Questions and Answers on the 8th Cohesion Report: Cohesion in Europe towards 2050

(Source: European Commission)

What is the Cohesion Report?

Every three years, in accordance with the Treaty provisions, the Commission publishes a Cohesion Report that provides a comprehensive picture of the state of social, economic and territorial cohesion in the EU. It uses a wide range of indicators, such as prosperity, employment, education levels, accessibility and governance. The Cohesion Report captures the developments over the last years and highlights existing gaps and areas of improvement for the coming years. It also indicates how Cohesion policy supports EU regions to promote sustainable development and overcome their challenges.

What are the main issues covered by the report?

The first seven chapters of the 8th Cohesion Report analyse how regional disparities have evolved in recent years (preliminary impact of the pandemic, economic disparities, environment, transport, employment, demography, governance). The eighth chapter covers national policies, with a focus on public investment. The last chapter focuses on the link between Cohesion policy and other EU policies (Common Agricultural Policy, Horizon Europe and Connecting Europe Facility).

What are the main findings of the report?

The report shows that Cohesion policy has boosted growth in less developed regions. Thanks to Cohesion policy investments in the 2014-2020 period, the GDP per capita of less developed regions is expected to increase by up to 5% by 2023. The same investments also supported a 3.5% reduction in the gap between the GDP per capita of the 10% least developed regions and the 10% most developed regions. Moreover, over time Cohesion policy has become a more important source of public investments. During the 2007-2013 programming period, the amount of Cohesion policy investment was the equivalent of 34% of total public investment in less and moderately developed Member States. In the 2014-2020 period this percentage increased to 52%.

Other key findings of the report:

Economic disparities

Since 2001, less developed regions in Eastern Europe have been catching up with the rest of the EU, leading to a substantial reduction of the GDP per capita gap. At the same time however, many middle-income and less developed regions, especially in the southern and south-western EU, have suffered from economic stagnation or decline. Many were hit by the economic and financial crisis in 2008 and have struggled to recover since.

Impact of the COVID-19 Pandemic

Excess mortality between March 2020 and late 2021 was significantly higher in less developed regions (17%) than in more developed regions (12%) and transition regions (11%). The economic impact of the pandemic was the highest in the southern regions with an economy more dependent on tourism and proximity services. Compared to 2019, the nights spent by tourists dropped by 90% in the months after March 2020.

Green transition

Available data suggests that the EU has met its 2020 target of reducing greenhouse gas (GHG) emission by -20% compared to 1990 levels, but significantly more efforts will be needed to reach the 2030 target of -55%. Between 1990 and 2018, GHG emissions increased in several EU regions. Only 40% of EU water bodies were in a good ecological state in 2019. Despite significant progress, several less developed regions still need important investment in wastewater treatment.

Air pollution has dropped significantly in the EU. Nevertheless, exposure to air pollutants is still too high in many cities. One out of three city residents are exposed to one or more air pollutants above the EU thresholds.

Digital transition

Broadband connections are slower in less developed regions and rural areas. For example, while 2 in 3 city residents have access to very high-speed broadband, only 1 in 6 rural residents does. Businesses in less developed Member States are less likely to use e-commerce and e-business technologies. Businesses in more developed countries are twice as likely to use cloud computing or have significant e-commerce sales as compared to those in less developed Member States.

Education

In less developed regions, adult participation in education and training is less than half that of more developed regions (5% vs 12%). Young adults are more likely to leave education and training early in less developed regions (12%) than in more developed regions (9%). Tertiary education has been growing in all regions, but the gap between more and less developed regions remains wide.

Employment

The EU employment rate is higher today than before the 2008 economic crisis, but not all regions have fully recovered. Regional disparities are still higher than before the economic crisis. In less developed regions, employment rates are 10 percentage points lower than in more developed regions. This gap has not shrunk between 2013 and 2020.

Gender equality

In less developed regions, women are faced with a bigger disadvantage compared to men. For example, the gender gap in employment rates is almost double in less developed regions (17 percentage points) compared to more developed regions (9 percentage points). Over time, more women have been elected to local, regional and national positions. Nonetheless, in 2020 still only one in three position was held by a woman. In eastern regions, the share of women in regional assemblies is particularly low: in several regions, their share is below 10%.

Demographics

The EU population is ageing and will start shrinking in the years to come. In 2020, 34% of the EU population lived in a shrinking region. This is projected to reach 51% in 2040. All regions will have to adjust to a growing population aged 65 and over and a shrinking working age and younger population.

Governance

The business environment, which includes, for example, the procedures and costs of setting up a business and obtaining the necessary permits, improved in all EU Member States, but significant differences between and within Member States remain.

Rural regions and areas

Rural regions have an older population and are more likely to have a shrinking population. In 2020, 62% of the rural population lived in a shrinking region compared to only 15% of the urban population. In the eastern EU, life expectancy is lower in rural regions than in urban ones. In the rest of the EU, rural life expectancy is equal or higher than urban life expectancy. Eastern rural areas tend to have higher at risk of poverty and social exclusion rates than cities, while the opposite is true in the north-western EU. Satisfaction with life, job opportunities and financial situation, follow a similar pattern. In the southern EU, the situation is mixed: in some cases rural areas perform better, while in others cities do.

Outermost regions

In 2019, all the outermost regions had a GDP per head below 75% of the EU average (except Madeira, 76%). In Guyane and Mayotte, GDP per capita was below 50% of the EU average. All the outermost regions had an employment rate below the EU average in 2020. It was below 50% in Guyane and Mayotte.

