis outlined by Mario Draghi’s team in September 2024.
While Draghi’s critique is highly accurate, his report largely overlooks certain European vulnerabilities that fundamentally hinder the likelihood of success for his proposed recommendations. Specifically, the report barely addresses interregional and broader social disparities within the EU, as well as the complex dependencies on imported intermediate goods, which significantly impact Europe’s economic resilience and industrial strategy.
Competitiveness & the Digital Economy
Europe’s competitiveness, particularly in the field of digital technologies—once the top priority of the Lisbon Strategy—has instead become one of its greatest weaknesses. While the EU was once considered a potential leader in telecommunications and green technologies, the technological gap between the EU and, first, the United States, and later China, has been widening for nearly fifteen years.
The absence of major European global tech giants is a stark symptom of this decline. The scale of this gap is difficult to fully convey: while companies like Apple, Amazon, NVIDIA, and Chinese giants Alibaba and Tencent grew by thousands, tens of thousands, or even hundreds of thousands of percent between 2005 and 2020, Europe’s leading digital and communications firms at the start of the millennium (SAP, Nokia, and Ericsson) followed a very different trajectory. Since 2005, only SAP has grown, by roughly 240%, while Nokia has lost nearly 90% of its market capitalization, and Ericsson has declined by around 80%.
Today, Europe’s largest technology company is ASML (a leader in precision manufacturing), followed by SAP (which focuses on consulting and data services). In green technologies, the key players are mostly limited to turbine and hydroelectric manufacturers such as Ørsted and Vestas. While ASML (Netherlands), Ørsted, and Vestas (Denmark) are globally competitive and, in ASML’s case, even irreplaceable, they primarily represent precision industrial manufacturing and not digital or green technologies in the true sense. More importantly, they are exceptions in the European landscape. None of these companies rank among the world’s ten largest tech firms, and their revenues and market capitalizations are many orders of magnitude lower than those of the dominant U.S. and Chinese technology giants—despite being Europe’s clear champions.
Despite funding initiatives such as Horizon Europe, which allocates €95.5 billion for research and development from 2021 to 2027, structural barriers continue to prevent these investments from translating into a comparable global market position.
Trade Dependencies and Vulnerabilities
The COVID-19 pandemic and the subsequent energy crisis definitively exposed the fragility of the EU’s trade and technological relationships, as well as the risks associated with these dependencies. Initiatives such as the Critical Raw Materials Act (CRMA) and the Draghi Report aim to reduce reliance on external suppliers. However, these strategies devote less attention to the fact that their success will depend on the EU’s ability to implement complementary measures, such as strengthening domestic production and recycling capacities, as well as effectively advancing its geoeconomic priorities on the global stage. In particular, the issue of Europe’s industrial manufacturing capacities remains inadequately addressed in current EU materials and even in the Draghi Report (see below).
The Draghi Report, along with other EU documents, identifies material dependency as a key weakness in terms of access to critical raw materials (CRM), which are essential for the green and digital transitions. It acknowledges that the EU’s current dependence on China (for rare earths and battery materials) and other third countries significantly undermines European strategic autonomy. However, despite being presented as a landmark step, the Critical Raw Materials Act (CRMA) fails to offer realistic solutions to the systemic challenges at hand:
Circular economy and domestic supply: The report emphasizes recycling and the utilization of domestic resources (e.g., lithium in Portugal, rare earths in Sweden). However, these solutions hinge on accelerating mining permit approvals, improving recycling systems, and addressing public resistance—all of which remain unresolved. Even under the best-case scenario, the timeline for achieving significant progress in these areas is at least a decade.
Diversification through trade partnerships: Proposed joint trade strategies and alliances, such as the Critical Raw Materials Club, are framed as safeguards against external shocks. However, they echo earlier initiatives like Global Gateway, which failed to deliver meaningful results due to limited geopolitical influence and internal EU contradictions. Our analysis shows that, despite the Draghi Report’s urgent tone, this approach is not a realistic pathway to resolving the issue.
