REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Seventh progress report on economic, social and territorial cohesion
Date: 2011-11-24
Institutions: European Commission
Subjects: EU policy, economic and social cohesion, innovation, regional integration, research and development, sustainable development

EUROPEAN COMMISSION 

Brussels, 24.11.2011 
COM(2011) 776 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Seventh progress report on economic, social and territorial cohesion 

{SEC(2011) 1372 final} 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

4.3. 

5. 

Introduction .................................................................................................................. 3 

Smart growth................................................................................................................ 4 

Education and training ................................................................................................. 4 

Research and Innovation .............................................................................................. 5 

Digital society .............................................................................................................. 6 

Creative cities: Hubs of innovation.............................................................................. 6 

Sustainable growth ....................................................................................................... 7 

Resource efficient Europe ............................................................................................ 7 

Sustainable cities.......................................................................................................... 8 

Inclusive growth........................................................................................................... 9 

Employment ................................................................................................................. 9 

Poverty and exclusion ................................................................................................ 10 

Inclusive cities: the urban paradox............................................................................. 11 

Conclusion.................................................................................................................. 12 

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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Seventh progress report on economic, social and territorial cohesion 

1. 

INTRODUCTION 

In  June  2010,  the  European  Council  approved  the  Europe  2020  strategy,  the  EU's 
strategy  for  smart,  sustainable  and  inclusive  growth.  Regional  and  local  authorities 
can make a key contribution to this strategy through the actions that fall within their 
responsibility.  This  is  particularly  critical  in  more  decentralised  or  federal  Member 
States.  

Involving  regional  authorities  in  European  policies  can  increase  the  efficiency  of 
these policies, as highlighted by a number of recent studies1. An integrated regional, 
or place-based, approach can be more efficient for policies with marked externalities 
and  in  countries  with  substantial  internal  disparities.  Such  an  approach,  however, 
requires  a  strong  administrative  and  institutional  capacity  and  the  right  national 
framework conditions.  

In  the  fifth  Cohesion  Report2,  the  Commission  proposed  to  further  strengthen  the 
regional  and  urban  dimension  of  cohesion  policy  and  its  partnership  principle.  The 
following public debate showed clear support for these changes3. The regulations for 
the period 2014-2020 put forward by the Commission on 6 October 2011 show how 
these changes will be implemented4.  

Cohesion Policy is a key delivery mechanism for Europe 20205, with a long tradition 
of  designing  and  implementing  integrated  regional  and  urban  programmes  in 
partnership with regional and local authorities, economic actors, social partners and 
civil society. It can provide Europe 2020 with the active support of regional and local 
authorities it needs to succeed. 

This  progress  report  assesses  how,  in  the  context  of  cohesion  policy,  regions  and 
cities  can  contribute  to  three  types  of  growth  of  the  Europe  2020  strategy.  It 
measures the distance of cities and regions to the national 2020 targets proposed in 
the  national  reform  programmes.  This  distance  to  target  depends  on  the  disparities 
with the country, the ambition of the NRP and expected speed of change. 

This analysis does not imply that all regions can or should reach all their national or 
the  EU  targets.  For  some  regions,  the  distance  to  the  target  is  simply  too  great. 

1 

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An Agenda for a Reformed Cohesion Policy, F. Barca, 2009. 
http://ec.europa.eu/regional_policy/policy/future/barca_en.htm and The balance between sectoral and 
integrated approaches and the involvement of sub-national levels in EU Member States. 
http://ec.europa.eu/regional_policy/information/studies/index_en.cfm#2 
Fifth Report on economic, social and territorial cohesion, 2011. 
http://ec.europa.eu/regional_policy/sources/docoffic/official/reports/cohesion5/index_en.cfm  
SEC(2011) 590 http://ec.europa.eu/regional_policy/consultation/5cr/pdf/5cr_result_sec2011590.pdf  
See COM(2011)615 http://ec.europa.eu/regional_policy/what/future/proposals_2014_2020_en.cfm#1  
See: A strategy for smart, sustainable and inclusive growth, COM (2010) 2020. 
http://ec.europa.eu/europe2020/documents/related-document-type/index_en.htm 

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Furthermore, for some issues it is not realistic or desirable that all regions reach the 
same  target.  For  example,  R&D  is  highly  concentrated  in  part  due  to  benefits  of 
clustering research. The concentration of poverty and exclusion, however, has a lot 
of negative effects.  

