The Commissioner for Cohesion Policy and Reforms, Elisa Ferreira, expressed concern about the situation of middle-income regions in transition, particularly the economic stagnation many of them are experiencing, at the presentation of the 8th Cohesion Report on Wednesday 9 February.
In her introductory remarks, the Commissioner painted a mixed picture of cohesion policy. On the one hand, since the 2008 crisis and the contraction of public spending, cohesion policy has played an increasing role in maintaining territorial integrity and public services.
For example, in the so-called ‘cohesion’ Member States, the Cohesion Fund has increased from the equivalent of 34% of total public investment in 2007-2013 to the equivalent of 52% of such investment in the 2014-2020 period. This was met with some success. “We estimate that the GDP per capita in less developed regions will be up to 5% higher in 2023 thanks to cohesion policy investment over the last 7 years”, the Commissioner said.
However, she added: “On the other hand, many less developed and middle-income regions, especially in south and south-western Europe, are stagnating or falling behind. Can we as Europeans live with limited convergence? Can the European model accommodate a development trap where poor regions converge to some extent, but no more?”
The observation is indeed the following. While the least developed regions (i.e. with a GDP per capita of less than 75% of the EU average) are growing strongly, the transition or middle-income regions (i.e. with a GDP per capita of between 75 and 100% of the EU average) are stagnating, as in Southern Italy, Spain and Greece.
While it is quite easy to increase growth in less developed regions, which benefit from low-cost labour, for example, regions in transition often face several obstacles.
Their industrial fabric is weak, their demographics are in decline, with a flight of young people to more promising regions and urban nodes, the local workforce is not sufficiently trained, and average wage incomes no longer allow for wage competition through price, especially if wage growth is higher than productivity.
A more “sophisticated” strategy must therefore be developed, which takes time, the Commissioner explained. This must focus in particular on the level of training and education of the people living in the territory, in line with the needs generated by the dual digital and green transition. Furthermore, the Commissioner insisted on the improvement of the quality of local and regional institutions to enable the efficient use of the funds in place.
There is a risk. Indeed, a “geography of discontent” is emerging. A “simplistic” approach is then established among a section of the population in these regions, according to the Commissioner: “the system doesn’t care about me, so I don’t care about the system”. A distrust of the established institutional order may emerge.
Pandemic widens disparities
As is often the case in times of crisis, the pandemic has revealed and, above all, aggravated the disparities between regions by causing “the worst recession since 1945”. This is reflected in the mortality rate: while it increased by 13% in European regions, it rose to 17% in the less developed regions.
There is also a digital and innovation divide. Very high-speed connections are available to only two out of three urban dwellers and one in six rural dwellers in Europe. Moreover, innovation areas are becoming increasingly concentrated, we are told.
Lessons for cohesion policy
Although this is not the purpose of this report, which aimed to take stock, several lessons can be drawn for the future of cohesion policy. The Commissioner said that the territorialised approach should be horizontal and should concern all European policies. The report stresses the importance of a partnership approach, which “strengthens” cohesion.
One of the challenges ahead is the proper articulation between cohesion policy and other policies, which are mostly centrally managed. Responding to EUROPE, the Commissioner said this was a “very important” issue.
It is important to avoid creating “zero-sum” situations, where European policies contradict each other. As a reminder, many MEPs and regions have pointed to the impact of the emergency measures and especially the Recovery and Resilience Facility on the programming of cohesion policy for 2021-2027 (see EUROPE 12877/10).
To consult the report: https://aeur.eu/f/9n (Original version in French by Pascal Hansens)