From the perspective of this analysis, what is most striking is that the Draghi Report completely overlooks a far more complex and difficult-to-solve issue:
Europe’s import dependency on intermediate goods
More than 40% of EU imports in key sectors—including mining, metallurgy, fossil fuel processing, chemicals, energy, water supply, and waste management—consist of intermediate goods (i.e., products used in further manufacturing or production processes rather than for direct consumption). The European economy is also highly dependent on intermediate goods across numerous strategic industrial sectors, including information and communication technologies (IT/ICT) (Baldwin & Lopez-Gonzalez, 2015; OECD, 2013).
Artificially created Chinese industrial overproduction, along with U.S. pro-industrial policies, further exacerbate this problem, making it a growing concern for the European Commission (European Commission, 2020).
From a geopolitical standpoint, it is crucial to highlight that Europe’s reliance on intermediate goods becomes a critical vulnerability in the event of any major escalation in the Middle East (e.g., disruptions in the Suez Canal and other key maritime chokepoints) or in East Asia (e.g., a crisis in the Taiwan Strait and the EU’s dependence on key ports and trans-shipment hubs in Southeast Asia).
Plan B's key pillars.
Graph coming soon...
In the services sector, intermediate goods account for nearly 60% of imports, meaning that almost two-thirds of imported services are used to generate additional value-added within European economies. This high level of dependency makes the EU more vulnerable than the U.S. and China if intermediate goods imports—whether in goods or services—are disrupted.
Within the timeframe of Trump's presidency, this leaves the EU more susceptible to economic coercion, not only in terms of tariffs impacting exports but also in terms of inputs for industrial production and services (i.e., intermediate goods imports).
The Central European region is the most vulnerable to all three major global trends:
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Digitalization
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The Green Transition
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Anti-globalization sentiment
The unequal socio-economic impact on less resilient regions becomes evident in the following maps, which compare the NUTS2 regional socio-economic index for 2019 (pre-COVID) and 2020 (post-COVID). The evolution of the index clearly shows how Central and Eastern European regions were disproportionately and significantly worse affected.
Notably, COVID-era economic shocks did not yet reflect the energy crisis or the current energy policy measures, which have since further exacerbated economic disparities. Under present conditions, any geopolitical disruption to supply chains would have an extremely severe impact on industrially developed Central Europe, particularly affecting its already highly vulnerable regions.
Graph coming soon...
Social Fragmentation & Inequalities
This brings us to another long-standing pillar of EU strategies—social cohesion. Our findings indicate that even in cases of successful economic transformation within the EU, there is a simultaneous deepening of socio-economic disparities, both intra-societally and inter-regionally.
Countries and regions capable of investing in innovation and infrastructure have achieved higher returns, while less developed areas have continued to lag behind (OECD, 2020). The gap between economically dynamic urban centers—such as Munich, Amsterdam, Paris, Prague, and Warsaw—and peripheral or post-industrial areas is widening, with rural regions often excluded from the benefits of globalization and EU membership in general. Internal inequalities within the EU have deepened over the past decade, undermining both social cohesion and trust in EU institutions.
Graph coming soon...
The graphic above presents the GARI Composite Index, which assesses regional (NUTS2) socioeconomic vulnerabilities to the green and digital transitions. The data confirms a widening gap between urban centers and regional areas.
Since populist movements capitalize on these disparities, trust in institutions and governance continues to decline, making social fragmentation not just an economic issue but a political challenge and a threat to democracy itself. No policy can ever be entirely fair, and economic growth inevitably leads to some level of social and economic inequality. However, our findings indicate that current EU strategies are not mitigating these disparities—they are actively contributing to them.
The Draghi Report acknowledges these problems but offers few concrete solutions beyond vague commitments to initiatives in education and vocational training—which in the past have struggled to deliver fair and tangible outcomes. The core issue is that one side of EU policy exacerbates social inequalities, while the other tries to counteract them through financial and regulatory interventions.