In short, cohesion policy programmes should select their investment priorities taking 
into account the starting position of a region or city in relation to the national 2020 
targets and identify the concentrations to promote and the ones to fight.  

2. 

SMART GROWTH 

The  smart growth  objective is  to improve education, promote R&D and innovation 
and  move  towards  a  digital  society.  Through  investments  in  education,  training, 
research and innovation, the EU economy can become more productive and maintain 
or increase its global market share. This can in turn help to increase the number of 
jobs and improve their quality. 

2.1. 

Education and training 

Human  capital  is  one  of  the  key  determinants  of  regional  growth6.  High  levels  of 
education  attainment  favour  innovation  as  it  facilitates  the  rapid  diffusion  and 
absorption  of  new  knowledge  and  techniques.  Regional  development  is  therefore 
closely  linked  to  the  capacity  to  create,  retain  and  attract  human  capital,  which  is 
linked to the quality of its education institutions and life-long learning opportunities. 
Investment  in  education  and  training  should  go  hand  in  hand  with  policy  reforms, 
such as those included in the education and training strategy ET 2020. 

Developing  and  attracting  (entrepreneurial)  talent7  has  become  a  key  source  of 
growth as this can boost the innovative milieu and can lead to more innovative, high-
growth firms8 in a region.  

The Europe 2020 target is to increase the share of people aged 30-34 with a tertiary 
degree  to  40%  by  2020.  Currently,  only  one  in  five  EU  regions  has  reached  this 
target.  Member  States  have  set  themselves  targets  ranging  from  26%  to  60%.  The 
regions eligible under the regional competitiveness and employment (RCE) objective 
score the best with (one in three), the transition9 regions score average (one in four), 
while the convergence regions score poorly (one in twenty).  

The  share  of  tertiary  educated  tends  to  be  higher  in  capitals  and  adjoining  regions, 
several  of  which  have  already  reached  the  Europe  2020  target.  The  distance  to  the 
national  target  is  significant  for  many  regions  in  Portugal,  Slovakia  and  Germany 
(see fact sheet 1). 

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See Regional Outlook, Paris, OECD, 2011. 
See Sixth Progress Report: Creative and innovative regions. COM (2009) 295. 
This is the new Europe 2020 innovation indicator. 
Phasing  In  and  Phasing  Out  regions  are  grouped  as  Transition  regions  since  both  receive  transitional 
support. 

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The variation in human capital between regions within a Member State is often larger 
than  between  Member  States.  Therefore,  the  national  strategies  need  to  be 
complemented  by  regional  policies.  A  recent  report  suggests  that  delegating  more 
human capital development decisions to the regions10 can be more effective.  

Europe 2020 aims to reduce the share of early school leavers to less than 10%. The 
share  is  significantly  higher  in  most  southern  European  regions.  In  contrast,  it  is 
much  lower  in  Poland,  Slovenia,  Slovakia,  Austria  and  the  Czech  Republic.  The 
distance to the national target is highest in Spanish and Portuguese regions and some 
regions in Greece, Italy and Bulgaria. For this target, the convergence regions score 
better than the other regions, with almost half respecting this target compared to only 
one in four for the RCE and transition regions (see fact sheet 2). 

2.2. 

Research and Innovation 

The  Innovation  Union  flagship  underlines  the  role  of  research  and  innovation 
boosting  job  creation  and  economic  growth.  Regions  are  playing  a  more  important 
role  in  innovation  policy  for  two  reasons:  the  recognition  of  the  regional  and  local 
dimensions in national innovation strategies and the increasing role of innovation in 
regional development strategies.  

Research and innovation tends to be concentrated in a few economically successful 
regions,  but  a  large  range  of  development  paths  exist  across  Europe.  Also  the 
institutional frameworks for innovation policies are extremely varied, in terms of the 
competences  of  regional  governments,  the  match  between  administrative  and 
functional regions, and cross-regional relationships.  

