REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL Eighth progress report on economic, social and territorial cohesion The regional and urban dimension of the crisis
Date: 2013-06-26
Institutions: European Commission
Subjects: economic and social cohesion, economic recession, foreign investment, gross domestic product, impact study, marginalisation, poverty, report, unemployment

EUROPEAN 
COMMISSION 

Brussels, 26.6.2013  
COM(2013) 463 final 

REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Eighth progress report on economic, social and territorial cohesion 

The regional and urban dimension of the crisis 
{SWD(2013) 232 final} 

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TABLE OF CONTENTS 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

2.6. 

3. 

3.1. 

3.2. 

3.3. 

4. 

4.1. 

4.2. 

5. 

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

Setting the scene........................................................................................................... 3 

Contraction of GDP and employment .......................................................................... 3 

Deteriorating national and sub-national finance .......................................................... 4 

Construction and manufacturing most affected by the recession................................. 4 

Exports recovering ....................................................................................................... 5 

Foreign direct investments slowing down.................................................................... 6 

Increasing risk of poverty and exclusion...................................................................... 7 

The regional impact.................................................................................................... 10 

GDP and employment in the first three years of the crisis......................................... 11 

Unemployment increasing especially in southern regions......................................... 11 

Migration slowing down ............................................................................................ 12 

The urban impact........................................................................................................ 12 

Metro regions mix resilience and vulnerability.......................................................... 12 

Cities in crisis ............................................................................................................. 13 

Cohesion Policy and the crisis ................................................................................... 15 

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REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND 
THE COUNCIL 

Eighth progress report on economic, social and territorial cohesion 

The regional and urban dimension of the crisis 

1. 

INTRODUCTION 

In  2014,  the  Cohesion  Policy  programming  period  will  start  in  the  aftermath  of  the  worst 
recession of the last fifty years. The crisis has reversed the process of convergence of regional 
GDP  per  head  and  unemployment  within  the  EU.  The  challenge  now  is  to  ensure  a  prompt 
return to a strong growth path, especially in the less developed regions and cities. 

To support the forthcoming programme negotiations, this report highlights the crisis-induced 
changes that will affect the context and priorities of the new programmes. The report first sets 
the  scene  with  an  overview  of  the  main  developments  at  national  level.  It  then  looks  at  the 
impact of the crisis on regions and cities and the growing disparities. Finally, it outlines how 
the  changed  economic  environment  will  affect  the  future  Cohesion  programmes  and 
underlines the need for a strong thematic concentration. 
This  report  follows  the  7th  progress  report,  published  in  2011,  and  will  be  followed  by  the 
publication of the 6th Cohesion Report in 2014. The 6th Cohesion report will also cover issues 
such innovation, climate and environment, which could not be included here. 

2. 

SETTING THE SCENE 

2.1. 

Contraction of GDP and employment 

The EU entered a recession in the second quarter of 2008, which lasted five quarters. Since 
the recession, overall growth in terms of GDP has been sluggish. The EU's GDP contracted 
again in the last quarter of 2011 and the first two and the last quarter of 2012. If GDP also 
contracts in the first quarter of 2013 it will have become a triple-dip recession.  

The overall impact of the crisis on GDP and employment between 2007 and 2011 has been 
highest  in  the  three  Baltic  States,  Ireland,  Greece  and  Spain  (see  COM  Staff  Working 
Document, Figure 1). The Baltic States and Ireland started growing again in 2010 or 2011 and 
are forecast to continue to grow until 2014.  

Spain  and  Greece,  however,  have  not  returned  to  a  consistent  growth  path.  Spain  started 
growing in 2011, but its GDP contracted in 2012. Provisional GDP growth rates for Greece 
show a continuation and strengthening of the recession. Its GDP declined by around 7 % in 
2011 and 2012 and may only start to grow in 2014. 

In  addition,  Cyprus  was  confronted  with  a  financial  crisis  in  2012  which  led  to  a  harsh 
reduction of GDP and employment which is expected to continue until 2014.  

In  contrast,  nine  Member  States  experienced  a  relatively  mild  recession  or,  in  the  case  of 
Poland, merely a slowing down of growth.  

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2.2. 

