Regions 2020. An assessment of future challenges for EU regions

Today's global financial and economic turbulence adds a high degree of unpredictability about the future of the world economy. In this context, it is even
more important to examine the extent to which Community policies are adapted to future challenges that European regions will face in the coming years and what the role of Community Policies should be in responding to these challenges. The reflection process on the future of cohesion policy takes place in the context of the budget review, following the mandate received in 2005/2006 "to undertake a full, wide-ranging review covering all aspects of EU spending, including the Common Agricultural Policy, and of resources, including the United Kingdom rebate, and to report in 2008/2009". In this context, the Commission launched a public consultation based on its Communication "Reforming the Budget, Changing Europe" adopted on 12 September 2007. This consultation paper presented the Commission's approach to the budget review. It sketched out the new policy challenges which could have a significant impact on where the Union directs its efforts in the future and, at the same time, made an assessment of the added value of EU spending, a condition for choices on future spending priorities. Among the challenges identified, the following four may be of particular relevance for European regions:

-Globalisation is driving scientific and technological progress, making the European dimension ever more important in boosting knowledge, mobility, competitiveness and innovation. The opening up of huge new markets creates vast new opportunities for Europeans, but it will at the same time test Europe's
capacity to further adjust to structural change and manage the social consequences of that change. The transformation to a knowledge and service economy is as profound as the earlier changeover from agriculture to industry.

-Demographic change will transform the age and employment structure of our societies, raising important issues of both economic efficiency and intergenerational equity. Migratory pressure will have a particularly strong effect on Europe, due to its proximity to some of the world's poorest regions and those likely to be worst affected by climate change and natural resource constraints.

-The impact of climate change on Europe's environment and its society has become central to the European agenda, challenging policymakers to reflect on how best to respond with the policy instruments at the EU's disposal. This applies both to efforts to mitigate climate change by tackling the growth in
greenhouse gas emissions and the need for measures to adapt to the consequences of climate change.

-Secure, sustainable and competitive energy represents one of society's main challenges. Limited supply, increased global demand and the imperative to cut
emissions have led to a new realisation of the need to move towards a lowcarbon
economy in Europe.


Together these challenges will impact on the development of Europe's economies and societies over the coming years. This document seeks to explore the regional effects of these challenges in the medium-term perspective of 2020. It seeks to illustrate which regions are most vulnerable to these challenges, as a step towards a better understanding of the potential pattern of regional disparities that these challenges will generate. Regional disparities in economic output and income in the European Union are far more extreme than in similar economies such as the US or Japan, particularly following recent enlargements. The richest regions are eight times richer than the poorest regions. The key cohesion challenge will therefore continue to be the integration and convergence of the new Member States, in spite of impressive GDP growth rates in recent years. Growth in the countries which have been the largest beneficiaries of the policy in the period 1994-2006 – Greece, Spain, Ireland and Portugal – has been marked, although development needs persist in some Southern European regions, Eastern Germany and peripheral areas. In short, the primary dimension of regional income disparities in the EU remains East-West, with a weaker North-South dynamic and core-periphery pattern at both EU and national levels. One question that this document seeks to address is whether the new challenges will further consolidate this pattern or generate new territorial disparities. Such an exercise is, by its very nature, limited; it simplifies a complex reality and focuses on a single regional level.4 It cannot substitute for a detailed analysis of specific national and regional contexts, nor take into consideration the capacity of Member States and regions to respond. As with all prospective work, this exercise is based on assumptions which appear reasonable today, but which may or may not correspond to future reality.