Policy must be tailored to help low-income regions catch up. Corina Crețu, Commissioner for Regional Policy, explains how cohesion policy ensures growth
In June 2015 I launched an initiative to examine the factors that hold back growth and investment in certain regions in the EU. It distinguished between two groups of regions: “low growth regions” which are characterised by a persistent lack of growth over the last decade or more (mostly in Europe’s South), and “low income regions” whose GDP is on the rise, but which remain very poor (mostly on the eastern part of the EU).
There are several reasons why some regions have not yet reached the expected rate of growth and income. In the south of Europe unemployment is rife, particularly among the young. In the East the process of catching up with EU living standards has slowed down, and disparities within countries have increased. Investment has also declined in these regions due to the crisis, by as much as 40% in southern regions.
All low-income regions have lost population since 2000 (in some regions by more than 20%) primarily due to net migration. This meant an out-migration of young qualified workers (‘brain-drain’) and a limited capacity to attract talent from other regions, which is likely to limit their growth prospects. Public and private investment dropped in these regions, especially in low-growth regions.
What is very clear is that the answer to each region’s problems needs to be tailor-made. For some, it will require investments in infrastructure – this is the case for the regions in the eastern part of the EU. This should help unlock their economic potential, which is currently held back, by an insufficient or inadequate road network. Therefore, completion of the Trans-European Network is a priority.
Others, in particular the southern regions, need investments in human capital, skills and innovation, with particular attention to the insertion of university graduates into the labour market, avoiding common problems of mismatch between educational supply and labour demand.
Another important factor is to create stronger links between cities and their surrounding areas. These regions continue to urbanise either through faster population growth in cities in low-growth regions or through population reductions outside cities in low income regions. Generating more spill overs from these successful cities (which function as economic engines) would be beneficial.
The quality of institutions and regional administrative capacity are also an essential criterion to boost economic growth. Cohesion policy supports programmes to strengthen institutional capacity and improve the efficiency, transparency and accountability of public administrations, as well as promote e-government, reduce regulatory red tape, modernise public procurement, support anti-corruption measures and support judicial reform.
In addition, these regions will create more and better jobs if they find their niches, by building on their assets and on what they can do best. This is the concept of “smart specialisation”, which we have developed in the Policy must be tailored to help low-income regions catch up. Corina Crețu, Commissioner for Regional Policy, explains how cohesion policy ensures growth EU. Smart specialisation requires improving regions’ innovation systems, along with a stronger partnership between businesses and higher education institutions. The active involvement of all regional actors – universities and schools, employment organisations and trade unions, SMEs, investors, national and regional administrations – is crucial for focussing on the activities that can put regions on a growth path.
Romania and Poland are the first countries to pilot this initiative with 2 regions each, respectively the North-West and the North-East, and Swietokrzyskie and Podkarpackie. Based on the results of the pilot projects, this model of cooperation of EU, national and regional actors will then be transferred to other European regions facing similar challenges.
Cohesion policy plays an important role in low-growth and low-income regions and accounts for a very high share of their public investment in most of them. The 2007-2013 cohesion policy has produced strong results in practice, helping small and medium-sized enterprises develop and create jobs, helping people acquire skills, develop transport, social infrastructure, helping to achieve greater energy efficiency and protect the environment. Moving to the next level of economic development cannot be accomplished by a one-size fits- all policy, but will require regionally differentiated investments and policy responses.
It is clear that comprehensive and well-timed development strategies are therefore needed not only to address some of the basic problems of lagging regions, but also to enhance their capacity – and, as a consequence, that of the entire Union – to adopt new technology, retain and attract talent, generate and stimulate new investments, and, last but not least, make the most of the economic potential across all of the EU.
Helping the regions of Europe still struggling with low growth and small incomes to thrive remains a challenge. It requires a sustained and concerted effort across many fields, at EU, national and regional level. European cohesion policy holds one of the keys to addressing this challenge, by providing investment, savoir-faire and by guiding these regions towards finding their own solutions to development.
Commissioner for Regional Policy