European Regions

This report looks at how regional policies can support productivity growth and jobs. While there has been a remarkable decline in inequality in OECD countries, inequality among regions within certain countries has increased over the same time period. Regions that narrowed productivity gaps tended to benefit from economically vibrant tradable sectors and integration with well-functioning cities. This report considers in detail the role of the tradable sector as a driver of productivity growth and its relationship with employment. It addresses the possible risks of a growing tradable sector and how diversification is central to strengthening regional economic resilience. It considers how regions integrate global value chains and highlights the role of regional and policy links in fostering productivity growth and job creation. It asks what policies can help better anticipate or cushion shocks from trade in specific regions and, more generally, what strategies and framework conditions are conducive for regional productivity and employment growth.

Good governance is based upon foresight that allows decision makers to highlight their choices under a new perspective. The Committee of the Regions (CoR) has turned to forward planning and foresight to react to new political and socioeconomic developments in Europe.
The aim of this report is to identify the future challenges that confront the CoR and the European local and regional authorities (LRAs) at the horizon in 2025. It draws up three possible scenarios with predictions about the future evolution of European integration and the implications for the LRAs and the CoR.
The future evolution of European integration necessarily involves an identification of a number of trends, challenges and opportunities over the coming decades. Subsequently, the report formulates key questions for debate and provides practical options and suggestions on how LRAs can make progress.

"This paper provides a concise analysis of the potential impacts of key challenges such as globalisation, demographic change, climate change, energy and new social risks on regional disparities in Europe in the period up to 2020. The challenges reviewed here are relevant for other parts of the world as well as Europe and will require responses at many levels - global, European, national, regional and local.

This paper is particularly concerned with regional impacts and more especially the potential effect of new challenges on convergence or divergence of trends in regional income and well-being within the European Community and neighbouring areas. The present paper is based upon 5 thematic workshops held between March and June 2009 in Brussels and the background papers prepared by experts in preparation of the workshops. The paper is also based upon a new analysis produced by the Regional Future network itself, as well as prior research by international institutions and scholars. The study team has carried out the analysis using a definition of the challenges considered more suitable for the aim of the study on regional disparities; definitions which would allow to identify and measure effect on disparities more directly were adopted. Furthermore, we avoided as far as possible the overlapping between definitions of challenges and their manifestation, which we call features of the challenge. This approach implies that each feature has been analyzed only within one challenge, even if it was relevant for others as well. The purpose was to clarify and simplify the conceptual framework of the analysis in which the number of links among challenges is very high and their direction and sign is difficult to define. In other words, we made sure that each individual feature of the challenges was analyzed once, in coherence with the challenge boundaries set by its definition.

This method allows us to make clear hypothesis on the two sided nature of each phenomenon and of its features; many features of the challenges in fact can benefit as well as penalize regions depending on the economic and social structure, the geography and location and also the geo-economic position of each region. Most of these factors are strongly influenced by the National characteristics of the Member State to which they belong. To carry out the analysis we defined a model based on a definition of sensitivity to the challenge which summarizes the vulnerability of each region under that challenge and gives us a parameter to estimate the likely impact of the challenge on its economic performance. The sensitivity parameters of each region were then related to a set of hypothesis of challenge intensity (scenarios), namely how fast and how strong the challenge impact would affect EU regions and give rise to income disparities."

The definition of the globalisation process is particularly difficult. Globalisation is not an unequivocally defined statistical variable which is directly measurable (like GDP and Trade) or indirectly computable (like Ageing and Migration), but rather the multifaceted synthesis of a vast number factors of different nature - economic, social, technological etc. – which are often difficult to find into current statistics. Beside, globalisation is a bundle of different dynamics, which means that it became quickly impossible to operate a clear cut distinction between its causes and effects.

One of the consequences of these complexities is that the measurement of globalisation and the notion of its impact are not universal, but vary accordingly to the specific interests of the analysis. In the context of our exercise, we look at globalisation as a process of international (market) integration, where local economies and social systems experience a rapid increase of their sphere of action and their reciprocal interdependence. According to this definition, globalization assumes the characters of a structural development of the economic system. Cyclical events, though with profound consequences as the recent financial and economic crisis, do not modify the pattern of the analysis since it is believed that their influence is temporary and will not change the
direction of long term trends.

A first way of sketching globalisation according to this definition is by measuring the evolution of the share of trade in GDP. In addition, the role of investments is of everincreasing importance, since companies have supplemented trade with investments and moved from geographically concentrated goods and services production networks to geographically disperse ones. The brief analysis presented in the next section attempts to offer an idea of "the openness boom" spreading around the world and the EU with its Member states.

Section 3 attempts to identify the main advantages and disadvantages of globalisation for EU stakeholders. Globalization gives the EU greater access to other countries' markets and resources, while granting other countries greater access to the EU, one of the largest and wealthiest markets in the world. Overall, this process has been mutually beneficial.

However, the benefits have not always been evenly distributed across the EU territory and economic sectors.

Considering that productivity, employment and education are the main elements which transform the challenge posed by globalisation into an opportunity, section 4 briefly presents the projected regional pattern of these variables for the 2020.

Finally, section 5 presents the main findings of the regional analysis carried out with the "globalisation vulnerability index". The index synthesises the overall position of the EU regions in respect of the variables analysed in section 4 and compares their different position vis-à-vis the challenges posed by the globalisation process.

This paper summarizes main findings on the impact of climate change on temperature and precipitation, outlines some of their impacts on socio economic conditions as well as identifying vulnerable regions. Conclusions are drawn in respect of the impact on the regional growth potential, sustainability and equity. The analysis on which the findings of the note are based are uncertain to some degree, as they relate to projections of climate conditions in the future. There are also significant uncertainties involved in presenting impacts on a regional level which result from modelling results which are based on more aggregated data.

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.