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Regional growth closes gaps in income and employment - 18/06/2008

A researcher at the environmental technology resource centre in Luxembourg

Poorer regions catching up, profiting from expansion of fast-growing sectors

The EU must invest more in research and development and in higher education to stay competitive in the global economy, says a Commission report on economic and social cohesion published on 18 June.

The Commission also announced the results of a public consultation on its cohesion policy, confirming strong support for even more ambitious post-2013 plans. The consensus was the policy should focus on innovation, education, support for small and medium enterprises, EU-wide infrastructure and the fight against climate change.

Less than a quarter of EU residents aged 25-64 are in the ‘highly educated’ bracket, and many live in or near cities, making the recruitment of ‘knowledge workers’ a major challenge in less developed regions. Yet an educated work force is important for economic growth. Demand is particularly high for science and technology backgrounds in health, education and high-tech manufacturing. The EU spends only 1.2% of its GDP on higher education, not even half the 2.9% invested by the United States.

The EU also lags far behind the United States in spending on research and development, notes the report. It calls for strong investment in research and development to foster innovation and raise productivity.

But there is good news for less developed regions. Many are getting a boost from growth in three fast-growing sectors – financial and business services; trade, transport and communication; and construction. This could help them catch up with more prosperous regions.

High-tech manufacturing is the sector where the EU retains a global edge. It includes the manufacture of electrical and optical equipment, surgical equipment, aircraft, spacecraft and pharmaceuticals.

Disparities in income and employment across the EU have narrowed in recent years, driven by rapid economic growth in the poorest regions. Between 2000 and 2005, per capita GDP in these regions grew 50% faster than in the rest of the EU. The unemployment rate dropped by three percentage points over the same period. These regions are still undergoing major economic restructuring, with jobs shifting from agriculture to services.One of the EU’s overarching goals is to ensure that its 27 countries develop together. Nearly 36% of the EU’s 2007-13 budget, or € 347b, is devoted to this ‘cohesion policy’.

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