Cohesion funds and pro-growth measures have consistently produced uneven results:
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They fail to account for local specificities
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They often do not reach the regions most in need
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When they do reach the right areas, they face absorption capacity limitations and long-term sustainability challenges
The Green Economy Transition: New Dependencies & Entropy
The EU’s ambitious green agenda has positioned it as a global leader in climate policy, yet its implementation reveals fundamental contradictions similar to those previously outlined. The most notable success of the green transition has been the rapid increase in renewable energy production and consumption and the overall reduction in energy intensity of the economy. In hindsight, however, it is evident that these achievements have been driven primarily by strict regulatory measures—a strategy that has not been nearly as effective in other key economic areas (such as competitiveness).
While the shift to renewable energy has helped reduce direct dependence on an aggressive and unpredictable Russia, Europe has instead become entangled in a far more complex web of dependencies on new resources and technologies. However, this has not occurred from a position of technological leadership but rather as an end-user of cost-effective technologies developed or manufactured elsewhere (IEA, 2023).
This follows the same logic that defined the EU’s previous, ultimately unsuccessful, economic model: Europe’s lack of competitiveness is compensated by increasing reliance on cheaper inputs for production and trade—the only difference being that this time, the focus is on green technologies.
For example:
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Solar panels: Over 80% of the world’s solar panels are manufactured in China, meaning the EU is a consumer rather than an owner of intellectual property and production capacity.
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Battery technologies: Despite EU investments in battery gigafactories, key components and materials for batteries are increasingly sourced from Asia (World Bank, 2021).
In other words, an area that has been a top EU priority for more than a decade has contributed to a highly sophisticated network of dependencies—on fragile supply chains, geoeconomically strategic nations like China, and a highly competitive U.S. administration (Trump’s USA)—without the EU having any significant leverage or influence to counteract this reality.
Unequal Socioeconomic Impact of the Green Transition
Investments in renewable energy have not been evenly distributed across EU member states or social groups—a pattern identical to that seen in competitiveness policies. Wealthier regions and countries with greater absorption capacity, such as Benelux and Denmark, have benefited the most from the transition, while less developed regions continue to struggle with deepening structural barriers (Veugelers, 2023).
Meanwhile, Central European regions, including Germany, whose economies remain industry-driven, face significant economic and social costs in their attempt to phase out fossil fuels.
This uneven progress not only undermines the EU’s climate goals but also deepens internal divisions, further weakening the Union’s cohesion and resilience. Regions reliant on traditional industrial sectors—such as manufacturing—bear the greatest burden of the green transition, fueling populism and political instability.
Neither the digital nor green transformation alone are to blame for these tensions, but they expose the growing friction between the EU’s climate and economic ambitions and its long-term social cohesion objectives. The unequal distribution of costs and benefits highlights the EU’s inability to align its three fundamental pillars: competitiveness, sustainability, and cohesion.
Focus on Industry and a Realistic Path Forward
Despite the aspirations of EU green policy architects, the EU’s climate successes have been mostly concentrated on increasing the share of renewables in total energy consumption and production. However, overall energy consumption per capita has followed contradictory and imbalanced trends.
The European Commission continues to neglect energy efficiency in energy-intensive industries (EIIs) such as metal processing, chemicals, cement, glass, wood processing, paper production, and mining, as well as engineering networks like water supply, district heating, and waste pipelines. The following GARI calculations on the energy intensity of metal processing industries across European countries illustrate how, over the last 15 years, energy intensity in this sector has either stagnated or worsened (e.g., Austria, Czech Republic). Structural improvements (Netherlands) or consistently high efficiency levels (Scandinavia) remain exceptions rather than the norm.
A similar pattern is evident in Germany, where, despite being a green transition leader, energy intensity in metal processing has stagnated since 2014, and in the steel sector, it has actually increased since 2018. The overall trajectory across sectors reflects the secondary importance of industrial energy intensity as an issue in the EU.
