Regional cohesion — survey evidence on the ability of local governments and firms to tackle post‑pandemic challenges

By Debora Revoltella, Emily Sinnott and Patricia Wruuck, European Investment Bank

SSource: Ricochet69 and ibreakstock/Depositphotos

Addressing transition challenges through cohesion policy

EU integration has been an engine for economic convergence, creating opportunities for people across its regions. Cohesion in the European Union has improved, with central and eastern European economies especially catching up over the last two decades. However, gaps remain and new challenges have emerged. Globalisation and digitalisation fuelled prosperity in some regions, but less in others, and in the aftermath of the global financial crisis, regional convergence had slowed (1). The COVID 19 crisis has exacerbated existing inequalities as its impact was felt unevenly across Europe, for example, with some regions particularly hard hit by job losses in sectors such as tourism (2). Currently, regions are rebounding at different speeds and the risks for a strong recovery have increased. At the same time, regions face the need for a transformation in the way their economies work to flourish in the post‑pandemic environment.

Effective cohesion support requires an understanding of the investment gaps

We analysed evidence from two surveys — the European Investment Bank’s Municipalities survey and the annual EIB investment survey (EIBIS) — to identify private and public investment gaps, needs and local abilities to advance on the transformation towards a smart and green economy (3). Our analysis classified EU regions at NUTS2 level based on the categories guiding current EU cohesion policy. We distinguished between regions with GDP per capita below 75 % the EU average (less developed), between 75 to 100 % (transition) and those with income levels above average (more developed or non‑cohesion) (4).

Preparedness of cohesion regions for digital and climate transitions

Cohesion regions report more often that they have infrastructure gaps. Non‑cohesion regions are one third less likely to state they have gaps compared to less developed regions. For the latter group, basic infrastructure gaps are most pronounced. These gaps are in urban transport, water and waste utilities and social infrastructure, i.e. including needs in health and housing (see Figure 1). Despite some convergence in incomes, this data shows that differences still exist in living conditions. Similarly, digital infrastructure tends to be more advanced in non‑cohesion regions, facilitating digitalization by firms and strengthening resilience in many regions when the pandemic shock hit (EIB 2022). In reaction to the pandemic, municipalities across the EU have put a stronger focus on investment in digital infrastructure. However, fewer cohesion regions include aspects like the introduction of digital payments, wireless internet or digital public administration in their infrastructure investment planning indicating more limited preparedness and digital capacities.

Relating to the question: For each of the following would you say that the quality of infrastructure is satisfactory, slightly lacking or substantially lacking? Source: EIB Municipalities survey 2020.

Figure 2 — Share of firms reporting investment gaps

Basis: All firms (excluding ‘don’t know’/‘refused’ responses) relating to the question: Looking back at your investment over the last three years, was it too much, too little, or about the right amount? Source: EIBIS 2021.
Basis: All firms (excluding ‘don’t know’/‘refused’ responses), relating to the question: And as a response to the COVID‑19 pandemic, have you taken any actions or made investments to…? Source: EIBIS 2021.

Unlocking opportunities requires investment

Greater difficulties in accessing finance is one of the reasons behind lower investment. More firms in cohesion regions are finance constrained8. A higher share report access to finance as an investment obstacle. However, access to finance is not the only barrier firms in cohesion regions are facing. On average, more firms report obstacles, indicating a more difficult investment environment marked by higher levels of uncertainty (see Figure 4). Also, energy costs are a problem for many firms in cohesion regions indicating greater difficulties in dealing with the climate transition. For cohesion policy, this suggests that financing is needed to reduce investment gaps and realise opportunities from structural change, but it will not be enough alone.

Basis: All firms (excluding ‘don’t know’/‘refused’ responses), relating to the question: Thinking about your investment activities, to what extent is each of the following an obstacle? Is it a major obstacle, a minor obstacle or not an obstacle at all?

Cohesion policy as key instrument to support regions’ resilience

Cohesion policy has contributed to reduce disparities and maintain investment following the global financial crisis (European Commission 2022)9. In addition, it has supported regions to address the EU‑wide crisis linked to the COVID‑19 pandemic, through reorientation of public spending programs and new funding measures.



Articles from the European Court of Auditors, #EU's external auditor & independent guardian of the EU's finances.

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European Court of Auditors

Articles from the European Court of Auditors, #EU's external auditor & independent guardian of the EU's finances.