Cohesion Policy and Industrial Policy are at the core of development policy in the EU. Cohesion Policy aims at territorial, social, and economic cohesion, pursued historically via redistributing resources for key infrastructure investments. Industrial Policy, while originally subsumed under the EU’s Cohesion Policy, developed gradually into a wholesome strategy aiming to ‘direct’ innovation and economic transformation, with emphasis on the green and digital transition.

While the ‘Lisbonisation’ of Cohesion Policy has seen its objectives shift towards technological upgrading and global competitiveness (an ‘entrepreneurial shift’), bringing it closer to the innovation focus of Industrial Policy, recent developments in the EU have pushed the latter towards the pursuit of more “macroscopic” objectives, such as ‘open strategic autonomy’, decarbonisation, ‘resilient single market’ and, much more recently, (defence) ‘readiness’. The coordination of these two policies is crucial to balance the new goals and ambitions of the EU with its Treaty obligation of promoting territorial cohesion. We demonstrate that this is not to be taken for granted. The two policies differ significantly in terms of their principles, governance and fund-allocation criteria; while substantial differences exist also in terms of their thematic prioritising and spatial targeting and selectivity. Taking stock of the differences, we advance two main recommendations. First, that Industrial Policy becomes more ‘territorialised’ – an Industrial Policy that ‘thinks locally’. This involves developing a spatial strategy alongside the sectoral-thematic strategies and wider missions, obtaining a more direct spatial character in its financial interventions and support actions, and directing resources also to areas that lack ‘excellence’ via appropriate instruments able to nurture untapped advantages. Second, that Cohesion Policy becomes more ‘strategic’ – a Cohesion Policy that ‘acts globally’. While maintaining its principle of place-based strategizing under locally-advanced logics of intervention, this involves two key changes: a partial re-centralisation of the policy, to connect more organically to (and to influence) the strategic objectives of the EU in the realm of Industrial Policy; and stronger horizontal cooperation in the formulation of the local strategies, so that successful re-specialisations that make sense at the local level also contribute to the overall re-specialisation of the EU’s economic space.

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