Fourth Report on Economic and Social Cohesion

Fourth Report on Economic and Social Cohesion Growing regions, Growing Europe May 2007 by Lewis Dijkstra EUROPEAN COMMISSION Regional Policy The value added of cohesion policy • It contributes to GDP growth and job creation • It supports growth–enhancing investments in regions and Member States • It promotes multi-level governance through contractual arrangements between level of government • It leverages private resources • It improves strategic and management capacity at national, regional and local level EUROPEAN COMMISSION Regional Policy 1. Contribution of cohesion policy to GDP … 1994-1999: • 2.2% in Greece and 4.7% in Portugal • 2.8% in Ireland and 1.4% in Spain • 2.8% in Greece and 2.0% in Portugal • 1.1% in the Mezzogiorno and 1.0% in Spain 2000-2006: 2007-2013: preliminary estimates suggest: • Around 8.5% in Lithuania, Latvia and Czech Republic • Around 6.0% in Bulgaria and 7.5% in Romania • Around 5.5% in Poland • Around 3.5% in Greece and 1.0% in Spain, German Länder and Mezzogiorno EUROPEAN COMMISSION Regional Policy … and to employment … • Cohesion policy co-finances the training of 9 million people annually, more than half of them women, leading to better employment conditions and higher incomes • Over 450 000 gross jobs were generated in Objective 2 regions of six countries between 2000 and 2005, accounting for 2/3 of spending in Objective 2 • By 2015 it is estimated that cohesion policy will generate another 2 million additional jobs in Convergence regions EUROPEAN COMMISSION Regional Policy 2. The priorities of cohesion policy for 2007-2013 … Outermost regions Energy Telecom infrastructure Culture Tourism Urban / rural generation Capacity building* Social infrastructure Support to firms R&D, innovation and information society Sustainable development Investing in people Transport 0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 Breakdown of cohesion spending 2007-2013 by category (billion EUR) * including technical assistance (data as of end of April 2007) EUROPEAN COMMISSION Regional Policy 3. Cohesion policy improves governance • The integrated approach gives coherence to sectoral policies strengthening their impact and creating synergies • The 7 year programming approach with clear strategic priorities improves the quality of public investment • The partnership principle is key to good governance involving Community, national, regional and local authorities and stakeholders EUROPEAN COMMISSION Regional Policy 4. Leveraging effects • Between 2000 and 2006, every Euro invested in cohesion policy led to a further expenditure of 0.9 Euro in Objective 1 regions and as high as 3 Euro in Objective 2 • For 2007-2013, two new instruments, JEREMIE and JESSICA, developed in cooperation with international financial institutions, will transform grants into a sustainable source of financing EUROPEAN COMMISSION Regional Policy Cohesion policy does not operate in a vacuum Other factors influence the impact and effectiveness of cohesion policy. For example: • Price stability and sound budget balances lead to lower interest rates, which stimulate investments increasing both productivity and employment • Effective and efficient public administration also has a large impact on development EUROPEAN COMMISSION Regional Policy Economic Cohesion Converging but still a long way to go EUROPEAN COMMISSION Regional Policy GDP per head disparities higher after enlargements Disparities between the top and bottom 10% regions almost doubled due to the two most recent enlargements EUROPEAN COMMISSION Regional Policy Regional growth in the world • In the EU, growth is more uneven than in the US and mostly lower than in China and India • But growth in the EU is highest in the regions with the lowest GDP per head EUROPEAN COMMISSION Regional Policy High growth in lagging Member States 150 135 257 GDP per head (PPS), 2005 and GDP Growth 20002005 10% Index EU-27=100 (lefthand scale) GDP growth 2000-2005 (righthand scale) 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% GDP per head 2005 index EU27=1000 120 105 90 75 60 45 30 15 0 GDP growth 2000-2005 LU IE DK NL AT BE UK SE FI DE FR IT ES CY EL SI CZ PT MT HU EE SK LT PL LV RO BG EUROPEAN COMMISSION Regional Policy … catching up fast… • Growth in the new Member States has been strong over the past 10 years, especially in the eight with the lowest GDP per head • The Baltic states doubled their GDP between 1995 and 2005 • Convergence is strong at the national level EUROPEAN COMMISSION Regional Policy …but it will take time When will the new Member States reach 75% of EU GDP? • The Czech Republic, Cyprus and Slovenia have reached it • By 2016 the Baltic States, Hungary, Malta and Slovakia will have reached it • Poland and especially Romania and Bulgaria will take longer • Lagging regions will take much longer due to uneven growth in some countries EUROPEAN COMMISSION Regional Policy Four (former) cohesion countries • Ireland has grown exceptionally fast and now has the 2nd highest GDP per head in the EU • Spain has grown quickly and now has a GDP per head above the EU average • Greece has grown above the EU average