Europe’s Internal Weakness in Green Industrial Policies
This, according to GARI, is a fundamental internal weakness of EU green policies. They were based on the assumption that economic inputs from heavy and energy-intensive industries could be sourced outside the EU (through targeted investments, subsidies, and strategically and operationally better-positioned supply chains). Investing in the efficiency (and future) of these industries was seen as a diversion of necessary support away from green technologies.
We are therefore in a situation where European energy-intensive industries (EIIs) are both essential and unwanted, while also falling behind globally due to high energy costs and years of being underestimated. Europe’s industrial base, once a pillar of its global competitiveness, has been steadily undermined by excessive dependence on global supply chains.
The Draghi Report correctly calls for renewed attention to industrial competitiveness, but only within the narrowly defined sector of green industries. Without addressing the structural problems of European industry as a whole (including EIIs), it is inevitable that massive support for green industries will increase Europe’s external dependencies and internal disparities.
The European Commission is aware of these industrial challenges, but according to our analysis, the proposed strategies for Europe’s future are not only unrealistic but outright dangerous, as they repeat the same failed approaches of the past.
The EU’s Industrial Strategy: Vision vs. Reality
transform the European economy and industry into a new ecosystem, which stands out for its sustainability, global competitiveness, role as a driver of innovation, social inclusivity, and contribution to building Europe's economic resilience (New Industrial Strategy for Europe, European Commission, 2020). It assumes an industrial base rebuilt for green technology production, powered by renewable energy, just as it assumes a leading role of the EU in digital and green technologies.
This was the EU’s vision for the future in 2020: industrial sectors that are not only leaders in decarbonization but also competitive on a global level, producing high-end products and contributing to a circular economy. The Draghi Report is more critical of the current state of European industry and its ability to become a digital leader, yet in terms of long-term vision of the future, its recommendations hardly differ with the logic of existing industrial strategies.
The core of this logic is a commitment to decarbonizing energy-intensive industrial sectors. This is therefore a partial departure from previous assumptions, namely that EIIs would essentially be relocated outside the EU. The cornerstone of the initiative are green hydrogen, which is considered a clean alternative fuel and raw material; carbon capture and storage (CCS), and carbon capture and utilization (CCU), as tools to mitigate emissions in industrial sectors where direct electrification is not yet feasible.
The Commission has proposed a range of instruments to support this transition, including:
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Financial instruments such as the EU ETS Innovation Fund, focusing on large-scale industrial decarbonization projects
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Carbon Contracts for Difference (CCfD), aimed at reducing investment risks for low-carbon technologies
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The Just Transition Mechanism, with a €100 billion budget, designed to mitigate the social impact of these changes and help regions and vulnerable professions adapt to new socio-economic conditions
The Draghi Report’s Approach: A Repetition of Past Failures
It is a grand and on-paper convincing vision, which, as previously mentioned, is also largely adopted by the Draghi Report. For Draghi, “the decarbonization of industry represents a key opportunity not only to reduce energy prices but also to strengthen the EU’s position as a global leader in clean technologies and energy security.” The Draghi Report also highlights that massive investments in renewable energy will increase Europe's dependence on Chinese technologies:
“China already controls a significant share of global solar panel, battery, and electric vehicle production, and its manufacturing capacity in these sectors is expected to become excessive by around 2030. This dominance has led to a sharp deterioration in the EU’s trade balance with China, most notably in the import of photovoltaic products, batteries, and electric vehicles. (...) It is likely that China’s surplus capacity will continue to be redirected to the EU market, particularly as other countries, such as the United States, introduce new tariff barriers.”
At the same time, the Draghi Report finally acknowledges that only a very limited portion of EU funding (e.g., from emission allowances) focuses on industry. Instead, most financial resources are allocated to households, renewable energy subsidies, and energy price reductions. The majority of funds are “given to households, support to renewable energy sources, and lowering energy prices. In contrast, energy-intensive industries in other regions, such as China, benefit from significantly higher state support, which is a key factor in their competitiveness” (ibid.). Draghi’s Report therefore urges that “the EU must take a more strategic approach to supporting its energy-intensive industries.”