Demographic change in the outermost regions is varied. Half of the regions have a growing population, whereas the rest is shrinking. In Guadeloupe and Martinique the population is shrinking rapidly, while in Acores and Madeira the reduction is slower. Conversely, in La Réunion and Canarias, the population grew more than twice as fast as the EU average. In Guyane and Mayotte, the population grew more than 10 times faster than the EU.

What are the main challenges of EU regions identified by the report?

Internal territorial disparities have been widening in fast growing Member States, with significantly higher growth in the capital region and other metropolitan regions;

Several middle-income and less developed regions, especially in southern and south-western Europe, have suffered from relative economic decline and are stuck in a development trap with extended periods of low productivity and employment growth, due to insufficient regional innovation performance;

Demographic change is affecting most of the EU regions. For example, the working age population will shrink by more than 10% in 1 out of 4 regions. This trend weakens growth potential and skills development, while favouring the concentration of economic activities in fewer locations.

The regional innovation divide in the EU has increased. Many regions are lagging behind, due to insufficient investment in research and development and weaknesses in regional innovation ecosystems.

The risk of poverty and social exclusion remains high. While 17 million people were lifted out of poverty and social exclusion between 2012 and 2019, still more than 1 in 5 persons in the EU are at risk of poverty or social exclusion. Pockets of deprivation persist even in prosperous regions.

What are the main conclusions of the report?

Less developed Eastern EU regions have been catching up with the rest of the EU, leading to a substantial reduction of the GDP per capita gap. This is due to a structural transformation, notably a shift of employment out of agriculture and into higher value-added sectors. Nevertheless, many less developed and transition regions in Southern and South-western Europe experienced stagnation or relative decline and are stuck in a development trap. They have struggled to recovery from the 2008 crisis and will need reforms of the public sector, an upskilled labour force and a stronger capacity to innovate.

To tackle the demographic change and the aging population, companies will have to adapt to a shrinking labour force by recruiting more from groups with lower employment rates such as youth, women and non-EU migrants, and by investing more in innovation, and in training, in particular of older and low-skilled workers. Primary and secondary schools will have to adjust to the lower number of pupils, while other public services and healthcare will need to serve a growing number of older residents.

Employment has been growing, but differences between regions remain larger than before 2008. The employment rate in less developed regions is still far below the one in more developed regions (66% vs 76%). Furthermore, in less developed regions the gender employment gap is almost twice that of more developed regions. Disparities in education and skills are also visible between urban and rural areas. To increase employment rates, less developed regions should facilitate employment growth and reduce the employment gap of women and youth. Furthermore, despite improvements, less developed regions continue to lag behind in tertiary education, life-long learning and digital skills.

The number of people at risk of poverty or social exclusion has dropped between 2012 and 2019 by 17 million, but the coronavirus pandemic put an additional 5 million people at risk of poverty or social exclusion. As the EU emerges from the pandemic crisis, efforts must be made to continue the previous trend of poverty reduction.

Health disparities between regions have been shrinking, with life expectancy increasing quickly in less developed regions. However, the latter are still behind the EU average. Air and water pollution remain high in several less developed regions.

The green transition will boost employment and growth in renewable energy, recycling, design, renovation and ecosystem services, but it may adversely affect sectors that need to transform to reduce their emissions and the regions in which they are located. Such regions should be supported in the transition with ad hoc instruments, such as the Just Transition Fund.

Road and rail transport infrastructure improved in the EU. However, some gaps remain and more investments in transport infrastructure are needed, in particular in Eastern regions.

Basic broadband access is almost universal in the EU, but very-high-speed connections are only available to 2 out of 3 city residents and 1 out of 6 rural residents. More investments in internet infrastructure, digital technologies, e-commerce and e-business practices are needed to improve online services in rural areas and less developed regions.

Entrepreneurship and innovation are essential for economic growth, but regions fare differently. Better scores in entrepreneurship are noted in larger cities, while other areas could improve through upskilling, reskilling and entrepreneurial support. In terms of innovation, many regions, including in more developed Member States, lag behind due to a lack of investment in research and development and weaknesses in regional innovation ecosystems. Support must focus on better innovation diffusion at national and regional level, the creation of smart specialisation strategies at regional level and spill-overs from international trade linkages and value chains.

Governance in the EU is improving, but gaps remain between and within Member States. Improving institutions can contribute to more effective investment, higher levels of innovation and entrepreneurship. All Member States have improved their business environment, but differences remain. The effectiveness of the justice system also differs between Member States and in a few Member States the rule of law has deteriorated over time.

How will 2021-2027 Cohesion policy help tackle the challenges ahead?

In the new programming period 2021-2027, Cohesion policy will continue supporting all EU regions to tackle the challenges ahead, for example:

By supporting territories most affected by the socioeconomic impact of the transition to climate neutrality thanks, also, to the Just Transition Fund.

By investing in the digital transition to expand very-high-speed internet access, boost digital skills and invest in IT equipment.

By tackling demographic challenges thanks to the new policy objective “A Europe closer to citizens”, which will encourage the implementation of long-term strategies through the involvement of local actors.

By paying a greater attention to regions falling – or at the risk of falling – into development traps, in particular by fostering innovation with smart specialisation strategies.

By becoming more flexible. Drawing the lessons from the coronavirus pandemic, Cohesion policy will be even more adaptable to a changing environment and unexpected shocks, allowing for a higher flexibility in terms of transferring resources, planning and extending capacity to address future crises.

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