Predictable or Flexible? How to Implement the European Economic Security Strategy

CSDS POLICY BRIEF • 2/2026

By Antonio Calcara and Floor Doppen

22.1.2026

Key issues

• The European Economic Security Strategy is defined, but its implementation involves a fundamental trade-off between predictability (legal certainty, market stability) and flexibility (rapid, intelligence-driven responses to geopolitical risk);
• Divergent national approaches to investment screening and export controls risk fragmenting the single market and weakening the EU’s collective leverage vis-à-vis major powers;
• The EU must operationalise economic security by combining predictable procedural baselines with targeted discretion, strengthening coordination across instruments while avoiding rigidity or fragmentation.

 

Introduction

On 3 December 2025, the European Union (EU) presented a Joint Communication on strengthening Economic Security, which builds on, updates and closes gaps in the 2023 Economic Security Strategy. The 2023 strategy defined the EU’s overarching objectives to promote industrial strengths, protect European interests and partner with like-minded countries. Since then, global competition has intensified, driven by sharper geopolitical tensions and the growing use of economic coercion for strategic ends. China’s export controls on critical raw materials have again exposed Europe’s dependence on Beijing, while US tariffs and pressure to align with American export controls on advanced semiconductors have placed European governments and institutions in a difficult position.

The Communication on strengthening European Economic Security has many positive features, notably its aim to better connect protection and promotion initiatives and to improve coordination among member states, EU institutions and public and private actors. The key objective of defining a European Economic Security Strategy was to balance openness and security. The key question is how Europe can protect its economy without undermining openness or its trade and investment relations with third countries – a principle that has long underpinned EU trade policy since the creation of the single market.

With the strategy now defined, it is essential to consider how it will be put into practise and by whom. Given the complex mix of shared and exclusive competences between the EU and member states and the political discretion involved, it is necessary to examine the decisions that various stakeholders will make when implementing the strategy and applying new and recast economic security tools.

This CSDS Policy Brief examines a relatively underexplored tension in the implementation of the strategy by the EU institutions and the member states: the balance between predictability and flexibility. Europe’s multilevel, rules-based governance has traditionally prioritised predictable mechanisms, legal certainty and harmonisation, limiting political discretion and discrepancies between EU institutions and member states or among member states themselves. However, intensifying geoeconomic competition may push European states to develop more flexible responses to emerging challenges derived from trade and foreign investment. This could involve relaxing or broadening intervention criteria, creating emergency security mechanisms or selectively deploying economic security tools to pursue geopolitical objectives more effectively.

This brief unpacks the trade-off between predictability and flexibility in implementing the European Economic Security Strategy, focusing on its two main security and public order tools: foreign investment screening and export controls. Together, these cases highlight the delicate balancing act required to achieve the strategy’s core objectives. Understanding the opportunity cost of prioritising one approach over the other is essential for informed implementation by EU institutions and member states. The brief concludes with policy recommendations and discusses the Anti-Coercion Instrument (ACI) as a key example of how this balance might be achieved.

Implementing the European Economic Security Strategy: predictability vs flexibility

The global political environment that once enabled the EU to rely on rules-based multilateralism, open supply chains and comparative advantage has eroded rapidly. States are now increasingly using economic tools to achieve geopolitical aims. While this is not a new phenomenon, what is novel is the normalisation of the weaponisation of critical economic, investment and industrial linkages to undermine adversaries.

In response to a growing competitive geoeconomic environment, the EU recently updated its Economic Security Strategy. Debate over the strategy’s design centred on the balance between openness and security. Now, the key challenge shifts from strategy design to implementation, requiring the coherent adaptation of existing tools. This next step entails another balancing act: that between predictability and flexibility. This trade-off is inherent to all economic security instruments, which must simultaneously protect the single market and provide a stable investment environment, while allowing rapid responses to emerging geopolitical risks, coercion, adversarial behaviour and supply-chain shocks.