Deteriorating national and sub-national finance  

The  economic  and  financial  crisis  has  led  to  significant  increases  in  total  government  debt 
(see  Factsheet  1)  in  four  ways.  First,  several  national  governments  supported  the  financial 
sector  through  bank  recapitalisation  and  assets  transfers.  Second,  the  slowing  down  of 
economic  activity  reduced  tax  receipts  and  increased  social  spending  (e.g.  unemployment 
benefits). Third, governments adopted stimulus packages to boost demand. Fourth, the debt–
to–GDP ratio is also driven upwards by low GDP growth. 

As a result, the government debt-to-GDP ratio in the EU jumped between the first quarter of 
2008 and the fourth quarter of 2012 from 59 % to 85 %. National increases were highest in 
Ireland  (90  percentage  points),  Portugal  (56  pp),  Greece  and  Spain  (both  49  pp).  Member 
States  that  bought  out  failing  banks  may  be  able  to  reduce  their  debt  by  selling  the  banks 
remaining assets, but their value remains uncertain.  

High government debt can raise concerns about a government’s ability to service its debt in 
the long run. This may lead to higher interest rates and payments. The higher taxes required to 
service the debt may act as a brake on growth.  

In  the  2011-2013  period,  many  Member  States  have  embarked  on  fiscal  consolidation  by 
primarily cutting expenditure (-1.5 % of EU GDP in 2011 compared to 2010). Mainly growth-
friendly  expenditure  was  cut.  Consequently,  public  investment  (here:  Gross  Fixed  Capital 
Formation) as a share of GDP will be lower in 18 Member States in 2013 than in 2011. These 
cuts may affect medium-term growth. 

Public  debt  does  not  affect  all  countries  equally.  Estonia’s  public  debt  is  only  10 %  of  its 
GDP. Only 13 Member States have a public debt below 60 % of their GDP: the three Nordic 
Member  States,  Luxembourg  and  nine  of  the  ten  Central  and  Eastern  Member  States.  The 
crisis affects sub-national governments in two ways. First, the crisis has led to a decrease of 
tax  revenues  and  to  tax  cuts  to  stimulate  growth.  Second,  the  crisis  has  increased  local 
demand for public services and social protection, triggering higher public expenditure.  

Fiscal consolidation is putting pressure on sub-national governments' budgets. They still face 
higher  levels  of  social  expenditure  and  have  to  reduce  expenditure  and  increase  revenues. 
Their financial difficulties may affect delivery of public services.  

Growth-friendly fiscal consolidation should ensure that reductions in central government debt 
are  not  offset  by  an  increase  in  sub-national  government  debt.  This  co-ordinated  debt 
reduction  should  also  ensure  that  growth-enhancing  public  investments,  including  those  co-
financed by Cohesion Policy, are maintained. 

2.3. 

Construction and manufacturing most affected by the recession 

Although  the  crisis  started  in  the  financial  and  insurance  sector,  this  sector  accounted  for 
roughly the same amount of gross value added (GVA) and employment in the EU in 2011 as 
it  did  in  2007.  In  the  six  Member  States  most  affected  by  the  crisis,  however,  this  sector’s 
employment dropped by 1 % and its GVA by 1.8 % a year between 2007 and 2011 (see COM 
Staff Working Document, Figure 2). 

Between 2007 and 2011, both GVA and employment in construction declined by 3 % a year 
in the Union. In the six countries where the impact of the recession was greatest, the decline 
was even between 10 and 20 % a year for employment and between 6 % and 20 % for GVA. 

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These dramatic declines in the construction sector are linked to the real estate bubble and the 
ensuing collapse of real estate prices in several Member States. Between 2007 and 2012, real 
estate  prices  dropped  by  between  30 %  and  50 %  in  Ireland1,  Latvia  and  Estonia  (see 
Factsheet  2).  In  Portugal,  they  have  declined  by  -9 %  so  far.  In  Greece,  Eurostat  figures 
indicate  moderate  increase  between  2007  and  2010,  but  other  sources2  indicate  that  prices 
have started to fall since 2010. Overall, more decreases cannot be excluded. 

