Southern Europe in crisis: industrial policy lessons from Italy and Portugal

Abstract

Italy and Portugal have characteristics in common and some relevant differences, both of which provide useful inputs for a comparative analysis. Lucchese et al. (Industrial policy and technology in Italy, 2016) argue that deindustrialization in Italy stems partially from the shortcomings of industrial policy, which has been unable to promote the development of more knowledge-intensive activities. In contrast, our assessment of industrial policy in Portugal indicates that the absence of structural change towards more knowledge-intensive activities does not seem to result from the absence of adequate industrial policy measures. Even though most of the policy instruments that have been put in place in Portugal being of a ‘horizontal’ nature, support has been unevenly distributed across industries, often being concentrated in more technology-intensive industries. We conclude that despite existing room for improvements in the industrial policies, overcoming the current crisis in the Southern belt of the euro zone will require decisive changes in macroeconomic policies.