Predictability and flexibility embody competing imperatives. Predictability is achieved through clear rules, transparent criteria, stable procedures and legal certainty. It offers stability for governments and firms, reduces political divergence across EU institutions and member states, and enables firms to plan investments, manage supply chains and anticipate compliance costs. It also enhances legitimacy by limiting politicisation and arbitrary decisions, reassures partners through rule-based action and strengthens deterrence by signalling clear red lines to foreign actors. However, predictability can constrain governments’ ability to respond to evolving threats or evasion tactics designed to exploit rigid frameworks, potentially undermining the effectiveness of economic security tools. Fast-evolving and emerging technologies, geopolitical shocks and coercive practices often defy predefined categories, requiring more adaptive responses.

Flexibility provides this adaptability. For its part, flexibility relies on political and government discretion, intelligence-based assessments, strategic ambiguity and the ability to act swiftly under uncertainty. It enables authorities to respond to sensitive intelligence, rapidly update export controls, withdraw licenses, intervene in foreign acquisitions and deploy emergency funding to address supply-chain disruptions. It also creates strategic ambiguity, making EU responses harder to anticipate and thereby reinforcing deterrence. However, an excessively flexible approach poses risks to feasibility and competitiveness, and could undermine the single market. Broadly designed investment and trade controls may overburden administrative capacity, while the unpredictability that results from flexibility can deter investment by increasing legal uncertainty. Similarly, the risk of politicisation or selective enforcement could undermine the rule of law and expose member states to costly investor-state arbitration. Moreover, highly flexible systems can encourage regulatory arbitrage, as investors seek to exploit differences across member states, weakening the single market’s level playing field in the process.

Focusing on the trade-off between predictability and flexibility is essential, as the implementation of the European Economic Security Strategy will be shaped by and impact the actions of other major international actors, notably China and the United States (US). Insights from strategic and security studies help to clarify the importance of the balancing act: in nuclear deterrence debates, credibility depends on balancing predictability and flexibility. Predictability allows adversaries to clearly understand red lines, reducing the risk of miscalculation and unintended escalation. This is achieved through transparent doctrines, stable Command and Control structures and consistent force modernisation. Flexibility, by contrast, enables adaptation to evolving threats, technological change and shifting geopolitical conditions through variable force postures, dual-capable systems and tailored escalation management.

Economic security tools operate in a similar manner. Instruments such as foreign investment screening, export controls and targeted sanctions can deter adversaries by increasing the costs of harmful economic or technological actions. At the same time, they serve defensive purposes by protecting Europe against disruptions and enhancing resilience when risks materialise. Because reducing strategic dependencies is a long-term process, the EU must understand how escalation dynamics may unfold and determine which measures correspond to different levels of response. The following sections illustrate the stakes of this trade-off by examining foreign investment screening and export controls, where the tension between predictability and flexibility is most pronounced.

Investment screening

Foreign investment screening across the EU exemplifies the tension between predictability and flexibility. Overall, in the balancing act between the two, governments focus on two aspects: 1) defining a scope of sectors within which the state can intervene that is sufficiently predictable for firms; and 2) safeguarding flexibility for governments to respond to emerging risks or acute threats that require quick intervention.

It is important that this balance is struck well, because otherwise investment screening may become both costly and ineffective. The recently concluded negotiations on the EU regulation on foreign investment screening faced the all-too-familiar tension between the need for consistency and predictability of screening rules and ensuring sufficient flexibility. These debates were especially contentious when they concerned the mandatory list of sectors where all member states are to screen investments, which highlighted the different government approaches across the EU.

Several member states, like Czechia, Denmark, Germany and the Netherlands, emphasise legal certainty, clear thresholds and well-defined criteria for intervention. Some combine this predictability with built-in flexible “security valves”. Germany, for example, can intervene in any merger or acquisition (M&A) where the foreign firm acquires over 25% of shares in a company, in any sector. Germany used this security valve to intervene in the Chinese COSCO investment in a Hamburg port terminal. Czechia adopted a similar system, and its government has ex-post screening powers, meaning that if they identify an acute security threat in a transaction that was already concluded, the government can legally intervene and unwind the investment after the fact (similar to the US system). The government used these powers in 2025 to order the divestment of a Chinese foreign investment, concerning a ground satellite station in the Czech countryside.