Some  regional  innovation  policies  focus  too  narrowly  on  science  and  technology, 
which  need  a  certain  scale  or  critical  mass  of  activities  not  present  in  all  regions. 
Innovation,  however,  goes  far  beyond  science  and  technology  and  also  includes 
organisational and process innovation, creativity and design.  

A  regional  innovation  strategy  should  involve  a  rigorous  assessment  of  a  region's 
strengths and weaknesses and benchmarking with other similar regions. The strategy 
should cover all dimensions of innovation and involve key regional actors to identify 
targets and the appropriate policy mix. Human capital is a key source of innovation.  

The  level  of  technological  innovation  and  the  speed  of  its  diffusion  and  absorption 
differ widely between EU regions11. Regions with the highest innovative capabilities 
can  be  found  in  northern  Europe,  typically  in  the  most  innovative  countries. 
However,  a  few  regions  outperform  their  national  levels  also  in  less  developed 
countries,  providing  a  general  picture  of  high  concentration  of  technological 
capabilities in few regions across Europe.  

The  Europe  2020  target  is  3%  of  GDP  to  invest  in  R&D  and  Member  States  have 
defined  national  targets  for  investments  in  R&D.  In  2009,  R&D  expenditure 

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Human Capital Leading Indicators. Policy Brief, Vol. V, No. 1, P. Ederer et al. Lisbon Council, 
Brussels, 2011. http://www.lisboncouncil.net/publication/publication/64-leadingindicators.html  
See  The  regional  impact  of  technological  change  in  2020  by  Wintjes  and  Hollanders  2010. 
http://ec.europa.eu/regional_policy/information/studies/index_en.cfm#1  

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represented  2%  of  GDP  in  the  EU-27.  R&D  is typically concentrated in core areas 
such as capital and metropolitan regions. In 2008, expenditure exceeded the Europe 
2020  target  in  24  out  of  159  RCE  regions,  but  only  in  one  out  of  84  convergence 
regions  and  not  in  a  single  transition  region.  On  average  R&D  expenditure  of  the 
convergence  regions  is  only  0.9%  of  their  GDP  (see  table  1).  The  RCE  regions 
exceeding the Europe 2020 target are mostly located in northern countries (Germany, 
UK,  Sweden  and  Finland),  Austria  and  capital  regions  such  as  Hovedstaden 
(Copenhagen) and Ile de France (Paris). In 2008, only 16 regions across Europe have 
reached the national targets set by 2020. Therefore, significant efforts are needed in 
all Member States to meet the national targets in this respect (see fact sheet 3).  

2.3. 

Digital society 

The  Digital  Agenda  for  Europe12  promotes  the  fast  development  of  digital 
technologies and an inclusive digital society. The availability of high-speed networks 
is  a  key  factor  for  competitiveness,  as  it  determines  the  capacity  of  regions  to 
compete in and benefit from the global knowledge-based economy, technology and 
market.  

According to the 2011 digital agenda scoreboard, broadband (DSL) coverage in 2010 
reached  95%  of  the  total  population.  Coverage  in  rural  areas  is  significantly  lower 
(83%) and represents a challenge for a number of countries where less than 60% of 
the  rural  population  has  access  to  broadband  (Bulgaria,  Slovakia,  Poland  and 
Romania). Nevertheless, the gap between urban and rural areas13 has been reduced in 
the recent years (e.g. Romania and Cyprus). Still further investments are needed to 
reach the broadband targets. 

The utilisation of the networks for private and public e-services is also growing but 
still  involves  a  relatively  limited  share  of  the  European  population.  In  2010,  only 
41% of the population interacted online with public authorities and only 40% ordered 
goods or services online. The percentage of turnover of enterprises generated online 
rose from 8.6% in 2004 to almost 14% in 2010, confirming a trend of increasingly 
dynamic growth in this area. However, important barriers to the digital single market 
remain to be addressed.  

2.4. 