While all this sounds promising, Draghi’s own approach essentially recycles recipes already embedded in the EU’s 2020 industrial strategy
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Decarbonization
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Hydrogen, CCU, and CCS technologies and massive investments in these technologies
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Workforce retraining
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An ambitious and unified external European economic policy to address geopolitical risks
Draghi Report Reality Check
GARI’s analysis concludes that this plan is objectively entirely unrealistic. The time and financial infeasibility of this approach—combined with its failure to account for real absorption capacities in individual regions and sectors, as well as its misjudgment of the EU’s position in the global technological and geo-economic landscape—makes the industrial strategy an extremely risky and fiscally unsustainable undertaking
A critical mistake, in our view, is that for normative reasons, the European Commission has deliberately and explicitly chosen not to address the issue of actual thermodynamic energy efficiency in energy-intensive industries (EIIs)—except for a few isolated exceptions, such as electric arc furnaces in steel mills and recycling. While the language of the strategy is dressed in a cloak of efficiency, the majority of its proposals focus on transitioning to new energy sources and reducing emissions, while almost entirely neglecting the question of reducing energy consumption for the same output.
From a thermodynamic perspective—which we consider the only objectively valid approach in energy policy—the introduction of renewable energy sources simply changes the energy source rather than reducing the overall energy demand in EIIs. Efficiency, in thermodynamic terms, means achieving the same results with less energy, not merely producing cleaner energy. True efficiency involves process optimization, waste reduction, and energy recovery wherever possible. For example
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Carbon capture and storage (CCS)—at least in the short term—increases energy demand due to the additional steps required to capture and store emissions.
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Green hydrogen, hailed as a transformative technology, requires significant energy input for electrolysis — according to the Draghi Report, this process would necessitate nearly tripling solar panel installations and more than doubling wind power capacity (European Competitiveness, 2024a).
While even the most basic logic suggests that applying next-generation industrial decarbonization technologies (such as CCU and CCS) will be more accessible and effective only after maximizing the efficiency of existing systems. The required investments in further phases of decarbonization will naturally be lower in direct proportion to the reduction of emissions achieved through energy efficiency.
According to GARI’s preliminary calculations, a realistic and cautious strategy, supported by an annual budget of €50–70 billion (compared to the €750 billion annually recommended in the Draghi Report), could address Europe’s immediate economic, social, and environmental challenges within two to four years, while still aligning with its decarbonization goals. (most of the initiatives suggested by EU policies so far, even in the unlikely event of successful realisation, should count on a time frame of 10 - 25 years)
With a similar level of investment, approximately 1,000 to 1,400 industrial facilities per year could undergo medium-scale energy efficiency improvements.
GARI presents a pragmatic and cautious “Plan B for Europe”, acknowledging the EU’s structural constraints and offering a gradual, realistic pathway forward. The plan prioritizes energy efficiency in energy-intensive industries, a sector capable of delivering immediate and tangible results while addressing Europe’s fundamental vulnerabilities. It focuses on precision manufacturing and infrastructure modernization, advocating for a robust incentive plan and carefully selected regulations in energy efficiency, workforce reskilling, and investments in core and critical infrastructure. The goal of these measures is to balance external dependencies, competitiveness, environmental sustainability, and social cohesion in a way that is realistic, organic, and capable of delivering results within a sufficiently short timeframe—without succumbing to the pitfalls of overly ambitious but unattainable goals.
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This report presents a comprehensive analysis of Europe’s industrial and energy landscape in the context of global competition, systemic dependencies, and political realities. It examines the structural weaknesses in current EU strategies—including the Draghi Report—highlighting overlooked risks, unrealistic assumptions, and the growing disconnect between political ambition and implementation capacity. Drawing on macroeconomic data, geopolitical developments, and sector-specific trends, the study identifies actionable insights across energy, infrastructure, trade, and industrial policy. The goal is to support decision-makers with grounded, data-driven perspectives and to offer a foundation for realistic, long-term solutions.