Predictability fosters legitimacy and market stability. Firms usually know whether they fall under the scope of screening, and authorities can manage case-loads relatively efficiently. At the same time, governments can avoid accusations of politicisation: an investment does or does not fall within the scope, and intervention is not the result of a political decision, but of clearly defined legislation.

However, predictable systems may incentivise circumvention by hostile actors. Clear and predictable rules allow foreign firms to operate under intervention and detection thresholds by lowering the amount invested or by creating alternative vehicles to acquire control over or access to certain operations. Additionally, predictable systems face the risk of missing the tools to intervene when new threats arise. In the Nexperia case, the Dutch government relied on unconventional ad hoc tools that significantly increased the politicisation that surrounded the intervention and fed into the diplomatic row that ensued. Clear ex-post screening powers to address security concerns related to the shifting governance practices of the firm might have worked well to preclude some of the backlash it galvanised.

Member states like France, Italy or Sweden employ broader, more discretionary screening frameworks and prioritise flexibility. Because these regimes cover investments in a wide array of relatively ill-defined sectors, they are flexible mechanisms that enable government intervention in emerging technologies, sensitive data assets or strategic infrastructure not covered under traditional lists. Predictability in these systems derives from the near-certainty of a screening review, which may be costly to investors.

Flexibility enables easy intervention in investments that previously might have been less sensitive, and precludes circumvention behaviour, since the government can (and will) intervene if it needs to. France, rightly so or not, regularly politicises proposed investment deals by threatening to block them. Sweden was able to intervene in a greenfield investment (which most countries cannot do) in a battery materials factory at the end of 2024, which gave it the necessary flexibility to impose conditions to address risks related to the investment.

Flexible systems, however, are also prone to expansionist or protectionist use: Italy, unsurprisingly, recently received a warning from the European Commission over its far-reaching “golden power” investment screening regime. At the same time, flexible systems require a lot of administrative capacity to deal with all the incoming notifications. Without sufficient resources, discretionary regimes face missed cases, inconsistent application or overwhelming delays. These, as well as predictable systems with “security valves”, require significant monitoring capacity of the market, intelligence analysis, interagency coordination, technical expertise and rapid decision-making structures.

Whether flexible or predictable, the variation across regimes in the EU is a source of frustration for firms, leading to overall losses in competitiveness in the EU as a whole. The balance the European Commission is seeking to strike is one of both flexibility and predictability, while respecting member states’ prerogative to make their own decisions domestically regarding investment screening. As a result, the new Regulation will force all regimes to add water to the wine: those that prioritise predictability will need to introduce more flexibility, and highly flexible regimes are required to guarantee more predictability and legal certainty for investors. What this highlights is that the implementation of the Economic Security Strategy still needs to leave wiggle room for states to strike their own balance between predictability and flexibility, albeit within pre-determined and supranationally defined lines.

Export controls

Export controls are among the EU’s most important economic security tools. They regulate the export of dual-use items –goods and technologies with both civilian and military applications– and other strategically sensitive products. Export controls illustrate a core trade-off between predictability and flexibility. Predictable, transparent licensing rules provide firms with certainty to manage supply chains, secure contracts and plan investments. Yet, rapid technological change and intensifying geopolitical competition require flexibility. Highly predictable regimes risk circumvention, while flexible controls allow authorities to adapt to emerging technologies, act on intelligence and coordinate sanctions. Excessive flexibility, however, can disrupt the internal market and undermine investment decisions.