Creative cities: Hubs of innovation 

Cities  have  always  been  centres  of  specialisation  and  innovation.  For  example, 
patenting is highly concentrated in a few metro regions14 (see fact sheet 4). Given the 
high  concentration  of  innovative  activities  in  cities,  the  full  utilisation  of  their 
potential represents one of the main resources for strengthening regional innovation 
in  both  convergence  and  RCE  regions.  In  virtually  all  Member  States,  the  share  of 
tertiary  educated  aged  25-64  is  higher  in  cities  than  in  other  areas.  In  22  Member 

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http://ec.europa.eu/information_society/digital-agenda/publications/index_en.htm 
In the EU, 47% of the population lives in urban areas or cities, 25% in towns and suburbs and 28% in 
rural areas based on the degree of urbanisation classification.  
Metro regions are one or more NUTS 3 regions that represent an agglomeration of more than 250 000 
inhabitants.  For  more  detail  see  Regional  Focus  01/2011.  L.  Dijkstra  and  H.  Poelman,  2011. 
http://ec.europa.eu/regional_policy/information/focus/index_en.cfm  

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States,  the  share  is  between  10  and  25  percentage  points  (pp)  higher  in  cities  (see 
Figure 1).  

The coverage and use of broadband internet tends to be higher in urban areas15 than 
in  rural  areas,  but  in  countries  with  high  share  of  broadband  coverage  this  gap  has 
almost disappeared. The ultra fast next generation access networks are also expected 
to be rolled out in large cities first.  

The innovative capacity of cities can also be demonstrated through their productivity. 
Three  out  of  four  metropolitan  areas  in  the  EU  have  a  higher  level  of  productivity 
than the other regions in their country. But higher productivity should not be equated 
with  higher  productivity  growth.  Between  2000  and  2008,  only  two  out  of  five 
metropolitan areas experienced higher productivity growth than the other regions in 
their country.  

The  comparative  advantage  of  metro  regions  is  strongest  in  the  Member  States  of 
central  and  eastern  Europe,  where  metropolitan  areas  often  have  a  level  of 
productivity  more  than  50%  higher  than  in  the  rest  of  the  country.  However,  this 
often only applies to the capital region, while the productivity of secondary growth 
poles16 lags further behind the capital region than in more developed Member States.  

3. 

SUSTAINABLE GROWTH 

The sustainable  growth objective  aims to enhance resource efficiency17 and to help 
the EU prosper in a low-carbon world, while preventing environmental degradation 
and biodiversity loss as well as a more competitive economy. It promotes more water 
efficiency and the use of waste as a resource. It addresses combating climate change 
and strengthening the resilience of our territories to climate risks. This includes the 
reduction  of  greenhouse  gas  emissions,  the  promotion  of  renewable  energies  and 
more efficient energy supply systems. 

3.1. 

Resource efficient Europe 

The Europe 2020 strategy aims to reduce greenhouse gas emissions by at least 20% 
(and  30%,  if  the  conditions  are  right)  compared  to  1990,  and  to  increase  energy 
efficiency and the consumption of renewable energy both by 20%. 

Under  the  'Effort  Sharing  Decision'18,  Member  States  have  adopted  a  mix  of 
emission reduction targets and limits on emission increases (see fact sheet 5). Some 
have  already  reached  their  target  and  only  need  to  maintain  this  lower  level  of 
emissions. Greece, for example, committed to reduce emissions by 4% compared to 

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18 

See Eurostat Regional Yearbook 2011, chapter 16. 
See ESPON interim report of Secondary Growth Poles 
See Roadmap to a Resource Efficient Europe COM(2011)571 
In the Climate and Energy Package, the overall emission reduction goal will be accomplished through 
(1)  the  EU  Emissions  Trading  System  (ETS)  and  (2)  the  'Effort  Sharing  Decision'.  This  last  decision 
establishes  for  the  period  2013–2020  annual  binding  national  greenhouse  gas  emission  targets  with 
2005 as a base year from sectors not included in the ETS - such as transport, buildings, agriculture and 
waste. Cohesion Policy actions can play a role in reducing GHG emissions in these sectors, but should 
not subsidise emissions reductions already covered by the ETS. 

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2005  levels  and  already  had  cut  them  by  almost  7%  in  2009.  Others  committed  to 
limit the increase in emissions and actually reduced them, like Slovakia which agreed 
to limit the increase to 13%, but actually reduced emissions by 12%.  

On  the  other  hand,  some  Member  States  will  have  to  reduce  their  greenhouse  gas 
emissions significantly. For instance Ireland, Denmark and Luxembourg still need to 
cut emissions by more than 10 percentage points to reach their target.  

