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4 Factors determining real convergence

4.4 Infrastructure endowment

Most public investment in Member States as well as that supported by the Structural Funds goes on infrastructure. An adequate endowment of infrastructure is a necessary, but not sufficient, condition for the economic development and competitiveness of a region, an important factor determining both the location of economic activity and the kinds of activity or sector which develop. Investment in infrastructure is essential for reducing the effect of distance between regions, especially between those on the periphery and those in the centre. Other conditions, however, need to be met in parallel if the increase in accessibility in peripheral regions is not to become a threat rather than an opportunity.

Transport infrastructure

Transport infrastructure, in particular, plays an important role in reducing regional disparities and improving the competitiveness of regions by facilitating trade and the movement of labour. Improvements in infrastructure reduce both the time and the cost of transporting goods and so increase productivity and alter the comparative advantage of being located in different regions. Equally, they have a similar effect on 'travel to work' time, so extending the boundaries of local labour markets and increasing effective labour supply.

Transport infrastructure, however, remains largely the responsibility of government and is still an important component of structural and regional policy. Despite the privatisation of particular means of transport over recent years (especially high-speed rail and motorways), the cost of investment in basic infrastructure remains too high to be covered by the private sector. In addition, when deciding investment in new infrastructure, the subsequent recurrent cost of maintenance should be taken into account.

Road transport remains dominant

Roads are the predominant means of travel. In 1997, they accounted for 86% of all journeys made in the EU (measuring these in terms of passenger miles) and 94% of those made by land. Moreover, the transportation of goods by road is continuing to increase, accounting for 43% of all transport of goods in 1997 (measured in terms of freight-miles) as against 31% in 1970. Excluding that carried by air and sea, they accounted for 74% of all freight transported in the EU, while only 14% went by rail and 12% by inland waterway and pipeline.

The development of motorways has increased the density of road transport. Although the scale of the road network at Union level has remained broadly unchanged, the length of motorways increased by 40% over the 10 years 1988 to 1998, due notably to growth in the 4 cohesion countries, where many roads have been converted to motorways. Over this period, the density of motorways1 in these four countries taken together rose from below the Union average (43%) to around the same level, the largest increase occurring in Spain, where the density rose from 63% of the average to 136%. On the other hand, while there was also substantial growth in Ireland and Greece, density is still well below the average (12% of the average in Ireland in 1998 as against under 2% in 1988, and 17% in Greece as opposed to their being no motorways at all in 1988).

At the regional level, growth has followed a similar pattern. Although the density of motorways remains higher in central or the most developed regions in each country than in Objective 1 or peripheral regions, growth has been concentrated in the latter.

Motorway networks are less developed in the Nordic countries (in Finland, density is only 41% of the EU average and in Sweden, 65%), especially in the most northerly, sparsely populated regions covered by Objective 1, reflecting their geographical, and demographic, features.

The EU average, however, should not be regarded in itself as an objective to be reached in some kind of mechanical way. Every region has its own specific needs in this regard, in terms of both the overall scale of transport networks and particular modes of transport. A minimum level of transport infrastructure is necessary for regional competitiveness, but this is not necessarily the same level in all regions. Moreover, quality and safety may be just as important for development (See Graphs 10 and 11 on the length of roads and motorways)

Reduction in rail transport despite modernisation

The importance of rail transport in the Union has diminished in spite of the modernisation of the network in a number of countries. In 1997, rail accounted for 6% of all passenger travel in the EU as against 10% in 1970. The decline in freight transport by rail has been even more pronounced, falling from 21% in 1970 to 8% in 1997, and between 1990 and 1997, the amount of goods carried by rail fell by 7% whereas the amount carried by road rose by 29%.

The decline of traffic has been accompanied by a slight decline in the size of the rail network, as measured by the miles of track, and little reduction in either national or regional disparities in the EU. Indeed, in the cohesion countries, rail density2 declined from 66% of the EU average in 1988 to 61% in 1998, due in particular to the closure of many lines in Spain and Portugal.

Nevertheless, the rail network has been modernised to some extent in the cohesion countries. In 1999, 24% of lines were double track as against 17% 10 years earlier and 39% were electrified, up from 32% in 1988. The rate of modernisation was highest in Spain, while in Greece both the length and standard of track remained very low (45% of the EU average as regards rail density, with only 12% of lines double track and no lines at all electrified). This, however, is due in some part to the geographical features of the country - the large number of islands and the mountainous areas(See graphs A.14, A.15 and A.16, in annex )

Sea transport: vital for island and coastal regions

The cost of infrastructure investment for sea transport is limited to the construction, maintenance and modernisation of ports which tends to be much less costly than road construction. In addition, although slow, sea and inland waterway transport is the least costly and most envoronmentally-friendly form. Nor is it affected by problems of congestion or capacity.