The US and China illustrate this challenge: US export controls allow case-by-case licensing for sensitive technologies, enabling swift responses but creating uncertainty for firms. China’s 2020 Export Control Law similarly grants broad authority to restrict exports, including extraterritorial enforcement. While public criticism is limited, firms –especially rare-earth magnet producers– report that controls can hurt revenues and long-term customer relationships. Both cases show the need to balance legal certainty with security responsiveness.

The European export control system is very complex due to its multi-level governance. Dual-use exports are governed by Regulation (EU) 2021/821, which sets a common framework for exports, brokering, transit and technical assistance, and aligns with multilateral regimes like the Wassenaar Arrangement and similar regimes for other categories of goods. While the EU regulates exports under the Common Commercial Policy, implementation and enforcement are delegated to member states. Member states are also able to introduce additional controls on items not listed in Annex I of Regulation (EU) 2021/821 for reasons of public security. Importantly, the EU cannot adopt autonomous, EU-wide controls independently of multilateral regimes, as member states –not the European Commission– are formal parties.

The EU’s export control system reflects the predictability-flexibility trade-off. EU-level regulation ensures predictability through a shared list, uniform licensing and common principles, helping firms plan and reassuring partners. Simultaneously, fixed lists can be too rigid as new threats emerge, prompting member states to adopt national measures that provide flexibility but create regulatory uncertainty and higher compliance costs. Fragmented controls risk undermining the single market, weakening collective leverage and inviting politicisation or retaliation.

Again, a Dutch case illustrates these tensions. As a key semiconductor hub, the Netherlands faced US pressure to restrict advanced chip equipment to China. Since 2023, the Dutch government has progressively tightened export controls on advanced semiconductor manufacturing equipment and related technologies, reflecting concerns about sensitive technologies facilitating military or dual-use capabilities abroad. Initial measures targeted specific equipment not covered by the EU control list, while further amendments in April 2025 expanded licensing requirements to additional chip production technologies. Invoking Article 9 of the Dual-Use Regulation, Dutch authorities now require exporters to obtain licenses on a case-by-case basis. This approach shows the value of national flexibility in responding to technological and geopolitical threats.

The costs of flexibility are evident. As national controls go beyond the EU list, exporters face added uncertainty and administrative burdens, especially when measures diverge across member states. Dutch unilateral measures did not fully satisfy Washington, which imposed extraterritorial restrictions on ASML exports, highlighting the limits of national action. The case also reveals structural weaknesses in the EU system: controls by one state can pressure others to follow, or firms reroute trade through less restrictive members. A European Commission survey confirms such circumvention. Politically, fragmented rules increase exposure to external pressure and retaliation.

These challenges have prompted calls for reform, which present their own challenge: Multilateral regimes like Wassenaar face deadlock, while bilateral US cooperation has had mixed results. The EU-US Trade and Technology Council coordinated controls against Russia but struggled with China, where US unilateralism and intra-European divergence persist. Against this backdrop, the European Commission released the “White Paper on Export Controls” in January 2024. The document explicitly acknowledges that ‘the lack of a common EU voice exposes individual Member States to geopolitical pressures’. It highlights deficiencies in transparency and consultation, as states are not required to inform or consult the European Commission or each other before adopting national controls, creating an incoherent patchwork and enabling forum shopping. Accordingly, in April 2025, the European Commission issued a Recommendation on the coordination of national control lists to improve information sharing and alignment with EU and multilateral standards.

The future of EU export controls hinges on greater coherence without losing flexibility. Proposals include enhanced supranational competences: a 2023 European Parliament committee suggested a European Export Control Agency, the 2024 White Paper advocates giving the European Commission authority to amend Annex I of the Dual-Use Regulation and the recent European Economic Security Communication calls for an evaluation of the regulation in light of new geopolitical realities. Such reforms are politically sensitive, as export controls touch on national security competencies. As noted by Bora and Rueda, France and Germany oppose EU involvement in arms exports. Yet as dual-use technologies blur civilian and military boundaries, some EU-level oversight may be inevitable. Any move toward supranationalisation must maintain predictability while allowing flexibility to respond to technological and geopolitical shifts.