The picture is similar for renewable energy consumption (see fact sheet 6). The share 
of renewable energy in gross final energy consumption varies from 44% in Sweden 
to  0.2%  in  Malta.  All  Member  States,  except  Latvia  and  Slovenia,  have  increased 
renewable  energy  consumption,  with  especially  high  increases  in  Austria,  Estonia 
and Romania.  

Some Member States are close to the target they set under the Climate and Energy 
Package. For instance Sweden has to increase the share of renewables by another 4.6 
pp  to  reach  it  target  of  49%  by  2020.  For  some,  the  distance  to  the  target  is  far 
greater and additional efforts will be required to reach it on time. For example, the 
United Kingdom and Ireland want to increase their share of renewables by 13 and 12 
pp by 2020.  

Sustainable  growth  has  an  important  regional  dimension.  Regional  characteristics 
directly  determine  the  extent  to  which  EU  regions  can  produce  renewable  energy. 
For example, the production of solar and wind energy is highly location dependent. 
Coastal  regions  tend  to  have  a  high  wind  energy  potential,  while  southern  regions 
with  more  sunny  days  have  more  potential  for  solar  energy.  Moving  renewable 
energy  between  regions  with  a  high  potential  to  regions  with  a  high  demand  will 
require the development of better and more intelligent energy networks.  

Regions can reduce greenhouse gas emissions by promoting cleaner modes of public 
transport and shifting to more sustainable modes of transport. Initiatives to promote 
cleaner and more efficient transport have to adapt to the local context, focusing on 
the infrastructure in regions where it is still lacking while targeting the attractiveness 
of sustainable transport modes and demand management in other regions.  

Regions can play a prominent role in fostering energy efficiency. This is particularly 
true as regards buildings, where actions must adapt to the local context and climate. 
These  actions  are  likely  to  be  different  between  urban  and  rural  areas  or  between 
places  with  old  versus  more  recent  buildings.  The  objective,  however,  remains  the 
same: improving energy performance in conformity with EU legislation. 

3.2. 

Sustainable cities 

Cities are at the forefront of the fight against climate change, not only because they 
host a high share of the population and an even higher share of economic activities, 
but because working and living in cities is more resource efficient. People living in 
cities  take  shorter  trips  to  get  to  work  and  are  more  likely  to  walk,  cycle  or  take 
public transport. In the EU, for example, households living in urban areas are three 
times more likely to use only public transport, walking or cycling for their transport 
needs  (see  Figure  2).  They  tend  to  live  in  flats  or  townhouses  which  require  less 

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energy  to  heat  and  cool.  In  addition,  district  heating  systems  are  more  efficient  in 
dense urban neighbourhoods.  

In  the  EU,  final  energy  demand  per  capita  was  40%  higher  in  rural  areas  than  in 
urban  areas19.  A  large  share  of  that  difference  is  due  to  the  higher  efficiency  of 
cities20. From an energy efficiency point of view, policies that enhance the appeal of 
urban living and working should be promoted. 

As  a  high  share  of  CO2  emissions  occur  in  cities,  the  resource-efficiency  of  cities 
should be further enhanced. It is therefore essential to make cities an integral part of 
the  solution  in  the  fight  against  climate  change.  Policies  should  aim  to  reduce 
congestion, promote non-motorized transport and improve the energy performance of 
buildings21.  This  would  also  improve  air  quality,  which  is  lower  in  cities,  and 
increase  the  health  of  city  dwellers.  However,  care  should  be  taken  that  these 
measures do not lead to urban sprawl by shifting jobs and residents to the outskirts of 
the city.  

The Covenant of Mayors commits cities to reduce their greenhouse gas emissions by 
more than 20% by 2020 and has been signed by more than 2500 mayors in Europe 
representing  over  125  million  inhabitants.  The  Smart  Cities  and  Communities 
Initiative,  which  builds  among  others  on  this  covenant,  will  develop  a  more 
comprehensive approach to urban challenges around energy, transport and ICT. 

4. 

