The lack of federalism in Europe makes it impossible to establish a European industrial policy

The degree of federalism in Europe is low (limited to the EU budget, European Investment Bank investments and the NextGenerationEU plan). This poses a serious problem for the implementation of a European industrial policy. If there were a high degree of federalism in Europe, countries would be indifferent as to the geographical location of industry. If a country's comparative advantages mean that it is more efficient to set up a new industry in that country, the other countries will accept this, since they will benefit from the extra production in that country through increased transfers from the federal budget. But since the degree of federalism is low in Europe, countries refuse to allow industry to locate in another country. As a result: Industrial locations are not the result of countries' comparative advantages; There is a bidding war to attract industrial investment with subsidies; In the case of a European decision, investment is split between different countries.