Money, percentages, prosperity

The Current State of Industry in the European Union. Between Decline, Transformation, and Cautious Hope

A Crossroads in History

European industry stands at a crossroads. After decades of being synonymous with stability, quality, and a social model of prosperity, it now faces challenges that call its very existence into question. This is not dramatization but it is mathematics. Between 2019 and 2023, the European Union lost approximately 853,500 industrial jobs. The numbers speak soberly where politicians speak optimistically.

Yet industry forms the backbone of the European economy. The manufacturing sector accounts for over 20% of the eurozone’s GDP, creates highly skilled jobs, and is a source of export strength that keeps trade balances in equilibrium. Its decline is not merely a sectoral issue, it is a systemic risk.

Wake-Up Call

Europe's issues are deep-rooted, not just temporary. They won't fix themselves with the next economic upswing.

What makes this assessment especially concerning is how interconnected the problems are. Each of the four challenges amplifies the others: an older population reduces the workforce and the tax revenue necessary for the energy transition; disjointed capital markets hinder the growth of the companies that could bridge the AI and quantum divides; persistent energy expenses cut into the profits that would typically support research and development. It's a vicious cycle, not just one faulty part.

The demand for €750–800 billion in yearly investment is not a minor detail. It accounts for about 4–5% of the EU's GDP, every year, consistently. To give some context, even the significant post-war rebuilding effort was only a small portion of this in real terms. Bridging the innovation gap with the US and China while also making industrial infrastructure more sustainable and enhancing the single market would need a level of political cooperation that the EU has seldom, if ever, managed during peacetime.

The Energy Trap

Energy prices are perhaps the most pressing issue. Industrial companies in the EU pay, on average, two to three times more for electricity than their competitors in the United States. The energy crisis following Russia’s invasion of Ukraine in 2022 dramatically worsened the situation, and although prices have fallen from their peaks, they remain structurally at levels that erode competitiveness.

The case of the German chemical company Lanxess is symptomatic: at the end of January 2025, CEO announced that the company would prioritize investing in the U.S. over Europe. He cited the “bureaucratic monster of the EU” as the reason, claiming it stifles innovation and deters investors. Lanxess is not an isolated case, it is the visible flagship of a trend that analysts describe as the silent exodus of industry.

The European Commission responded in February 2025 with the Clean Industrial Deal and the Action Plan for Affordable Energy. The goal: to lower energy prices for energy-intensive sectors and channel more than 100 billion euros into the decarbonization of industry. The plan is ambitious. It's implementation, as is often the case in Brussels, will only be tested in practice.

Field Data and a bit numbers

Data from late 2025 and early 2026 paint a mixed picture. In December 2025, EU27 industrial production rose by (+1.4%) YTD. A modest but tangible increase. Poland (+6.9%) and the Czech Republic (+4.9%) saw the fastest growth. Slovakia recorded the largest decline (−8.5%). Germany, the engine of European industry (-0.7%).

In January 2026, the picture became more complicated: EU27 industrial production fell by (-0.6%) YTD. Ireland fell by (-13.1%), Luxembourg by (-14.9%), though statistical anomalies caused by the dominance of the pharmaceutical sector play a role here. Latvia, on the other hand, grew by (+13.3%), and Denmark by (+11.5%).

A sectoral view reveals a key shift: production of computers, electronics, and optical instruments is growing by (+12.7%) in December 2025, while traditional heavy manufacturing is stagnating or declining. Industry is digitizing, but this process is not automatically democratic. Those who have invested in the transformation are thriving. The rest are falling behind.

European industry will survive. The question is, in what form and at what cost. And who will have the chance to share in its fruits.

Three Major Structural Challenges

Behind the numbers lie three deeper structural problems that no Green Deal can solve overnight.

1. The technology gap. The EU lags behind the U.S. and China in key technologies, artificial intelligence, semiconductors, and quantum computing. While Europe produces top-tier scientists and research, it has failed to translate this into globally dominant technology companies. As a result, industrial digitalization is taking place on platforms and chips that originate from China or the US.

2. The demographic trap. Industry needs skilled workers. An aging Europe has fewer and fewer of them. While unemployment remains low (around 6% in the EU), paradoxically, industrial companies report a shortage of skilled workers even as they reduce their workforce. This is a qualitative mismatch, not a quantitative surplus.

3. Geopolitical dependence. Russia’s war in Ukraine has exposed the fragility of Europe’s energy architecture. Dependence on Chinese raw materials for batteries, solar panels, and electric vehicles shows that decarbonization without strategic autonomy may simply be another form of dependence.

Reasons for Cautious Optimism

Nevertheless, the picture is not entirely bleak. The outlook for 2026 is, as economists say, cautiously optimistic. Higher domestic investment in Germany (a record-breaking infrastructure program), rising defense spending across the EU, and the drawdown of European funds form a safety net that could, after all, accelerate growth.

Moreover, European industry still has much to offer. German engineering Mittelstand, Italian industrial craftsmanship, Scandinavian technological pragmatism, Central European manufacturing capacity - these are real strengths, not just nostalgic memories. Industrial production in key sectors such as aerospace, medical devices, and high-end engineering remains globally competitive.

The EU’s Competitiveness Compass, building on Draghi’s report, aims to significantly reduce energy costs, simplify regulation, and mobilize private capital for industrial transformation by 2030. Implementation will be crucial.

Money, Interest Rates, Prosperity

The words in the title of this essay money, interest rates, prosperity are not merely alliteration. They are the three pillars upon which the future of the continent is being decided in Brussels and Berlin, in Prague and Paris.

Money: where will the hundreds of billions of euros needed for the transformation come from? Partly from European funds, partly from private capital, partly from new EU debt instruments. The question is not just economic even it is political.

Percentages: what portion of industry will survive decarbonization and digitalization? Which sectors will transform, and which will disappear? Figures from early 2026 show that the variation is enormous. The winners and losers are divided not by country, but by their ability to invest, adapt, and innovate.

Prosperity: for whom? Industrial transformation must not be solely the concern of shareholders and technological elites. If the loss of traditional industrial jobs is not accompanied by adequate retraining and social cushioning, industrial regions will become a breeding ground for political populism, which ultimately threatens the very foundations of a functioning economy.