This paper argues that the New Economy paradigm and the interests of the more advanced EU Member states dominate current thinking on EU industrial and regional policy. European integration is driving a political economy of regionalism that—far more than traditional divisions between labour and capital—decisively defines the contours of “economic interests” in the New Europe and has the most significant impact on EU, national and subnational policy approaches. The New Economy paradigm is driving a radical shift in EU policy from cohesion or redistribution toward innova-tion promotion and affects distributional struggles at the EU, national and subnational levels. This shift has important implications for future EU in-dustrial and regional development policy goals. On the one hand, shifting strategies pose significant challenges at the national and subnational levels. While political decentralization dominates current discourse, national gov-ernments—in particular perhaps in the New Member states (NMS’s)—are more likely to favour centralized control over national and regional spend-ing priorities. On the other hand, seemingly at the expense of the NMS’s, the increasing concentration of EU funding on a large number of less ad-vanced economies is eroding the policy’s traditional support basis
