THE REGIONS, THE CRISIS, GOVERNANCEAND THE FUTURE OF EUROPEAN POLICIES

CPMR Policital Bureau, Odessa, June 12th 2009

SUMMARY

1. Overview of global economic situation

2. Impact of the crisis on EU Regions• Survey• Policy Workshop and Manifesto

3. Regional policy• Barca report• Preparing Göteborg General Assembly

1. OVERVIEW OF GLOBAL ECONOMIC SITUATION

Based on forecasts from EU DG ECOFIN, International Monetary Fund, OECD, World Bank

Based on main available indicators: GDP, employment, wages, investments

THE EU IN THE WORLD: LOSING MOMENTUM GDP growth: 2009 as a black year for most advanced economies + Russia and Brazil

Asian economies to continue growing even though at lower speed

-8

-6

-4

-2

0

2

4

6

8

10

2008 2009 2010

% change on the preceding year

0

10

20

30

40

50

60

70

80

90

100

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

US=100

China

Japan

Eurozone

Middle East

RUIndia

AfricaBrazil

THE EU IN THE WORLD: LOSING MOMENTUM GDP/head horizon 2014: EU and Japan losing track of the US, China accelerating convergence during the crisis

22,6

21,2

10,8

8,6

6,6

4,6

19,518,3

15,5 15,5

5,5 5,7

4,1 3,8 3,43,23,73,8

15,0

8,5

0,0

5,0

10,0

15,0

20,0

25,0

%

2007 2014

THE EU IN THE WORLD: LOSING MOMENTUM Share of world GDP: the US and EU losing momentum, China and India catching up

WITHIN THE EU: VERY DIVERSE PICTURES

-14

-12

-10

-8

-6

-4

-2

0

2

4%

2009 2010

Only 1 EU country with positive GDP growth in 2009 (CY)

14 countries will remain in recession in 2010 (grey zones)

WITHIN THE EU: VERY DIVERSE PICTURES

-5000

-4000

-3000

-2000

-1000

0

1000

GD

P p

er

cap

ita in

pp

p c

han

ge 2

008-2

010 v

olu

me in

US

D

Only 4 EU countries with a GDP/head higher in 2010 than in 2008 (CY, PL, SK, EL)

In LU and IE, each citizen will have 4.000 to 5.000 US$ in his pocket

WITHIN THE EU: VERY DIVERSE PICTURES

0

5

10

15

20

25

2008 2009 2010

%

Unemployment raising in all EU countries

Unemployment rate above 10% in 12 EU countries in 2010, above 20% in Spain

65

66

67

68

69

70

71

72

73

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

%

Lisbon target for employment

WITHIN THE EU: VERY DIVERSE PICTURESThe Lisbon strategy 70% employment target missed after having been achieved in 2006

Back to the 2000 situation…

-15

-10

-5

0

5

10

15

% c

ha

ng

e o

n p

rec

ed

ing

ye

ar

2008 2009 2010

WITHIN THE EU: VERY DIVERSE PICTURESReal wages growth slowing down in most EU countries

Consecutive decrease in real wages in 2009/2010 in 4 countries (LT, EE, IE, LV)

UNCERTAIN OUTLOOK FOR 2010 AND BEYOND

EU GDP FORECASTS 2008-2010(Source: DG ECFIN)

-5

-4

-3

-2

-1

0

1

2

3

Sp. 08 Aut. 08 Jan.09 Sp.09

GD

P G

row

th (

an

nu

al p

erc

en

tag

e

ch

an

ge

) GDP 2008

GDP 2009

GDP 2010

EU INVESTMENT FORECASTS(Source: DG ECFIN)

-12

-10

-8

-6

-4

-2

0

2

4

Sp. 08 Aut. 08 Jan.09 Sp.09

Inve

stm

ent

in a

nn

ual

per

cen

tag

e ch

ang

e 2008

2009

2010

EU UNEMPLOYMENT RATE FORECASTS(Source: DG ECFIN)