The  manufacturing  sector  took  a  hit  with  a  decrease  of  more  than  2%  a  year  between  2007 
and 2011. In the six most affected Member State, the annual average contraction was almost 
5 %.  The  decrease  in  GVA  was  more  moderate  at  0.9 %.  The  changes  of  GVA  were  more 
variable with the biggest reductions over the period occurring in Greece (-6 %) and Finland (-
5 %) and the biggest increases in Slovakia (8 %) and Ireland (4 %) (see COM Staff Working 
Document, Figure 3). The contraction of manufacturing was closely tied to the contraction in 
trade. 

2.4. 

Exports recovering 

In the wake of the crisis, credit became scarce, which reduced investments and consumption. 
This reduced trade in goods and caused the recession to spread quickly to important trading 
partners, leading to further income and/or job losses. Although the 2004 enlargement gave a 
boost to EU trade, the crisis caused an abrupt drop (see Figure 1). 

Figure 1: Changes in EU trade volume, 2000-2011 

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2 

2007-2010 
Economist Housing Index 

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Exports were still growing in 2008, albeit at a much slower rate, whereas the growth in import 
volumes  was  close  to  zero.  In  2009,  exports  and  imports  dropped  by  15 %  to  a  level 
comparable to that of 2005.  

The Central and Eastern Member States suffered the highest drop in imports (see Factsheet 3). 
Most of the countries that joined the EU after 2004 were enjoying a period of high economic 
growth fuelled by high investments and consumption, before the crisis hit them. 

In  western  Member  States,  exports  dropped  more  than  imports  because,  at  least  initially, 
domestic  consumption  and  investments  were  less  affected  by  the  crisis.  The  global  drop  in 
demand led to a reduction in exports, causing production to fall in the manufacturing sector. 
Exports,  fortunately,  recovered  quickly  with  similar  volumes  in  2010  as  in  2007.  However, 
the consequences of the abrupt fall in exports continue to be felt in the labour market. 

2.5. 

Foreign direct investments slowing down 

As  a  result  of  the  crisis,  foreign  direct  investment  (FDI)  dropped  rapidly.  Many  foreign 
investors  directed  available  resources  back  to  'mother'  companies.  Joining  the  EU  made  it 
easier for the Central and Eastern Member States to access FDI thanks to the single market 
and  the  incorporation  of  the  EU  acquis.  FDI  can  contribute  to  efficiency  gains,  transfer  of 
innovative  technologies  and  higher  productivity  in  the  receiving  countries.  Hence,  FDI 
inflows play an important role in the less developed Member States for employment creation 
and modernisation of their economies. 

Foreign direct inward investment flows from other Member States and from outside the Union 
grew  rapidly  between  2004  and  2007.  Inward  investments  flows  quadrupled  between  2004 
and  2007  (see  Figure  2).  Inward  investment  flows  fell  in  2008  and  2009  when  the  global 
credit situation deteriorated. The lowest point, in 2010, corresponded to the level of 2004. In 
2011 the flows grew again.  

Foreign direct investment flows do not show the stock of foreign investment. Stocks held in 
other  countries  increased  by  almost  60 %  between  2004  and  2007.  This  rise  was  never 
reversed. By 2011, foreign-owned stocks were more than twice as high than in 2004. 

In  some  EU  countries,  FDI  inflows  are  a  major  source  of  capital  and  investments.  For 
example,  average  FDI  net  inflows  as  proportion  of  GDP  between  2005  and  2007  were 
between  15 %  and  23 %  in  Bulgaria,  Malta,  Belgium  and  Estonia.  The  crisis  led  to  a  rapid 
reduction  of  FDI  inflows  in  ten  Central  and Eastern  Member  States.  It  dropped  by  between 
1.5 % and 6 % of their GDP between the periods 2005-07 and 2008-10, with the exception of 
Bulgaria, where it dropped by 12 % of its GDP (see Factsheet 4). 

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Figure 2: Foreign Direct Investment in the EU, 2004-2011 

2.6. 

Increasing risk of poverty and exclusion 

At EU level, the crisis increased the population at risk of poverty or social exclusion. Between 
2009 and 2011, the share increased by one percentage point. All three components (at-risk-of-
poverty rate, severe material deprivation and very low work intensity) are also on the rise, in 
particular very low work intensity (see Figure 3). This impact is likely to be felt more in the 
future as the crisis is not over yet and the effect takes time to filter through.  

