The industrial base of Central and Eastern Europe is a key driver of the region’s economy, and its transformation will be essential for maintaining regional manufacturing in the long term. Transforming it will require concerted action by CEE states as well as a regional approach to exploit synergies, improve cost-effectiveness, and cooperate on mutually beneficial solutions. However, to date there has been insufficient action and regional coordination to enable an industrial transformation which capitalises on the region’s strengths. This publication presents a bird’s eye view of the region and its countries, reflects on the opportunities for cooperation, and puts forward concrete suggestions for anchoring the new industrial reality of Central and Eastern Europe in clean industry hubs fit for the future.
Introduction and aims of this study:
- Central and Eastern Europe (CEE) has significant potential to become a pole of clean industrial production, but lacks the regional coordination essential for an efficient industrial transformation
- The current nationally siloed approach misses key opportunities to deliver industrial transformation, including coordinated infrastructure planning to leverage key resources across the region, and exploiting a regional market for industrial products
- The need for regional coordination comes in a time of pressure for CEE heavy industry to transform by decarbonising existing manufacturing and enabling new cleantech manufacturing, which will be essential to maintain the regional industrial base long-term, even if it poses challenges in the short-term
- Rising carbon prices, an incoming phase-out of free allowances under the EU Emissions Trading System (ETS), new regulations to nudge the consumption of lower-carbon industrial products, and an aggressive global cleantech race all mean that CEE countries must act now
- At the same time, the industrial policy landscape of the EU is undergoing a massive shift in the wake of Russia’s invasion of Ukraine, which exacerbated the existing pressure of high energy prices, and the 2024 Draghi report, which highlighted major gaps in the EU’s industrial competitiveness further addressed in the recently-published EU Competitiveness Compass
- Competitiveness will be a major driver for industrial transformation in the EU, and the forthcoming Clean Industrial Deal is expected to lay down rules and incentives for decarbonising industrial production in the EU, anchored in competitively advantageous sectors and promoting a coordinated approach
- Given the current context, it will be key for CEE to unlock cost efficiencies for its industrial transformation and align its national priorities to ensure that advancing EU competitiveness does not come at the expense of strategic considerations for autonomy and cohesion
- The purpose of this study is to reflect on the specificities of CEE countries which contextualise their outlook for industrial transformation, and to provide a high-level assessment for the benefits of a regional approach anchored in competitive and strategic industrial clusters
