The EUSBSR-forum in Riga (4-6.10.2023) has in its agenda four main goals: exchange of best practices of cooperation, stronger integration within the Baltic Sea Region and beyond, forming synergies between various priority areas, and creating links between the strategy and the public. In the forum’s background will be the EU new Cohesion Report (issued this February) devoted to economic, social and territorial cohesion in the region.
EU’s action plan and regional issues
As soon as presently main EUSBSR objectives, as formulated in the Action Plan 2021 are: “saving” the Baltic Sea, connecting the region, and increase prosperity, etc. special attention in all meeting and discussions are to be devoted to modern challenges, i.e. climate change issues, energy transition (e.g. “green energy”), digitalisation, etc. Since the main agents of change and progress are young people, the EUSBSR will place also strong focus on the importance of youth engagement in decision making and active youth representation in resolving challenges. Hence the 14th Forum main goals will be ultimately closely connected to resolving regional challenges.
This annual EUSBSR forum to take place in Riga, Latvia (4-6 October) is organised jointly by the Riga City Council, Union of the Baltic Cities, https://ubc.net/# and VASAB (The Vision and Strategies Around the Baltic Sea, https://vasab.org/ ), in close cooperation with the Latvian Ministry of Foreign Affairs and the Baltic Sea Strategy Point.
General reference: https://www.eusbsr.eu/annual-forum
Note. Legal background: the EU’s territorial cohesion has been included for the first time in the Lisbon Treaty, 2009. Article 174 of the Treaty on the Functioning of the European Union (TFEU) defines the Union’s objective for strengthening its economic, social and territorial cohesion, for an overall harmonious development.
The EU’s eighth Cohesion Report: Baltic Sea region
The Commission published the 8th Cohesion Report in February 2023, presenting an evaluation of the coronavirus pandemic’s impact at the regional development and showing all the positive and negative trends in EU regions, cities and rural areas.
The report assesses EU-wide economic, social and territorial cohesion: e.g. it shows that less developed regions have been catching up, but that many transition regions have been stuck in a development trap; furthermore, the growing innovation divide makes it harder for both types of region to catch up.
At the EU level, employment rates are presently even higher than before the economic crisis in 2008, though regional disparities are still above their pre-crisis level. As soon as demographic change will affect the EU in the coming decades, the Baltic region will have to adjust to a shrinking labour force and student enrolment and increasing aging population.
Fiscal consolidation after the crisis in 2008 has reduced public investment and has not yet regained its pre-crisis levels. As a result, cohesion policy funding has become ever more important, growing from the equivalent of 34% to 51% of public investment during 2007-2020.
The report highlights that the green and digital transitions will be key drivers of the EU growth, but argues that, without appropriate policy action, new economic, social and territorial disparities may appear. It launches a reflection on how cohesion policy should evolve to respond to these challenges.
Two EU Commissioners were “directing” the new report: Nicolas Schmit, Commissioner for Jobs and Social Rights, and Elisa Ferreira, Commissioner for Cohesion and Reforms; that’s quite natural as soon as the employment perspectives and job facilities are closely connected to regional issues.
Reducing regional disparities
Over several decades, EU cohesion policy has been aimed at reducing territorial disparities, boosting economic growth and improving quality of life; it played a central role in promoting the upwards social convergence advocated by the European Pillar of Social Rights. The new 2021–2027 cohesion policy programs, in close coordination with the financial support in the NextGenerationEU package will continue the historic trend.
Still, challenges remain and the national political economies must adapt: less developed regions continue to catch up but many transition regions are falling behind, concluded the new EU’s cohesion report. Although employment rates are higher than ever before in the EU and the region, disparities still remain even among prosperous regions.
The report mentions several example, e.g. levels of tertiary education continue to increase, though coped with the divide in innovation; trust in the EU institutions has been growing, but remains low in some regions and rural areas. Generally, quality of governance has been improving, but the rule of law has deteriorated in some EU member states.