since 2000 and reached 85% of the EU GDP per head • Portugal has lagged behind EU growth since 2000 and has today a GDP of 74% of the EU average, which is lower than it was in 1995 EUROPEAN COMMISSION Regional Policy Regional convergence is also strong • Between 1995 and 2004, the number of lagging regions fell from 78 to 70 in the EU27 • In the EU15, 12 of 50 lagging regions (measured against EU15 GDP per head) increased their GDP per head to over 75% of the EU15 average • But in 5 regions GDP fell below 75% EUROPEAN COMMISSION Regional Policy But some of the more developed regions are struggling • Some prosperous regions experienced very low or even negative economic growth rates • In the period 2000-2004, real GDP per head fell in 27 regions and in a further 24 it grew by less than 0.5% a year • Between 1995-2004, productivity fell in 29 more developed regions EUROPEAN COMMISSION Regional Policy Social Cohesion Converging, but with large disparities remaining EUROPEAN COMMISSION Regional Policy 24 million more jobs needed To reach the Lisbon employment targets another 24 million jobs are needed by 2010 with a third of those going to women and a third to people aged 55-64 EUROPEAN COMMISSION Regional Policy Employment rates converged • At the EU level, employment rates converged between 2000 and 2005, but the rate in lagging regions is still 11 percentage points below the rate in other regions • Female employment rates increased by more than 2 percentage points, while male rates remained stable • Employment rates of people aged 55-64 increased by 5 percentage points EUROPEAN COMMISSION Regional Policy Unemployment disparities decreased • Between 2000 and 2005 disparities in unemployment decreased • Unemployment rate in lagging regions fell from 13% to 12%, compared to 8% in the other regions EUROPEAN COMMISSION Regional Policy Poverty remains a challenge • The population at risk of poverty is defined as those having an income of 60% below the national median income • The share of national population at risk ranges from 9% in Sweden to 21% in Lithuania and Poland • Women, young children, the elderly and the unemployed have a higher risk of poverty EUROPEAN COMMISSION Regional Policy Education levels are increasing, but lagging regions remain behind • People aged 25-34 are almost twice as likely to have a university degree or equivalent than people aged 55-64 • But the proportion of people aged 25-64 with such a degree in lagging regions is almost half the proportion in other regions • The gap between lagging regions and the rest is even bigger among young people EUROPEAN COMMISSION Regional Policy Territorial Cohesion Changes in cities, suburbs and rural areas EUROPEAN COMMISSION Regional Policy Growth in the periphery is improving territorial cohesion • Regions outside the traditional core of the EU grew faster than the core • Several of the core regional economies are struggling, some even shrinking EUROPEAN COMMISSION Regional Policy Within countries growth is less balanced • Economic activity is concentrated in the capital city region and becoming more so • Secondary growth poles rarely rival the dominance of the capital, only exceptions to be found in Germany, Spain and Italy • Overall secondary cities saw their share of national GDP decline vis-à-vis the capital EUROPEAN COMMISSION Regional Policy Deprived urban neighbourhood Neighbourhoods with high unemployment rates can be found in large as well as midsize cities, in neighbourhoods close to the centre as well as on the outskirts EUROPEAN COMMISSION Regional Policy Neighbourhood unemployment EUROPEAN COMMISSION Regional Policy Rural areas • Three out of five remote rural regions are loosing population due to lack of job prospects and lower living standards • Especially the young and qualified leave these regions • Agriculture no longer constitutes the dominant part of the rural economy EUROPEAN COMMISSION Regional Policy More cross-border exchange • Many years of cooperation have made the borders between the EU15 much more permeable, this is not yet the case for the new internal borders • The EU’s external borders now reach the Black Sea, Moldavia, Ukraine and Belarus and completely encircle the western Balkans, creating new cooperation opportunities EUROPEAN COMMISSION Regional Policy Increases in accessibility • The investments in road infrastructure in Spain, Portugal and Greece have made them considerably more accessible • Motorway density is considerably lower in the new Member States EUROPEAN COMMISSION Regional Policy Lisbon in the regions • The Nordic, Dutch and UK regions score highly • While many regions in Poland, Slovakia and Bulgaria score poorly • Strong regional differences can be found in Spain, Italy and Germany EUROPEAN COMMISSION Regional Policy The reform of Cohesion Policy 2007-2013 Delivering Europe's new growth and jobs strategy EUROPEAN COMMISSION Regional Policy A new strategic approach • The new Community Strategic Guidelines incorporate the priorities of the Lisbon strategy • They set the framework for the national strategies and regional programmes under cohesion policy • This strategic approach will improve political