Cohesion in a time of transition

Source: Robertsrob/Depositphotos.

Cohesion was one of the drivers of the creation of the European Investment Bank (EIB) in 1958, and remains one of the Bank’s top priorities today. The Bank supports cohesion in the European Union by financing projects in regions that have a lower‑than‑average gross domestic product per capita and by complementing EU grants with loans. To adapt to the challenges of climate change and the transition to a modern, digital and low‑carbon economy in a fair way, the EIB adopted a new Cohesion Orientation in October 2021. Lilyana Pavlova is the Vice‑President of the European Investment Bank responsible for overseeing the Bank’s support for cohesion. Below she explains how the EIB plans to expand and modernise its investment in EU cohesion regions over the period of the EU’s current long‑term budget, 2021‑2027.

EU faced with a double bind

With the effects of climate change ever more apparent, and the need for immediate action even more urgent, the European Union has embraced a bold strategy to cut its carbon emissions by radically transforming its economies and embracing digitalisation. This transformation, supported by unprecedented financial backing from the NextGenerationEu recovery plan, will create opportunities and challenges for all of Europe, but the stakes are highest for those living in regions that are less developed or already struggling economically.

The EIB’s new Cohesion Orientation

Supporting the economic, social and territorial cohesion of the European Union is a core mission of the European Investment Bank (EIB), which was founded in 1958 to help foster European integration, support EU policies, and promote development at home and around the world. Over the last long‑term EU budget period from 2014 to 2020, cohesion accounted for as much as 30 % of our lending (€124 billion). That investment has paid off handsomely. Our internal models show that the impact of our lending in cohesion regions has been particularly positive, boosting growth by an estimated 2 % and employment by as much as 1 % in some cases (see also page 128). We would not be able to achieve this without fruitful cooperation and constant dialogue with the European Commission, the European Parliament, the European Committee of Regions, and other partners.

Source: European Investment Bank.
  • a more competitive and smarter Europe;
  • a greener, low‑carbon transition towards a net zero carbon economy;
  • a more connected Europe by enhancing mobility;
  • a more social and inclusive Europe; and
  • a Europe closer to citizens by fostering the sustainable and integrated development of all types of territories.

Green transition

The EIB is also the EU climate bank, and we see no contradictions between our new Cohesion Orientation and our ambitious climate goals — just synergies and opportunities. In our new Cohesion Orientation, we stress the role of climate action as a motor for economic development, and we therefore want our lending to less‑developed and cohesion regions to be as ‘green’ as our lending to the more developed regions. We are confident that we can increase our lending to cohesion regions and raise the proportion we lend to climate action to 50 % by 2025, a target that we have been working towards since November 2019 (see Figure 3).

Digital transition and innovation

The potential disruption to jobs and industries from the digital transition and from automation is sometimes overshadowed by the dramatic changes needed for decarbonisation. But structural gaps in digital and innovation activity and skills in cohesion regions are also significant, and have been exacerbated by the pandemic. Firms in cohesion regions generally innovate less, and they were more likely to cut back on innovation during the crisis. The EIB’s Investment Survey 2021 shows that fewer firms in cohesion regions are taking steps to transform digitally or to tackle climate change than in non‑cohesion regions. New policies are needed to spur innovation in these regions, to raise their income levels and to help them adjust to the digital transition. Innovation is crucial for economic competitiveness and the fight against climate change. This is because much of the technology we need to reach our climate goals is either not yet mature or has yet to be invented.

A just transition

Decarbonisation, digitalisation and automation are particularly challenging for less‑developed and transition regions. We will not succeed in transforming our economies if we leave a trail of disaffected communities in our wake. Investing in these regions to ensure a just transition is therefore vital to the European Union’s economic, social and territorial cohesion, as well as its climate goals.

Stimulating comparable development opportunities

We cannot change physical constants such as ‘distance to the capital’ or ‘population density’. This is why public policies and investors have to focus on the factors they can help to shape such as the availability of growth‑enhancing and low‑carbon infrastructure, and the skills of our young people, but also lifelong learning opportunities for our workforce and maintaining public and private R&D capabilities throughout Europe.

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