The  impact  on  the  risk  of  poverty  or  exclusion  was  the  highest  in  the  six  most  affected 
Member States, but the impact in Italy and Bulgaria was also significant. Several of the large 
Member States, however, had only small increases, such as Germany and the UK, or even a 
slight reduction of the risk of poverty or exclusion, such as Poland and Romania. 

Figure 3: Poverty and social exclusion in the EU, 2005-2011 

Share of EU population in 
At risk of poverty or exclusion

At risk of poverty
Very low work intensity*
Severe Material deprivation

* population aged 0-59
Source: Eurostat

2005

2006

2007

2008

2009

2010

2011

25.6
16.4
10.3
10.7

25.2
16.5
10.5
9.8

24.4
16.5
9.6
9.1

23.5
16.4
9.0
8.4

23.1
16.3
9.0
8.1

23.4
16.4
10.0
8.1

24.2
16.9
10.0
8.8

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In the wake of the crisis, many people were faced with a lower income due to job losses or 
reductions  in  hours  and  wages.  In  the  six  most  affected  MS  countries,  real  gross  adjusted 
disposable income dropped substantially after the crisis (see Figure 4). 

In  the  Baltic  States  real  adjusted  disposable  household  income  per  capita  grew  rapidly 
between  2005  and  2008  and  then  experienced  a  sharp  drop.  In  Latvia,  disposable  income 
shrank by nearly a fifth in 2009. Since 2010 disposable income has been growing again in all 
three Member States, but none have reached the pre-crisis level.  

In  Greece,  Spain  and  Ireland,  which  have  considerably  higher  levels  of  disposable  income 
than the Baltic states, the picture is more mixed. In Spain and Ireland, the effect of the crisis 
only  started  to  be  felt  in  2009.  Since  then,  both  countries  have  lost  around  8 %  of  their 
disposable income, returning them to 2005 levels. In Greece, the decline in disposable income 
started slowly in 2007. In 2009 and 2010 it took a very sharp downturn. As a result, Greek 
disposable income in 2011 was well below its 2005 level. 

Due to reductions in the median income, and thus the poverty threshold, the at-risk-of-poverty 
rate often goes down during a recession. This section will use a poverty threshold fixed at the 
2005 level to avoid this effect.  

Figure 4: Real gross adjusted disposable household income per head, 2005-2011 

In Ireland, the share of people at risk of poverty relative to the 2005 threshold increased from 
10 % in 2008 to over 15 % in 2010 (see Figure 5). This share reached 20 % in Spain and 23 % 
in  Greece.  Due  to  the  high  income  growth  of  the  early  part  of  the  2005  to  2011  period,  
the at-risk-of-poverty rates relative to the 2005 threshold only grew slightly post-crisis in the 
Baltic States, reaching 10 % or less, and did not reach the pre-crisis levels. 

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Figure 5: At risk-of-poverty rate with 2005 threshold, 2006-2011 

The  share  of  people  at  risk  of  poverty  relative  to  the  2005  threshold  increased  slightly  in 
Belgium,  Hungary,  Germany,  Luxembourg,  the  Netherlands  and  the  UK.  In  the  remaining 
parts of the EU, it declined or remained stable. 

The  share  of  population  aged  0  to  59  living  in  a  household  with  a  very-low-work  intensity 
increased  post  crisis,  but  still  remained  below  2006  values  at  the  EU  level.  In  the  six  most 
affected Member States, however, this share has increased with between 4 and 9 pp between 
2007 and 2011 (see Figure 6).  

Figure 6: Very low work intensity, 2005-2011 

Share of population aged 0 to 59 in living in very low work intensity 
households, 2005-2011

Estonia
Greece
Spain
Lithuania
Latvia
Ireland

2005 2006 2007 2008 2009 2010 2011 2011-2007
3.7
3.8
5.9
5.9
6.1
8.7

8.9
7.5
9.8
9.2
12.2
22.9 n/a

5.6
6.5
7.0
6.9
6.7
19.8

5.3
7.4
6.2
5.1
5.1
13.6

6.2
8.0
6.3
6.4
6.1
14.2

7.0
8.0
6.0
8.3
7.0
12.8

9.4
7.5
6.5
9.5
8.1
14.6

9.9
11.8
12.2
12.3
12.2

Source: Eurostat

The  share  of  severely  materially  deprived  population,  i.e.  those  unable  to  afford  4  out  of  9 
basic items, decreased at the EU level from 11 % to 8 % between 2005 and 2010. The highest 
shares can be found in Romania and Bulgaria and both managed to reduce the share of severe 
materially  deprived  population  to  31 %  and  35 %  in  2010.  In  2011,  however,  the  EU  share 
increased again. 