accountability and increase economic effectiveness and transparency EUROPEAN COMMISSION Regional Policy Earmarking resources has contributed to shift resources … 60% of resources in the lagging regions and 75% in other regions are targeted to investments linked to the Lisbon strategy: • • • • • R&D and innovation; infrastructures of European importance; industrial competitiveness; renewable energies, energy efficiency, and human resources EUROPEAN COMMISSION Regional Policy … particularly in the area of R&D and innovation EUROPEAN COMMISSION Regional Policy Better regulation • One set of management rules • One set of eligibility rules for expenditure • Simplification of financial management • Increased proportionality and simplification for control systems • Clearer rules on information and communication • Electronic government in practice EUROPEAN COMMISSION Regional Policy Future Challenges Question on how Cohesion Policy should respond EUROPEAN COMMISSION Regional Policy Challenges facing EU regions 1. Increasing global pressure to restructure and modernise 2. Climate change 3. Increasing energy prices 4. Emerging demographic imbalances and skills mismatch 5. National policies have difficulties keeping up with rapid change of the global context EUROPEAN COMMISSION Regional Policy 1. Global pressure to restructure • Many regions have an economic structure largely concentrated on sectors where competition from emerging economies is higher (e.g. textiles, clothing, leather, and lower-tech industries) • These are regions which need to engage in significant restructuring processes aimed at diversifying their economic structure into new, growing sectors, and modernising existing activities to move up the value chain EUROPEAN COMMISSION Regional Policy Employment in vulnerable sectors EUROPEAN COMMISSION Regional Policy 2. Climate change • The increase in temperature and droughts will affect biodiversity, agriculture, tourism and damage infrastructure in the north • The cost of shifting to a low-carbon economy will be asymmetric and may have an disproportionate impact on low-income groups or regions • However, this shift will also create new business and employment opportunities EUROPEAN COMMISSION Regional Policy 3. Increasing energy prices • Can threaten the competitiveness of geographically peripheral regions • But investments in renewable energy and energy efficiency can create employment • Tourism sector is vulnerable to higher transport costs • Low density sprawl will become more expensive encouraging more compact development in the medium term EUROPEAN COMMISSION Regional Policy 4. Demographic imbalance • Europe's population is projected to start declining by around 2020 • Between 2000 and 2005, EU population growth rate was 0.4% and 86% of that growth was due to migration • Already today, 85 regions of the Union (mainly in the new Member States) are experiencing absolute population decline, and another 76 maintain population growth only thanks to migration EUROPEAN COMMISSION Regional Policy Migration and low birth rates EUROPEAN COMMISSION Regional Policy More pensioners to support • These trends will have an impact on labour markets • The EU has already four persons of working age per pensioner, but only three people employed per pensioner • In addition, working age population will decline from 2017 EUROPEAN COMMISSION Regional Policy Skills mismatch EUROPEAN COMMISSION Regional Policy 5. National policies • Public investments at the national and subnational level have declined due to the cost of an ageing society and lower taxation • Resources are mainly directed toward growth poles, which may create large diseconomies of agglomeration and increase regional disparities • At the same time, decisions on and management of public investment is slowly but steadily being decentralised to regional and local levels EUROPEAN COMMISSION Regional Policy Question for debate The future of cohesion policy EUROPEAN COMMISSION Regional Policy Is cohesion policy sufficiently adapted to the new challenges? 1. What lessons can be drawn from preparing the 2007-2013 programmes? 2. How can regions react to competition in low and medium tech sectors? 3. What is the role of cohesion policy in responding to demographic change? 4. To what extent is climate change a challenge for cohesion policy? EUROPEAN COMMISSION Regional Policy How to develop a further integrated and more flexible approach? 1. How to better promote harmonious, balanced and sustainable development given the EU’s territorial diversity? 2. How will the challenges affect inclusion, integration and opportunity for all? 3. What are the key future skills for citizens? 4. What are the critical competencies at the regional level? EUROPEAN COMMISSION Regional Policy Assessment of the management of the 2007-2013 period 1. How should responsibility be allocated between the EU, nations and regions? 2. How to make cohesion policy more performance-based and user-friendly? 3. More synergy between cohesion policy and national and Community policies? 4. New opportunities to co-operate between regions, both within and outside the EU? EUROPEAN COMMISSION Regional Policy