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- There is a clear East-West divide in terms of individual purchasing power, with Eastern European regions showing PPS per capita GDP above EU average while Western European regions have values generally below average.
- However, the competitiveness based on Lisbon performance indicators is below average in much of Eastern Europe and increasingly more within the West.
- Southern regions are generally less able to meet Lisbon objectives than Northern ones, but not always: different patterns appear in France and Germany.
Observations for policy
The map shows a converging Eastern Europe in terms of individual purchasing power, but large differences in Lisbon performance (competitiveness) between the East and West and, equally important, within the West itself. Southern Europe is lagging behind in competitiveness, particularly in the case of Greece, Southern Italy, Portugal and Spain. Unbalanced development is also evident in France and Germany, although no North-South or East-West divides are present. Northern Europe displays almost entirely above-average performances in Lisbon indicators, signalling above-average compliance with Lisbon development objectives.
The positive effects of Eastern convergence with the West are shadowed by increasing within-country disparities in competitiveness in Western countries. In other words, East-West regional disparities are being tempered, but new disparities appear in the West itself. These observations are relevant in the context of the Europe 2020 Strategy, which is based on the lessons learned from the Lisbon Agenda and incorporates many of its measures. The map illustrates therefore where strategic action is needed at local level in order to meet some of the Europe 2020 goals taken from the Lisbon strategy, such as environmental protection or knowledge-based economy.
Policy context
The Lisbon Agenda, the predecessor of the Europe 2020 Strategy, was the EU’s development plan for the period 2000 – 2010, aiming to make Europe “the most competitive and dynamic knowledge-based economy in the world“ by 2010. It aimed at focusing on innovation as the motor of economic change, on promoting learning (knowledge-based) economies and on maintaining high social and environmental standards.
The competitiveness of European regions is a goal carried further in the Europe 2020 Strategy through headline targets such as increasing R&D expenditure to 3% of GDP, promoting energy efficiency and renewable energy (the 20/20/20 targets) and flagship initiatives such as the Innovation Union, A digital agenda for Europe or Resource-efficient Europe. This strategy is at the basis of other strategy documents such as the Territorial Agenda 2020 and the 2014 – 2020 EU Cohesion Policy.
Map interpretation
Europe is divided along both the East-West and the North-South dimensions. Eastern and Central Europe have higher GDP per capita at PPS than the West. Particularly in the East (i.e. the Baltic countries, Poland, Romania, Czech Republic) regions with GDP per capita at PPS of up to 20 percentage points more than the EU27 average are observed. As the map displays average values over the period 2001 – 2011, the large upward differences in GDP per capita at PPS in Eastern Europe is given by high growth rates in this period due to a catch-up effect to their Western neighbours. Nevertheless, in terms of Lisbon performance, indicators in Eastern and Southeast Europe are often clearly below average.
Regions with below-average composite Lisbon performance and above-average GDP per capita in PPS, as found in many Eastern European regions, indicate a growth pattern which, although statistically effective (i.e. large relative purchasing power) is not sustainable, knowledge-based nor competitive in the long run. On the other hand, regions with below-average GDP per capita at PPS and above average Lisbon performance, like many in the UK, the Netherlands, France and Northern Italy, had a tendency to abide by Lisbon objectives over the period 2001-2011, but this did not result in increased relative wellbeing for their citizens.
Growth in Eastern European regions implied industrial restructuring that was not always in line with Lisbon objectives. Most of these countries joined the EU in 2004, and Romania and Bulgaria joined in 2007, therefore they were newcomers to the concepts of sustainable and knowledge-based growth promoted by the Lisbon objectives. Their composite Lisbon performance is often clearly below average, since growth was often made at the expense of the environment and through a process of imitating the West, i.e. adopt Western technology rather than produce original innovations. These regions, therefore, are less able to increase their economic competitiveness in line with Lisbon objectives. The increased allocation of EU Structural Funds to these countries along with more rigorous social and environmental criteria for EU-funded projects within the EU Cohesion Policy should aim to ensure a sustainable development and catch-up process of such regions.
Western and Southern Europe display a pattern of below EU-average GDP per capita at PPS and mixed Lisbon performance indicators. A divide is noticed between regions particularly on the North-South axis: northern regions tend to be more competitive than southern regions, although exceptions exist, notably in France. In Germany, Eastern-German-regions are less competitive than their western counterparts. Stimulating improvements in competitiveness, particularly through R&D, energy efficiency and education investments as suggested by the Europe 2020 Strategy are key elements in ensuring a balanced long-term development of European regions.
Concepts and methods
The background colours of the regions display GDP per capita at Purchasing Power Standard (PPS), whereas the coloured circles indicate Composite Lisbon performance.
GDP per capita at PPS in this map indicates how much below/above the EU27 average is the average purchasing power per person in each region, expressed in currency units that are equivalent in value across all countries. The values of purchasing power per person are averaged over the period 2001 – 2011. Gross Domestic Product (GDP) reflects the commercial value of all final goods and services produced within a given area at a given time. Purchasing Power Standard (PPS) is an artificial currency unit, which can buy the same amount of goods and services in each country. It is calculated by dividing a country’s GDP in national currency by its Purchasing Power Parity, an estimation of the adjustment needed on the exchange rate between two countries’ currencies so that the exchange is equivalent to each currency’s purchasing power.
Second, the composite Lisbon performance is a benchmark index analysis of the economic Lisbon performance. It includes 7 of the 14 so-called “Lisbon indicators“ (named after the Lisbon Strategy whose objectives they assess), covering the domains of employment, innovation and research, economic reform, social cohesion, the environment as well as general economic background. This index therefore shows each region’s ability to improve their economic competitiveness in line with the Lisbon objectives.