Global Economics

Europe's Economic Choice: Hard or Soft?


Pushing competitiveness will have high social costs, while a policy that promotes cohesion will result in slower growth, says a new study

EU policy based on competitiveness will result in higher environmental and social costs in the future, while a cohesion-oriented policy will have a softer territorial impact but fewer economic benefits, a new study shows.

The study, based on research carried out for the European Spatial Planning Observation Network, examines two different potential policy mix approaches for the bloc in the coming years, and compares them with current trends.

The competitiveness policy mix foresees Brussels further pursuing liberalisation of public services, supporting regions with the strongest potential, promoting more immigration to boost the work force and re-targeting the EU's budget away from farmers and towards R&D. Under this scenario, protection of the environment would be dictated by market forces.

By 2030, this approach would be expected to have resulted in higher economic growth, but also "greater socio-economic polarisation, spatial segregation and conflict in the population."

The territorial outcome would see most economic activity concentrated in the "pentagon area" covered by London, Paris, Milan, Munich and Hamburg.

"The risk of rural marginalisation is much more intense than with current trends," while there is greater risk of industrial decline."

By contrast, a policy approach with cohesion as the main driver, would see "several well-performing integrated zones" outside the pentagon.

The cohesion policy mix assumed by the study foresees more EU money spent on infrastructure; a more restrictive immigration policy; strict environment measures and more public intervention.

This would lead to a "reduction in territorial imbalances, greater demographic revival, socio-cultural integration...but its economic and technological performance will probably be lower than that of the two other scenarios [current trends and competitive policy trend]."

Current trends...

The 12-page prognosis, published earlier this month and based on data from three years of research, indicates today's policy makers cannot ignore the near future impact of current trends in several areas.

By 2030, most European regions will have reached a median age of over 45 years - higher even in areas such as Scotland, East Germany and Northern Spain. This will be contrasted by "strong demographic potential" in metropolitan areas, particularly in North Western Europe.

While large cities will suffer from traffic congestion and air pollution, peripheral rural regions "will have to work hard to halt the vicious cycle of decline."

Meanwhile current economic trends suggest that "Europe as whole will progress towards a knowledge and service economy" leaving regions highly dependent on low and medium technology level exports most vulnerable to global competition.

Broader debate

The authors of the report say that in order for EU long-term policies to be improved, decision-makers must be made aware of the driving forces including climate change, demographic evolution and economic evolution that will "shape territorial developments in the decades to come."

It calls on policy makers to develop a "more balanced and harmonious territory to the benefit of the citizens of Europe."

The report- Territorial futures, Spatial Scenarios for Europe taps into a wider political debate in Europe about how to respond to the challenges of globalisation.

Until now, Europe has struggled to find a middle way amid a shrill debate on the issue. Proponents of free markets accuse critics of trying to build a protectionist fortress Europe, while those on the other side of the fence say neoliberalism will trample on EU basic social values and rights.

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