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Between  2008  and  2011,  severe  material  deprivation  increased  most  in  Latvia3  (12  pp), 
Lithuania (6pp), Hungary (5pp) and Greece (4pp). In 2010, Ireland’s share increased by 2 pp 
to  7.5 %,  which  is  high  given  its  income  levels.  Spain,  with  a  slightly  lower  income  level, 
only  had  a  rate  of  4 %.  Poland  achieved  a  remarkable  reduction  of  its  share  of  severely 
materially deprived persons, from 18 % in 2008 to 13 % in 2011. 

For  a  more  detailed  analysis  of  changes  in  poverty  and  social  exclusion,  including  poverty 
depth, see Chapter 2 of the Employment and Social Developments in Europe 2012 Report4. 

3. 

THE REGIONAL IMPACT 

The crisis brought to an end a long period during which regional disparities in GDP per head 
and unemployment were shrinking. Between 2000 and 2008, regional disparities in GDP per 
head dropped every single year (see Figure 7). In 2009, those reductions in disparities came to 
a halt and grew in 2010 and 2011.  

Figure 7: Regional convergence and the crisis 

Regional  unemployment  rates  had  been  converging  from  2001  to  2007,  but  then  diverged 
every year from 2007 until 2012. The EU-15 have also witnessed increasing disparities since 
2007 for both GDP per head and regional unemployment. 

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Part of this increase may be due to a break in the series.  
http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7315  

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3.1. 

GDP and employment in the first three years of the crisis  

Two thirds of the regions suffered a contraction of GDP of up to -6 % a year between 2007 
and 2010. The ten regions where GDP shrank fastest between 2007 and 2010 include the three 
Baltic States and seven regions from seven different Member States (See Factsheet 5). GDP 
shrank by more than 3% a year in these regions. None of the Spanish or Greek regions appear 
among these regions. Spain does not appear in the top ten because it suffered a smaller GDP 
reduction than employment reduction. Greece does not appear in the top ten because most of 
the GDP contractions occurred after 2010. In 2012, Cyprus saw the start of a contraction in 
employment and GDP which is expected to continue into 2014.  

In several Member States, the capital region has the highest growth rate, including Bulgaria, 
Germany, Slovakia, and Poland.  

One out of two regions saw its total employment shrink over the same period. Employment 
dropped  by  more  than  4 %  a  year  in  the  Baltic  States,  three  Spanish  regions,  the  two  Irish 
regions and one region in Bulgaria (see Factsheet 5). The contraction in Greek employment 
happened only after 2010, which is why they do not appear among the worst affected regions. 

Overall, the link between regional GDP and employment change is weak during these years, 
as  it  takes  time  for  reductions  in  output  to  affect  employment.  In  addition,  several  policies 
were aimed directly at maintaining (part-time) employment during the crisis.  

3.2. 

Unemployment increasing especially in southern regions 

At  EU  level,  unemployment  rates  increased  from  7 %  to  10 %  between  2008  and  2012. 
Unemployment  rates  in  the  most  affected  Member  States,  however,  doubled  or  even  tripled 
with increases above 8 pp in five Member States and up to 17 pp in Spain (see Factsheet 6). 
Unemployment rates, in the five most affected Member States for this indicator, ranged from 
12 % in Cyprus to 25 % in Spain5. 

Unemployment  increased  significantly  also  in  Latvia,  Estonia,  Slovenia,  Slovakia  and 
Denmark.  On  the  other  hand,  unemployment  rates  actually  dropped  in  Germany  and  barely 
changed in Luxembourg, Malta, Belgium and Austria. 

Overall, more than four out of five EU regions were faced with an increase between 2008 and 
2010. Most saw the biggest increase in this period. More than one third of these regions have 
managed to reduce unemployment since 2010.  