The paradox is clear: national competence ensures flexibility but weakens coherence, while stronger EU authority could improve coherence but risk rigidity. The challenge is reconciling predictability with flexibility, preserving the single market while remaining responsive in a rapidly evolving, weaponised global economy.

Conclusion: how to move forward

The European Economic Security Strategy marks a shift from conceptual debate to operational policymaking. The key question is no longer whether Europe should protect itself economically, but how. Economic security tools must combine clear procedural baselines with targeted discretion, enabling responses to emerging risks without undermining legal certainty, administrative feasibility, investor confidence, single market cohesion, competitiveness or credible deterrence.

Three principles should guide policy implementation:

Predictable rules, flexible responses

Predictability and flexibility should not be treated as opposites. Economic security instruments could operate within predictable frameworks while including flexible “security valves” for rapid intervention. Predictability governs decision-making – through transparent processes, defined roles and review mechanisms – while flexibility determines when and where authorities can act in response to new intelligence or emerging risks. The EU Anti-Coercion Instrument illustrates this logic. Designed to respond swiftly to economic coercion by third countries, the ACI relies on implementing and delegated acts, allowing the European Commission to act without lengthy legislative procedures. Discretion is embedded in a predictably structured framework to ensure predictability, proportionality and deterrence. Clear thresholds, graduated responses (deterrence, de-escalation and counter-measures as a last resort), and procedural safeguards enhance credibility while limiting arbitrary use. As discussions grow to activate the ACI against the US over the Trump administration’s threats over Greenland, observers and policymakers have a clear picture of the process that could lead to the impressive list of countermeasures available to the European Commission and the Council.

This approach should inform the implementation of the Economic Security Strategy. EU tools should clarify scope, process and escalation pathways while outlining room for rapid adjustment, reducing circumvention risks without overwhelming administrative capacity or undermining trust in the single market.

Security beyond defence tools

The trade-off often arises in restrictive tools like investment screening, export controls or sanctions, but it is equally important for expansionary instruments, including industrial policy, subsidies and investment support. These tools reduce strategic dependencies and strengthen Europe’s technological base, but require careful balancing.

The EU Chips Act illustrates the risks of rigidity. While it aimed to create predictable expectations for private co-investment, define priority technologies and set long-term goals, it has struggled to adapt to shifting markets, cost overruns and evolving technology. Difficulty in reallocating subsidies or adjusting priorities shows how rigid frameworks can undermine objectives. Predictability attracts private investment but should not block adaptability.

Industrial and innovation instruments should therefore include adaptive mechanisms, such as review clauses, flexible funding and contingency provisions. These allow policymakers to adjust incentives as technologies evolve, while providing firms with a stable investment horizon. Economic security requires protection from external risks and the capacity to seize emerging strategic opportunities.

Unity without centralisation

A recurring tension in investment screening and export controls is between national flexibility and European coherence. Divergent national approaches risk fragmenting the single market and enabling regulatory arbitrage, yet overly centralised control risks political resistance and slow responsiveness.

Stronger coordination, rather than full harmonisation, is the solution. EU institutions should set common baselines, information-sharing requirements and escalation mechanisms, while allowing member states limited discretion. Coordinated control lists, strengthened cooperation mechanisms, peer review, accountability mechanisms and mandatory notifications reduce forum shopping and strengthen resilience without limiting national responses.

Coordination must also be anticipatory. Reducing strategic dependencies is a medium- to long-term project, requiring clarity on which tools are preventive, which are for crisis response, and how Europe signals resolve of action. A shared understanding of escalation ladders across restrictive and expansionary instruments is crucial.

Ultimately, the European Economic Security Strategy depends less on new instruments than on how existing ones are used. Excessive predictability invites circumvention, while excessive flexibility risks incoherence. Europe’s challenge is to institutionalise flexibility without arbitrariness and predictability without rigidity – an essential balance for remaining open, competitive and secure in a weaponised global economy.

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