Missing money: Why Europe’s economic security requires a critical technology investment plan

In its latest white papers on the next steps for economic security, the European Commission makes important suggestions on investment screening, research security, and export controls – including a forum for political coordination on export controls (something I have advocated previously).

But while these control tools can address specific risks, the European Union’s outlook on economic security remains overly defensive – and does too little to address the broader goal of securing Europe’s techno-industrial position.

Security costs money – economic security is no different. And the EU’s ability to innovate, produce, and commercialise critical technologies is an essential part of it.

Tinkering with investment and export controls will not be enough. Europe’s economic security fortunes will deteriorate if it does not link these measures to a bold financial strategy that bolsters the continent’s technological and industrial capabilities. In a geo-economic world, these capabilities are among the most important pillars to be able to act independently, deter others – or even contain a rival’s techno-industrial advancement, as European sanctions on Russia have shown. Separating the economic security agenda from Europe’s competitiveness agenda is therefore a mistake.

Long-term strength

To fortify its techno-industrial position, the EU needs to establish central resources that enable the commission to co-fund early-stage, capital-intensive critical technology projects. Recent initiatives taken by the EU to shore up the continent’s defence-industrial strength – not least with a focus on scaling production capabilities – demonstrate its ability to use public resources for pressing and targeted security needs. The EU already established an ambitious tool for expanding capacity for semiconductor technologies with the Chips Act too.

The EU’s economic security posture needs a security-driven investment plan – for the capabilities Europe needs to act and deter – which supports Europe’s leading industrial innovators to upgrade in a collaborative way. In quantum computing and sensing, for example, Europe ranks among the global leaders in research and member states boast significant research budgets. But while the EU and United States have roughly the same number of start-ups, Americans have access to ten times more funding than their European peers, allowing more rapid industrial scale-up.

Europe cannot win the technology race with public money alone, of course, and must work hard on its wider competitiveness (including unlocking private capital). But this should not distract from the necessity to take strategic bets on scaling those projects where Europe can attain or retain a technology edge. A critical technology investment plan must do exactly that, while ensuring that production is located within the EU and will draw from a diversified supply chain.

Investment vs austerity

While leaders like French president Emmanuel Macron advocate increased public investment in critical technologies, the German budget crisis and Dutch national elections have fuelled austerity sentiment across Europe.

Recent decisions by member states to significantly scale back the proposed €10 billion STEP fund for scaling critical technologies, particularly in clean energy, highlight the fragile political support behind this agenda. Without a more serious promote agenda, Europe’s economic security will deteriorate.