by Leonard Reinard, Hubert Strauss and Alexandros Karvounis (European Investment Bank, Projects Directorate – Regional Development Division) *
For more than 60 years already, the EIB has played an important role in supporting countries and regions to tackle various issues around the challenge of inequalities. In this blog post, the authors reflect on spatial inequalities from an EIB perspective and illustrate how the EIB contributes to achieving the objectives and priorities of the Territorial Agenda 2030, which will be adopted at the Informal Meeting of Ministers responsible for Spatial Planning and Territorial Development and/or Territorial Cohesion on 1 December 2020.
Inequalities between people and places in the European Union have reached a concerning level. The megatrends of globalisation and technological progress have exposed formerly wealthy industrial regions to international competition and are threatening them with lasting decline. At the same time, many regions in eastern and southern EU member states are still far away from the EU average on many accounts. Even though many countries are generally catching up with the EU average, this convergence process does not affect all regions equally. Rather to the contrary, these countries often experience increasing inter-regional disparities and spatial inequalities.
Spatial inequalities have many faces. They show in education attainment, skill levels and school-to-work transitions, connecting and enabling infrastructure, availability of basic social, cultural and environmental services that matter for wellbeing, but also in the quality of governance and central governments’ ability to support regional and local investment and to combat poverty. Entrenched structural disparities along these and other dimensions result in divergent rather than convergent levels of productivity and income, demography and overall quality of life across European regions.
Spatial spill-overs intensify these inequalities. Being surrounded by strong regions tends to strengthen the own economic performance, and being strong as a region helps neighbouring regions. The opposite tends to hold true for clusters of weaker regions. Overall, the regions of Europe seem to fall into several distinct ‘economic development clubs’, with the richest club almost fully concentrated on a narrow corridor from Milan to London. Paradoxically, at a time when economic activity is de-materialising, location still matters a lot.
The two biggest challenges of our time, the climate crisis and the COVID-19 pandemic, risk to further exacerbate this geographical divergence in the future. The vulnerability to climate change is highest at the southern fringes of the EU and in coastal areas, calling for huge adaptation efforts. Over the coming, decisive decade, a number of regions dependent on mining and high-emission industries will have to accelerate their coal exit and energy transitions, implying the risk of significant job losses, lower regional GDP and tax revenues in the short term. Many of these locations are already ‘places left behind’ struggling with stranded assets, shrinking towns, and growing inequalities. The regional effects of the COVID-19 pandemic are still unfolding, but it is becoming clear that regions with a high share of economic activity in the cultural and tourism sectors as well as regions with poor ICT connectivity are hit hardest.
…and what the EIB does about them
Efforts to overcome spatial inequalities and lift the attractiveness of struggling regions have an obvious investment dimension. Investment is needed to improve access to basic services of general interest, ICT and physical connectivity, knowledge and skills, technology absorption capacity and to develop specific economic sectors where weaker regions may have a comparative advantage. Decentralised production of renewable energy, the bio-economy and sustainable tourism are good examples, but more examples and more tailor-made development strategies are needed to enable a catching-up process of regions already, or on the verge of, lagging behind.
However, even the best development strategies regularly face practical obstacles that prevent investment from happening. In a recent analysis, the EIB has identified different investment barriers in the area of regional and urban development:
- Mismatch between administrative boundaries and functional areas,
- lack of market size in many rural areas,
- capacity constraints on the side of public project promoters,
- poor institutional quality in some countries, and
- budget constraints for local and regional administrations.
Already today, the EIB supports relevant investments and provides technical advice. Many of these lending and advising activities address the abovementioned investment barriers, and they support the objectives and priorities of the Territorial Agenda 2030.
EIB activities related to the objective of a Just Europe
The EIB supports plan-led, balanced territorial development in a large number of regional multi-sector framework loans, which often contain thousands of smaller investment schemes in all kinds of sectors that matter for regional competitiveness and quality of life. Moreover, the EIB advisory services play a key role in overcoming capacity constraints in public sector projects:
- The initiative ‘Joint Assistance to Support Projects in European Regions’ (JASPERS) supports preparatory work on major investment projects and analyses of investment pipelines of coal regions in transition.
- The ‘Project Advisory Support Unit’ (PASU) provides support for the implementation of projects.
- The ‘Urban Investment Support’ platform (URBIS) is an advisory initiative of the European Commission and the EIB dedicated to supporting urban investment. It helps to bring integrated investment projects to mature.
The EIB also supports the priority of functional regions. In Poland, EIB urban framework loans have in several cases supported investment with a functional area approach building on the instrument of Integrated Territorial Investments (ITI) established in various metropolitan areas, for example in Rszesow, Bydgoszcz, Torun and across Silesia. In these cases, public project promoters work on urban and regional development needs across municipal borders following the integrated territorial investment model that also unlocks EU grants from the European Regional Development Fund (ERDF).
EIB activities related to the objective of a Green Europe
By launching its Climate Bank Roadmap, the EIB has committed 50 % of its total lending by 2025 to climate action and environmental sustainability. The EIB is committed to unlocking one trillion euro in investment in climate and the environment over the coming decade. In some regions, the transition to a carbon-neutral EU economy by 2050 will put an end to coal extraction, coal-based power generation and lead to closing certain high-emission industrial activities. A Just Transition that leaves no region behind is an integral part of the EIB’s Climate Bank Roadmap. It is the area where just and green objectives come together.
For a long time already, the EIB has fostered a healthy environment. Water and sewerage projects, many of which are located in lagging regions, help to bring healthy drinking water to citizens and to depollute river basins, water surfaces and our groundwater. EIB-financed large-scale renewable energy projects and modernised urban heating systems contribute to lower dependency on fossil fuels and better air quality in cities.
The EIB is also an active lender and advisor in the circular economy. Many projects have boosted resource efficiency, e.g. by reducing material consumption in industrial processes, increasing the share of recycling in waste management, improving water management systems and through innovative bioeconomy applications. Circularity considerations will gain even more prominence as the Climate Bank is becoming a reality.
Finally, building on 60 years of experience as an infrastructure lender, the EIB has been providing the long-term funding needed to build sustainable connections everywhere in Europe. Whether you cross the continent in a high-speed train or take the tram or tube in any city of Europe, chances are that the line and its rolling stock have benefited from an EIB loan. Electricity network projects supported by the EIB help to bring electricity from windy shores to the industrial powerhouses and large cities far away from the shores. In its long history of financing large projects to complete the Trans-European Networks in Transport (TEN-T) and Energy (TEN-E), the EIB has supported European integration, thereby enabling networks to better address peaks in demand and supply, and addressing bottlenecks at national borders. Last but not least, as a public long-term lender the EIB also plays a role in bringing the much needed high-speed Internet networks to areas where market providers fail or hesitate to invest.
To sum up, in its day-to-day work, the EIB Group is supporting numerous projects in line with the priorities of the Territorial Agenda 2030 in the areas of integrated urban and territorial development, climate change, environmental protection, circular economy, sustainable transport, renewable energy and energy efficiency.
The EIB Group considers the Territorial Agenda 2030 as an opportunity to present a new positive narrative for cohesion and achieve a sustainable future for all places and people in Europe. It will therefore continue to reflect the priorities and actions of the Territorial Agenda 2030 in its activities (where appropriate and relevant) and support place-sensitive investments through lending and grant-loan blending as well as advice in project preparation, project implementation and the use of financial instruments.
* The views expressed in this article are the authors’ and do not necessarily reflect the official position of the EIB Group. Corresponding address: firstname.lastname@example.org