INCLUSIVE GROWTH 

The  Europe  2020  strategy  has  a  strong  focus  on  employment  creation,  skills  and 
labour market reform and explicitly targets reducing poverty and exclusion. It aims 
to  increase  employment  rates  and  the  quality  of  jobs,  especially  for  women,  young 
people  and  older  workers.  It  also  wants  to  better  integrate  migrants  in  the  labour 
force. Furthermore, it will help people anticipate and manage change by investing in 
skills and training and modernising labour markets and welfare systems.  

4.1. 

Employment 

The  Europe  2020  strategy  aims  to  increase  the  employment  rate  to  75%  for  the 
population  aged  20-64  by  2020.  Member  States  have  set  national  targets  varying 
from 62.9% in Malta to 80% in Denmark and Sweden.  

Not all Regions are expected to reach the EU or national employment targets, as they 
face very different starting positions. The employment rate in convergence regions in 
2010 was only 63% after a decline due to the economic crisis. Only two convergence 
regions have reached the EU target of 75% in 2010. If the goal was to reach the 2020 
target in all convergence regions, 11 million people22 would have to find a job. The 

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22 

World Energy Outlook 2008, IEA, Paris, 2008. 
The  remaining  difference  may  be  due  to  a  higher  share  of  energy-intensive  manufacturing  located  in 
rural areas. 
The green  metropolis,  D. Owen.  Riverhead, 2009.  and  Triumph of  the City,  E.  Glaeser.  The  Penguin 
Press, 2011. 
This shows the number of jobs required for all convergence regions to have an employment rate of 75% 
or higher. The jobs required to reach 75% in all EU regions is 23 million. The number required to reach 

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transition regions also have a low employment rate of 64% and would need 3 million 
jobs to reach the EU target in all these regions. The RCE regions have a considerably 
higher employment rate of 72%, but because 60% of the EU working age population 
lives  in  these  regions,  they  would  still  need  9.4  million  jobs  to  reach  this  target  in 
each of these regions23.  

Employment  rates  below  60%  can  be  found  in  regions  in  southern  Spain  and 
southern Italy  and  some regions  in Romania  and Hungary (see fact sheet 7).  Many 
regions  in  Germany,  the  UK,  the  Netherlands,  Denmark,  Sweden  and  Austria  have 
already reached 75%. To ensure that the EU reaches 75% by 2020, especially those 
countries and regions where employment rates are currently low will have to make 
significant progress but the contribution from countries and regions already close to 
or above 75% will also be needed. 

The recent crisis also led to rapid increases in unemployment rates (see fact sheet 8). 
In  the  three  Baltic  States  and  seven  Spanish  regions  unemployment  rates  increased 
by  between  10  and  18  pp.  Unemployment  increased  least  (1.8  pp)  in  the  RCE 
regions. The convergence regions witnessed a more substantial increase (2.8 pp). The 
sharpest  increase,  however,  occurred  in  the  transition  regions  (6.4  pp).  Despite  the 
overall  increases,  unemployment  decreased  in  52  regions,  mostly  in  Germany  but 
also in some regions in Poland, France, Finland and Austria. 

4.2. 

Poverty and exclusion 

The Europe 2020 strategy aims to reduce the number of people at risk of poverty or 
exclusion by 20 million by 2020, corresponding to a reduction from 23% of the EU 
population  to  19%.  The  share  of  population  at  risk  of  poverty  or  exclusion  is  over 
50%  in  three  Bulgarian  regions  and  is  49%  in  Sicily  (see  fact  sheet  9).  The  lowest 
rates can be found in Ǻland, Trento, Navarra and Praha, where is it 10% or lower.  

The at-risk-of-poverty-or-exclusion rate is composed of three indicators: (1) having 
an  income  below  the  national  poverty  income  threshold  after  social  transfers  (2) 
severe  material  deprivation  and  (3)  living  in  household  with  a  low  work  intensity 
(see  fact  sheet  9  for  the  full  definition).  The  first  indicator  is  a  relative  poverty 
indicator because it measures the share of people with an income below 60% of the 
national median income. As a result, someone who is considered at risk of poverty in 
the  UK  would  probably  not  be  considered  poor  in  Bulgaria  with  the  same  income. 
The second indicator is an absolute measure of poverty as it measures access to nine 
essential  items  in  the  same  way  in  all  Member  States.  This  indicator  is  closely 
correlated to the level of development of a country. In 2009, it ranged from 32% in 
Romania  to  1%  in  Luxembourg.  The  last  indicator  measures  exclusion  from  the 
labour  market.  This  indicator  is  not  correlated  with  GDP  per  head  or  even 
employment  rates.  In  2009,  it  was  highest  in  Ireland  and  the  UK,  while  the  lowest 
rates were in Estonia and Cyprus. 