0

2

4

6

8

10

12

Sp. 08 Aut. 08 Jan.09 Sp.09

Un

emp

loym

ent

rate

(%

of

acti

ve

po

p)

2008

2009

2010

Worsening forecasts for 2010 (GDP, employment and investments)

VARIOUS PERCEPTIONS OF THE SITUATIONCitizens feeling concerned for mid-term perspectives (Source: Eurobarometer jan/feb 09)

VARIOUS PERCEPTIONS OF THE SITUATIONMarkets comforted by G20 decisions and national recovery plans (Eurostoxx 50)

2. IMPACT OF THE CRISIS ON EU REGIONS CPMR Regions participating in the survey

2. IMPACT OF THE CRISIS ON EU REGIONS

Highest level Lowest level GDP/head in %EU27 Aberdeen City and Shire

153.5 Podlaskie

38.4 Population PACA

4,74 Million inhabitants Shetlands Islands

21.900 inhabitants (2006) Unemployment (% labour force)

Primorsko-Goranska 14%

Shetland Islands 1%

Diverse regional profiles

Difficulties to get quantitative data > Qualitative answers

2. IMPACT OF THE CRISIS ON EU REGIONS

•Some Regions expect the crisis to unfold only in the coming months

•Export-oriented and mono-sector Regions as well as declining industrial districts first and strongly hit

•Differenciated impacts within Regions according to economic specificities

No impact

Low impactMedium

generalized impact

Medium-strong impact on few

specific sectors

Strong generalized

impact

-Shetland Is.

-Aberdeen--Ionia Nisia-Stockholm

-Anatoliki Mak.- Thraki-Podlaskie-Itä-Uusimaa-Primorsko-goranska-Region Midtjylland-Principado de Asturias-Friuli V. Giulia-PACA;

-Basse Normandie-Österbotten-Päijät-Häme-Västra Götaland -Nordland-Blekinge County -Bretagne

-Toscana -Puglia-Illes Balears-Castillia y León-Cornwall -Hampshire-Lisboa-Vale do Tejo-Somerset-Wales -East of England

Most Regions medium or strongly impacted

2. IMPACT OF THE CRISIS ON EU REGIONSEU:2009 sharp fall of all indicators. Data are based on % change

on previous year... export to be the most affected one…..

-15

-10

-5

0

5

10

15

% c

ha

ng

e o

n

pre

ce

din

g y

ea

r

GDP per capita 2,7 2,4 0,5 -4,2 -0,3

Total Investments 6,2 5,4 0,1 -10,5 -2,9

Export 9,2 5 1,6 -12,6 -0,2

Employment 0,6 1,7 0,7 -2,6 -1,4

Consumption 2,3 2,2 0,9 -1,5 -0,4

2006 2007 2008 2009 2010

2. IMPACT OF THE CRISIS ON EU REGIONS

1110

666

333333

2222

1

0 2 4 6 8 10 12

Automotive industry and supply chainConstruction–HousingWood and processing

Maritime industry Retail

Tourism Oil/Petrol chemical

MiningFood processing (including fish.)

Chemistry industry Electronics-Engineering

Iron & steel industryTransports-Logistics

Financial sectorTextile

Services

Few sectors left unaffected but a same economic sector can be very differently impacted according to the Region in which it is set

2. IMPACT OF THE CRISIS ON EU REGIONS

17

7

5

5

5

5

4

3

3

2

2

2

2

1

0 2 4 6 8 10 12 14 16 18

Exceptionally rising unemploymentIncreasing household debt/diff iculties in payingStrong increase in claims for benefit payments

Sharp decline in job vacanciesDiff iculties in accessing credit for households

Reduced domestic demands of goods and services,Increases in homelessness and housing w aiting lists

House repossessionRaising poverty/diff iculties in accessing basic services

Salary reductionsNew labour market entrants unable to f ind w ork

Decrease of citizens incomeIncreasing insecurity and tensions

Increase in precarious w orks

Unemployment to severely affect the majority of surveyed regions (17), however the social outwards signs of the crisis are numerous...

impact of the crisis

regional response

Shetlands Is. (Scot.) P.Goronska (HR)

R. Midtjyl land (DK)Nordland (NO)

Aberdeen (Scot.)

