France and Europe Aim to Strengthen Economic Sovereignty Amid Industry Challenges and New Legislation

Recent global crises including the pandemic, the war in Ukraine, and increasing trade tensions have led France and Europe to reassess their economic dependencies, especially in key strategic sectors such as industry, energy, digital technology, defense, and health. This reexamination raises questions about the ability and willingness to produce strategically important goods domestically, reflecting growing concerns about economic sovereignty.

In this context, Olivier Sichel, General Director of Caisse des Dépôts, highlights the crucial role that small and medium-sized enterprises (SMEs) can play in reinforcing France’s economic sovereignty. For instance, Elvia Electronics, a Normandy-based SME, manufactures electronic cards used in satellites, airplanes, trains, and cars, exemplifying the potential for local production in strategic industries.

Concurrently, a forthcoming European legislative proposal, scheduled for publication on February 25, aims to bolster production capacities in vital clean technology sectors such as solar energy, electric vehicles, and battery manufacturing. This reflects a broader push to reverse the decline in manufacturing’s share of the European economy, which has fallen from above 20% of EU GDP in 1991 to just over 14% currently, according to World Bank data.

The legislation notably targets China by introducing restrictions on foreign direct investments from countries holding more than 40% of global production capacity in certain sectors—a threshold that China exceeds in areas like solar panel manufacturing and rare metals processing. These restrictions aim to prevent undue control over European companies, particularly in battery technology and renewable energy industries.

The proposal has also sparked a debate over the extent of support for European firms, especially concerning rules requiring sourcing of materials and equipment from Europe in renewable energy tenders and public procurement. France advocates for stronger "European preference" rules, while Germany warns against measures that could be too restrictive. European Commissioner for Industry Stéphane Séjourné has recently sought to clarify misunderstandings regarding local content requirements.

This legislative push and growing industrial focus illustrate a concerted effort by France and the EU to balance economic sovereignty with globalization realities, addressing vulnerabilities highlighted by recent geopolitical and economic disruptions.