The  at-risk-of-poverty  rate  has  a  strong  regional  dimension  which  cannot  be 
explained  by  personal  characteristics  such  as  education,  employment  status, 

this  target  at  the  EU  level  is  lower  (17.6  million),  as  regions  with  employment  rates  above  75%  can 
compensate for regions with lower rates  
Estimates based on current number of jobs and the Eurostat regional population forecast. 

23 

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household  type  and  age.  Estimates  of  regional  poverty  based  on  these  dimensions 
considerably underestimate the regional variation of poverty. In other words, the at-
risk-of-poverty rate depends not only on a person's education or employment status, 
but also on where they live ('location effect').  

Unfortunately,  the  at-risk-of-poverty-or-exclusion  rate  is  not  available  at  regional 
NUTS 2 or 1 level in several large Member States. As cohesion policy aims to make 
a  substantial  contribution  to  reducing  poverty  and  exclusion,  especially  in  the  least 
developed  regions,  a  regional  benchmark  will  be  critical  to  monitor  and  assess  its 
impact. Estimates indicate that convergence and transition regions score significantly 
worse  than  RCE  regions  on  at  risk  of  poverty  and  exclusion  and  two  of  its  three 
dimensions (see Table 1). 

4.3. 

Inclusive cities: the urban paradox 

The urban dimension of inclusive growth is inversely related to the level of economic 
development: the more developed Member States tend to have less inclusive cities.  

In  more  developed  Member  States,  urban  areas  are  frequently  confronted  with 
substantially  higher  shares  of  people  living  in  a  jobless  household  (see  Figure  3). 
Also unemployment rates are higher and employment rates are lower in urban areas 
in  more  developed  Member  States.  In  the  UK,  Portugal,  France,  Austria  and 
Belgium, urban unemployment rates are between three and five pp higher24.  

The  high  share  of  people  disconnected  from  the  labour  market  in  areas  with  the 
highest  physical  concentration  of  job  opportunities  (cities)  was  highlighted  as  an 
urban paradox by the two State of European Cities Reports25.  

Severe  material  deprivation  and  the  at–risk-of-poverty  rate26  (see  Figure  4  and  5) 
tend  to  be  higher  in  urban  areas  in  many  of  the  more  developed  Member  States, 
despite higher average incomes in such urban areas. In Belgium, Austria and the UK, 
severe material deprivation is between three and five pp higher in urban areas than in 
the  rest  of  the  country.  Research27  has  highlighted  the  presence  of  large  (and 
growing) income disparities in cities.  

Living  in  an  urban  area  in  a  less  developed  Member  State,  however,  has  more 
advantages  than  living  in  a  rural  area  or  small  town.  Urban  areas  in  these  Member 
States tend to have higher employment rates and lower shares of jobless households, 
severe  materially  deprived  and  people  at  risk  of  poverty.  In  addition,  average 
incomes  are  much  higher.  For  example  in  Latvia,  Bulgaria,  Poland  and  Romania 
average incomes in urban areas are between 40% and 70% higher than in the rest of 

24 

25 

26 

27 

The Urban Audit shows that these higher unemployment rates are not evenly distributed over all cities, 
but affect some cities and some neighbourhoods much more than others. 
State of European Cities Report. Commission, 2007 and 2010. 
http://ec.europa.eu/regional_policy/activity/urban/audit/index_en.cfm  
This is particularly striking as the at-risk-of-poverty rate does not take into account the higher cost of 
living in urban areas, so probably underestimates the at-risk-of-poverty rate in cities. 
For example see the ESPON FOCI study. 
http://www.espon.eu/main/Menu_Projects/Menu_AppliedResearch/foci.html  

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the  country.  This  highlights  the  concentration  of  poverty  in  rural  areas,  often 
compounded by poor access to services28. 

