The difficult solution is to become more competitive and find new sources of value, as the US does with its technology industry. That means more reform, less welfare and less regulation: not because welfare and regulation are bad per se, but because they are unaffordable given the competition.
It is now increasingly hard to see how Europe, in particular, can avoid large-scale protection if it is to retain any industry at all.
So the plan is to wreck your welfare policies with neoliberal-style austerity... then also violate neoliberal principles through protectionism? This isn't just following a bad plan, this is following no plan. Also, I really don't see how deliberately making your workforce poorer and less educated will somehow produce 'new sources of value'.