In line with the recommendations in the European Economic Recovery Plan, several Member 
States set up measures to prevent excessive labour shedding, and to increasing the coverage 
and duration of benefits.  

Youth  unemployment  increased  from  16 %  in  2008  to  21 %  in  2011  at  the  EU  level  (see 
Factsheet  7).  In  52  regions,  one  out  of  three  economically  active  young  people  were 
unemployed. In 11 of those regions it was even one out of two, mostly in Spain and Greece. 
Also the share of people aged 15 to 24 not in employment, education or training (NEET) has 
risen:  between  2008  and  2011  NEET  rates  increased  in  almost  four  out  of  five  regions, 
especially in Romania, Greece and the UK (See Factsheet 8). 

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For a more extensive analysis, see the Employment and Social Developments in Europe Report 2012. 
http://ec.europa.eu/social/main.jsp?catId=738&langId=en&pubId=7315  

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3.3.  Migration slowing down 

Between 2004 and 2008, the number of residents living outside their country of citizenship in 
the  EU-27  increased  by  1.5  million  a  year.  As  a  result,  the  corresponding  proportion  of  the 
total  EU-27  population  grew  from  5.1 %  to  6.2 %.  For  the  years  2009  to  2011,  the  annual 
increase dropped to 0.9 million, leading to a share of 6.7 % in 2011.  

Between 2004  and 2008, Ireland, Spain, and Cyprus witnessed an increase of their share of 
foreign population of over 4 pp, mostly from the Member States who joined in 2004 or 2007. 
Over  that  period,  Italy,  Portugal,  Luxemburg  and  the  UK  also  experienced  a  substantial 
increase of the share of foreign citizens.  

The biggest effect of the crisis on migration was in regions that experienced largest inflows of 
labour migrants in the pre-crisis period. The slowdown in migration was strongest in Spain, 
Ireland,  Cyprus  and  some  regions  of  the  UK  and  Italy  (see  Factsheet 9),  but  remained 
positive.  Many  regions  of  Spain,  southern  France  and  northern  Italy  still  had  some  of  the 
highest levels of positive net migration.  

The crisis accelerated emigration in Lithuania and Latvia. In Poland, negative net migration 
became  less  negative  in  the  border  regions  and  positive  net  migration  of  the  capital  region 
increased.  The  negative  net  migration  was  shrunk  in  Romania  due  to  return  migration  from 
Spain. As the crisis continues to unfold, the increasing differences in regional unemployment 
rates and wages may still further affect migration.  

The rapid decline of employment in construction and industry contributed to the decline in net 
migration  in  Spanish  regions  and  in  Northern  Italy.  Net-migration  tended  to  drop  more  in 
regions with a high share of migrants from other Member States.  

4. 

THE URBAN IMPACT  

To analyse the urban impact, this report uses two spatial approaches: metro regions and cities.  

(1)  Metro regions are NUTS-3 regions that represent urban agglomerations of more 
than  250  000  inhabitants.  This  approach  allows  an  urban  interpretation  of  GDP 
and employment changes.  

(2) 

Cities  are  defined  at  the  local  level  and  capture  the  main  cities  in  the  EU.  This 
approach provides access to data on employment and poverty aggregated for all 
cities in a country.. 

4.1.  Metro regions mix resilience and vulnerability 
In two out of three Member States6, metro regions on average increased their GDP per head in 
PPS  relative  to  the  country  as  a  whole  between  2007  and  2010  (see  COM  Staff  Working 
Document, Figure 4). In the twelve Member States that increased their GDP per head relative 
to  the  EU,  their  metro  regions  outperformed  the  rest  of  the  country.  In  eight  of  the  twelve 
Member States that had a decline in GDP per head relative to the EU, GDP per head in metro 
regions declined faster than in the country as a whole.  

6 

This analysis excludes Luxembourg, Malta and Cyprus. 

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This pattern of faster GDP growth in growing economies and faster decline in most declining 
economies could mean that urban economies are more volatile and succeptible to booms and 
busts. 