The EU-wide economic modeling indicates that in 2023, GDP per head is 2.6% higher in less developed regions due to support from cohesion policy programs: it also shows that the gap between GDP per head in regions representing top and bottom deciles is going to fall by 3.5%.
Drivers in regional growth
The report mentions main drivers of regional growth and convergence: e.g. investments in infrastructure, skills, innovation efforts and governance structures. Nethertheless, gaps remain and many drivers of growth are still concentrated in more developed regions and urban areas. Recent research shows that the effect of these investments depends on appropriate region-specific investment mix and a good institutional and macro-economic framework.
During last decade, almost half of cohesion policy investment supported infrastructure, largely due to needs in the eastern EU states: it helped to reduce the road transport performance gap in the eastern and in some southern EU regions: e.g. these investments also improved rail performance, although more investment is still needed in the eastern EU, in particular to support the shift to a carbon neutral economy.
Innovation is the key determinant of long-term regional economic growth, but the regional innovation divide in Europe has grown: while some EU states have made significant progress in catching up, many regions, including in more developed states, lag behind: about 17 EU states are at the level of 100 percent in the innovation scoreboard. This is due not only to a lack of investment in R&D, but also weaknesses in regional innovation systems: better innovation diffusion at national and regional level can help less developed and transition regions to catch up. Also, smart specialisation strategies, which were introduced in cohesion policy for 2014–2020, can help to address this divide, but will need to focus more on regional potential.
The green transition and especially the goals of a carbon neutral and circular economy will transform regional economy: it will boost employment in various sectors, i.e. in renewables and energy, in recycling and design, renovation and services. Though may adversely affected sectors and the regions will need to reduce their emissions. Natural capital in rural regions may boost jobs in managing ecosystem services and renewable energy. The social impact of the EU goal of being climate-neutral by 2050 will thus differ from one region to another and may be higher in those with high poverty rates: this will require the support of the EU-wide policy instruments such as the Just Transition Fund.
All references and citations from the “Cohesion in Europe towards 2050” report and the “strategic foresight”: https://commission.europa.eu/strategy-and-policy/strategic-planning/strategic-foresight/2021-strategic-foresight-report_en
Regional digital transition
The digital transition is moving forward at different speeds across Europe: generally main efforts include expanding very-high-speed internet access, boosting digital skills and investing in ICT equipment. This will benefit rural areas because their internet connections tend to be slow and their digital skills are below average. Faster internet access will allow more people to work from home, improve access to online services, including training, health and e-commerce, and may encourage more services to move out of major urban centers.
Less developed states are supposed to benefit more from the speed-up in digital transition by more active use of digital technologies, e-commerce and e-business practices. Digital hyper-connectivity and technological transformations are having economic effect: the number of connected devices globally might increase from €30.4 billion in 2020 to €200 billion in 2030. Increased connectivity of objects, places and people will result in new products, services, business models, as well as life and work patterns.
Europe’s global leadership ambition in the twin transitions (climate and digital) could position its regions more strongly in the emerging lucrative market and create new types of green jobs.
However, shifts in the global political-economic order and demography could hamper the process as the world is becoming increasingly multi-polar. China is set to become the biggest global economy before the end of this decade, with India possibly surpassing the EU in the next 20 years The world’s population is expected to reach 8.5 billion in 2030 and 9.7 billion in 2050, while the EU’s population is expected to fall by 5%, to just over 420 million by 2050.
Perspective strategic orientations
The “EU-2021 Strategic Foresight Report” has identified ten strategic areas that would help to ensure the EU’s progressive development in the decades to come:
First five: = ensuring sustainable and resilient health and food systems; = securing decarbonised and affordable energy; = strengthening capacity in data management, artificial intelligence and cutting edge technologies; = securing and diversifying supply of critical raw materials; = ensuring first-mover global position in standard-setting;
Second five: = building a resilience and future-proof economics and financial systems; = developing and retaining skills and talents matching the EU ambitions development goals; = strengthening security and defense capacities and access to space; = working with global partners to promote peace, security and prosperity for all; and = strengthening the resilience of governance institutions.