Fr iul i V.G (IT )Toscana (IT )

Cornwal l (UK)

K. Makedonia-Thraki (EL)

Itä-Uusimaa (FI)

Västra Götaland (SE)

Österbotten (FI)

P. d Astur ias (ES)

Podlaskie (PL)

Ionian Is.

(EL)

PACA (FR) Bretagne (FR)Aqui taine (FR)

Päi jät-Häme (FI)

Wales (UK) Umbr ia (IT )

Pugl ia (IT )Casti l l i a y Leon (ES)

I l l es Balear s (ES)

East of England (UK)

Lisboa-V. do Tejo (PT)

Basse Normandie (FR)

Hampshi re (UK)

Somerset (UK)

Stockholm (SE)

Regionalized States

Decentralized States

Decentralized-Unitary States

Unitary States

2. IMPACT OF THE CRISIS ON EU REGIONS A broad range of regional responses raising the key question of governance

Budgetary / Fiscal measures • Support to public investment (short and long term)• Support to businesses / SMEs (access to credit with guarantee funds or preferential loan schemes)• Support to labour market (passive and active employment policies)• Social interventions

Regulatory measures• Reduction of administrative burden for businesses• Improve efficiency in public spending

Advisory measures and services•For the business community•For citizens

Governance measures• Strengthening existing partnerships• Creating new partnerships / ad hoc mechanisms

2. IMPACT OF THE CRISIS ON EU REGIONS According to competences and budgets, +/- formal measures packages (7 adopted a formal recovery plan) including

2. IMPACT OF THE CRISIS ON EU REGIONS

Approach Reasoning Regions

Ops have not been changed

1. The SF are not counter-cyclical measures; ÖsterbottenVästra Götaland

2. The measures contained in the operational programs are still valid

Ionian Is. Puglia Asturias

3 SF amount for a very small share of regional investments Päijät-Häme

4. Only delivery on the ground is likely to be re-adapted East of England (ESF)

5. OPs may be changed in the future should circumstances dictate

Ionia NisiaEast of England (ESF)

Ops needs to be partially revised

1 A certain re-prioritization of interventions along with speeding-up of project approvals and implementation is needed

A. Mak-Thraki PodlaskieToscana B. Normandie (ERDF)

2 Some shift in priorities have been made/will be made to readjust the Ops to the changed economic conditions

Lisboa-Vale do TejoItä-Uusimaa (ESF)

Ops needs a radical readjustment

The Structural Funds system should be made more flexible to make it easier for the private sector to access to fund.

Cornwall

Different approaches towards the use of Strucutral Funds in sustaining recovery

2. IMPACT OF THE CRISIS ON EU REGIONS

CPMR Policy Workshop, 16th July, Brussels

Manifesto: 10 signing Regions, 2 asking for amendments

CPMR Seminar « Impact of the crisis on post 2013 EU policies: what the regions expect », Marseille, 27th November 2009

Going on surveying regional situations?

CPMR initiatives

3. IMPACT ON THE DEBATE ON REGIONAL POLICY POST 2013

Low Structural Funds consumption rates (7% in average) used as argument by opposants to Objective 2

The crisis will have unpredictible impacts on GDP levels 2010/2011: which basis for regional policy envelopes calculation?

The « Barca » report proposes DG Regio embarrased with the « Barca » report: a CPMR Contribution?

On the one hand…

3. IMPACT ON THE DEBATE ON REGIONAL POLICY POST 2013

DG Regio embarrased with the « Barca » report supporting a modernized cohesion policy for all EU Regions

…but still shows no clear vision / ideas for the future

CPMR preparing its proposals for the Gothenburg AGM

On the other hand…