Despite the strong overall performance of metro regions, over three out of five saw their GDP 
per head drop between 2007 and 2010 relative to the national level. Smaller metros lost most 
ground  with  74%  of  them  declining  relative  their  country.  Also  second-tier  metros  suffered 
with 54% losing ground. Only capital metro showed a stronger performance with only 30% 
losing ground.  
In most Member States, employment7 in metro regions was more resistant to the crisis than in 
non-metro  regions  between  2007  and  2010  (see  COM  Staff  Working  Document,  Figure  5). 
Only in Finland, Greece, Hungary and Latvia did employment in non-metro regions decline 
more slowly than in metro regions.  

Similar  to  GDP  per  head  changes,  not  all  metro  regions  experienced  stronger  employment 
change than their country. Only half of the metro regions experienced a milder employment 
decline (or faster employment growth) than the non-metro regions in their country. Slightly 
more  than  half  the  second-tier  metros  outpaced  their  country.  Slightly  less  than  half  of  the 
smaller  metros  performed  better  than  their  country.  Capital  metros  performed  much  better: 
nine  out  of  ten  had  with  a  stronger  employment  performance.  Nine  capital  metros  even 
achieved employment growth despite a decline in national employment.  

In the UK and Spain roughly half of the metro regions had a worse employment performance 
than  the  non-metro  regions.  In  Greece  and  Hungary  almost  all  metro  regions  performed 
worse. In the majority of the Member States, however, all or most metro regions had a better 
employment performance than the non-metro regions. This was particularly evident in Poland, 
Slovakia, the Czech Republic, Romania and Bulgaria..  

In these first three years of the crisis, most metro regions showed themselves to be resilient, 
especially  the  capital  city  metro  regions.  The  second-tier  metros  performed  less  well.  The 
smaller metros proved quite vulnerable with the majority lagging behind in terms of change in 
GDP per head and change in employment. 

4.2. 

Cities in crisis 

Poverty  and  social  exclusion  are  concentrated  in  cities,  especially  in  North-western  Europe. 
The crisis has further intensified this concentration. The at-risk-of-poverty-or-social-exclusion 
(AROPE) rate increased by 1 pp in cities in the EU, compared to an increase of 0.5 pp outside 
cities (see Figure 8).  

7 

This analysis excludes Luxembourg, Malta, Cyprus and Italy. 

EN 

13 

   EN 

 
                                                 
Figure 8: Change in the risk of poverty or social exclusion, 2008-2011 

Change in the risk of poverty or social exclusion, 2008-201
AROP
EU27

AROPE

SMD

LWI

Cities
Other areas

EU15

Cities
Other areas

EU12

Cities
Other areas
Source: Eurostat

1.0
0.5

1.2
0.9

-0.4
-1.0

0.6
0.5

0.6
0.3

0.3
0.8

0.9
1.1

1.2
1.4

-0.3
0.3

0.5
0.3

0.7
0.9

-0.7
-1.5

In 2011, people living in cities in the EU-15 were at greater risk of poverty or social exclusion 
than  those  living  outside  cities  (see  Figure  9).  Also  the  three  components  of  this  risk  are 
higher in cities than outside. In the EU-12, the situation tends to be the opposite. People living 
in cities have a considerably lower risk of poverty or social exclusion.  

Figure 9: Risk of poverty or social exclusion in cities, 2011 

EU27

AROPE

AROP

LWI

SMD

Cities
Other areas

EU15

Cities
Other areas

EU12

Cities
Other areas
Source: Eurostat

23.3
25.0

23.1
21.9

24.1
34.5

15.7
18.0

16.8
16.6

9.9
22.2

11.0
9.1

12.0
9.2

6.5
8.9

8.4
9.2

6.8
5.3

16.5
20.8

Severe material deprivation is higher in cities in 18 Member States. Very low work intensity 
is more prevalent in cities in 15 Member States (see Factsheet 10). The poverty risk is higher 
in cities in 10 Member States.  

The high share of very low work intensity households in cities with their high concentration 
of jobs is somewhat paradoxical. This may be due to skills mismatch, precarious jobs or the 
higher share of one-person households in cities. It may also be related to the higher proportion 
of residents born outside the EU in cities.  
In  11  of  the  EU-15  Member  States8,  people  born  outside  the  EU  were  much  more  likely  to 
live in a household with a very low work intensity. In 2010, the very low work intensity rate 
of those not born in the EU was at least six pp higher than for people born in the country they 
are living in. Many non-EU born persons face multiple barriers to entering the labour market, 
such  as  not  speaking  the  local  language,  lack  of  skills,  lack  of  recognition  of  their 
qualifications and discrimination.  