5. 

CONCLUSION 

This  report  has  highlighted  the  regional  and  urban  dimension  of  the  Europe  2020 
strategy. It shows that significant efforts and investments are needed in all Europe's 
regions  to  achieve  the  smart,  sustainable  and  inclusive  growth  objectives.  It  argues 
that  those  needs  differ  between  regions  and  between  cities  and  that  policies  should 
take these needs into account. 

Given  cohesion  policy's  key  role  in  Europe  2020,  particular  attention  needs  to  be 
paid  to  the  convergence  regions,  but  improvements  are  also  necessary  in  the 
transition and RCE regions.  

The convergence regions score poorly on the smart growth front with low levels of 
R&D,  low  shares  of  higher  educated  and  low  productivity.  Many  also  display  low 
levels  of  employment  and  high  unemployment  levels.  The  risk  of  poverty  and 
exclusion is also higher in the convergence regions.  

Although transition regions and RCE regions score better on these issues, they also 
need to improve their performance to reach the Europe 2020 targets. The crisis has 
reduced employment in RCE regions and revealed a lack of competitiveness in some 
of  them.  Unemployment  has  risen  in  more  than  100  RCE  regions  and  36  have  an 
unemployment rate above the EU average.  

The challenge of sustainable growth is present in all regions. The energy efficiency 
of  existing  and  new  buildings  has  to  increase  everywhere.  Increasing  renewable 
energy  will  require  more  investment  in  efficient  locations  and  in  the  network 
connecting supply with demand.  

When  designing  regional  growth  strategies,  cities  should  play  an  active  role.  Cities 
are uniquely placed to promote innovation by offering firms of all sizes the dynamic 
environments  they  need  to  succeed.  They  are  at  the  forefront  in  the  fight  against 
climate  change,  creating  new  models  of  urban  development  with  even  higher 
resource efficiency. Last but not least, cities have a disproportionate share of social 
problems and poverty. As the Europe 2020 targets aims to increase employment and 
reduce  poverty  and  exclusion,  cities  need  to  address  urban  deprivation  and  the 
disconnection from the labour market, especially in the EU-15. 

This  report  provides  an  important  input  as  strategies  for  the  future  2014-2020 
cohesion policy programmes are being prepared. In essence, it sets out the baseline 
situation  to  be  addressed  in  relation  to  the  EU2020  targets  and  the  distance  to  the 
national  targets.  Future  cohesion  policy  programme  must  articulate  how  they  will 
contribute  to  this  catching  up  process  in  concrete  terms.  How  will  the  investment 
programmes contribute to change in these indicators? Are there intermediate steps or 
indicators  which  can  capture  positive  progress?  Cohesion  policy  programmes 

28 

See also Poverty and social exclusion in rural areas, European Commission, 2008. 
http://ec.europa.eu/social/BlobServlet?docId=2087&langId=en  

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provide  an  opportunity  to  design  strategies  in  an  integrated  way  —  focused  on  the 
specific  needs  of  each  territory  —  and  reflecting  the  trade-offs  and  synergies 
between different types of investments.  

Table 1: Indicators by type of region 

Indicator
Tertiary educated aged 30-34, in %
Early school leavers aged 18-24, in %
RD as % of GDP

Employment rate aged 20-64, in %
Unemploym ent rate, in %

At risk of poverty or exclusion *, in %
Severe material deprivation *, in %
At risk of poverty **, in %
Low work intensity *, in %

Year
2007-10
2008-10
2008

Convergence
25
13
0.9

Transition
33
18
1.0

2010
2010

2009
2009
2009
2009

63
12

31
16
21
6.7

RCE
37
14
2.0

72
7.9

19
4.3
14
7.0

120
-6.1

EU
32
14
1.9

69
9.7

23
8.1
16
9.0

100
0

64
15

25
7.5
18
7.3

93
4.7

GDP per head index (in PPS)
Change in GDP per head index
* Only national figures were available for DE, FR, NL, PT, RO, UK and only NUTS 1 in BE, EL and HU

2008
2000-2008

62
8.6

** For Portugal 2005 NUTS 2 figures were used

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