8 

The only exceptions were Italy, Greece, Portugal and Luxembourg. 

EN 

14 

   EN 

 
 
 
                                                 
As  with  poverty  and  social  exclusion,  cities  in  the  more  developed  Member  States  tend  to 
have lower employment rates and higher unemployment rates than towns, suburbs and rural 
areas  (see  Figure  10),  while  the  opposite  is  the  case  in  less  developed  Member  States.  The 
crisis has not altered this pattern.  

Figure 10: Employment and unemployment in cities and other areas, 2008-2011 

Employment rate, 20-64

Unemployment rate

2011

Change 2008-2011

2011

Change 2008-2011

EU-27

Cities
Other areas

EU-15

Cities
Other areas

EU-12

Cities
Other areas
Source: Eurostat

64.5
64.0

65.0
66.0

62.4
58.3

-1.8
-1.9

-1.7
-1.6

-1.4
-1.8

10.1
9.4

10.3
9.1

9.0
10.3

2.6
2.6

2.6
2.5

3.3
2.9

5. 

COHESION POLICY AND THE CRISIS 

This  report  outlines  a  few  of  the  key  issues  that  cohesion  programmes  should  consider  for 
2014-20 period.  

The  crisis  has  made  it  more  difficult  to  reach  the  Europe  2020  goals  due  to  reduced 
employment rates and increasing poverty and social exclusion. Moreover, widening regional 
disparities are undermining one of the key goals of the European Union and Cohesion Policy.  

Although  some  Member  States,  such  as  Germany  and  Poland,  have  escaped  the  crisis 
relatively unscathed, most will face more problems and fewer public resources. These include, 
for many if not most Member States: 

•  GDP and employment levels which have not yet returned to pre-crisis levels 
•  Higher levels of unemployment, poverty and exclusion  
•  Reduced household income, which depresses consumption and imports 
•  Unprecedented levels of public debt and the need for fiscal consolidation 

The report shows that the intensity of problems varies significantly throughout Europe. This 
suggests  that  the  design  of  future  cohesion  programmes  should  reflect  these  differences  to 
maximise impact and target problems where they are more acute.  

Against this background, the future cohesion programmes will have to put particular emphasis 
on  growth-enhancing  and  job  creating-investments.  Only  a  stable  and  strong  recovery  can 
reduce the unemployment rates.  

This is why the Commission is proposing to concentrate resources on a few, important areas 
such as employment (particularly for young people), training and education, social inclusion, 
innovation and SMEs, energy efficiency and a low-carbon economy and is open to expand it 
to ICT infrastructures and digital growth measures 

EN 

15 

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Exports and foreign direct investment constitute a major engine of growth in less developed 
Member States, helping to create jobs and transferring knowledge and technology. SMEs, one 
of the main target groups of Cohesion Policy, are particularly affected by the deteriorating the 
business  environment.  In  a  context  of  low  internal  demand,  exporting  more  goods  and 
services  will  help  to  revive  growth.  Investments  in  innovation  and  a  smart  specialisation 
strategy could improve the performance of this sector.  

The construction sector will continue to suffer from the consequences of the banking crisis, 
owing  to  limited  access  to  credit,  the  bursting  of  the  housing  bubble,  and  the  reduced 
disposable household income and income security. Investing in energy efficiency of buildings 
could help to restore some of the jobs lost in this sector.  

The  risk  of  poverty  or  exclusion  increased  at  EU  level  and  may  continue  to  rise  due  to  the 
delayed impact of the crisis on poverty and exclusion.  

Fiscal consolidation will further increase the role of Cohesion Policy as an important source 
of  public  investment  in  the  period  2014-20.  In  fact,  in  many  of  the  less  developed  Member 
States  and  regions,  cohesion  funding  already  represents  more  than  half  of  their  public 
investment.  The  Commission  urges  Member  States  and  regions  to  start  preparing  the  new 
programmes  without  delay  so  that  no  time  is  lost in  ensuring  that  projects  needed  to  revive 
economic activity and support social inclusion can start at the beginning of next year.  

EN 

16 

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