Sea transport accounted for 70% of the transportation of EU visible exports in 1997 and 30% of intra-Community trade. By contrast, only 7% of freight in the EU went by inland waterway.
Sea transport remains particularly important for transportation around the coasts of the EU and between the mainland and the many islands, even after the construction of several fixed links - the Oresund and the Channel Tunnel, in particular. In 1998, it accounted for 41% of all freight transported in the EU, both within and between Member States. The UK was responsible for 20% of this, Italy for 16% and the four cohesion countries together for 22%.

The volume of traffic going through the main ports increased significantly between 1990 and 1998, especially through those of medium size, including, in particular, Algeciras in Andalucia and Dublin, though traffic is still well below that handled by the largest ports in northern Europe, Rotterdam (where it is 10 times larger) and Antwerpen (3 times larger).

More notably, the growth of container ports has been more evenly spread across Europe. Five of the 12 largest ports in the EU are in the Mediterranean, including Giora Tauro in Italy, and these have experienced higher growth than those in northern Europe. The bulk of container freight is transported by road from and to the ports, except in Belgium and the Netherlands, where more goes by inland waterway. In France and Germany, although rivers and canals are not used to their full potential, there is a relatively high use of rail. By contrast, in the cohesion countries, almost all container transport is by road (89% to 98%).

The importance of intermodal transport is still very low in the EU as a whole. Only 12% of goods are conveyed from ports to inland destinations by means other than road (See Table A.20 , in annex).

Transport systems in the candidate countries: outdated infrastructure developing differently than in the EU

Although the same broad tendencies are apparent in the candidate countries as in the Union, in terms of shifts between modes of transport, the starting-point and the overall development of transport there is very different. In the first place, the volume of traffic stagnated during the 1980s and declined markedly during the 1990s, reflecting similar trends in the economy and in trade. The volume of freight transported fell by 22% between 1980 and 1998, whereas it grew by 52% in the Union over the same period.

As in the Union, however, road transport has become predominant. Despite the overall decline in the volume of goods transported, freight going by road increased by 19% between these years, though this is still much less than in the Union where it doubled. Moreover, in 1998, only 47% of freight went by road as against 74% in the Union, while rail transport, though in decline, remained important, accounting for 42% of the total as against 14% in the Union. Indeed, most freight still goes by rail in the Baltic States and Slovakia, whereas much the larger part goes by road in the Czech Republic and Bulgaria.

So far as sea transport is concerned, the main ports in the CECs are Constance, in Romania, Ventspils in Latvia and Gdansk and Szceczin in Poland. The amount of traffic going through these is similar to that handled by the medium-sized ports in the Mediterranean and only 5-10% of that handled by Antwerpen. Nevertheless, the Baltic ports are growing rapidly.

Inland waterways are of marginal importance except in Romania and Slovakia, where they account for over 10% of all goods transported.

Transport infrastructure in the candidate countries is in overall terms less extensive than in the Union, and the rail network, though representing a larger proportion of the total, is in a poor state. In an enlarged Union of 27 countries, the main features of the system in the candidate countries are as follow:

  • in the case of roads, all the countries, except Estonia, Lithuania and Poland, have a significantly less extensive network than the EU average. In Poland, it is similar to that in Ireland, while in Estonia and Lithuania as well as in the Czech Republic and Slovakia, it is more extensive than in three of the cohesion countries (see Graph A.17, in annex);

  • there are in general many fewer motorways than in either the EU as a whole or the cohesion countries. While motorway construction over the past 10 years has increased markedly in the Union, and in the cohesion countries, in particular, it was minimal in the candidate countries. The density of motorways is highest in Slovenia and Lithuania, where it exceeds that of Portugal, whereas in Poland, which like Ireland is well endowed with roads, they are almost non-existent;

  • railways are the most developed means of transport. The total length of track is in general greater than in the EU and almost double that in the cohesion countries. In the Czech Republic, it is twice the EU average and in Hungary, Slovakia, Latvia and Poland, 1 times. Nevertheless, in terms of the standard of the network, the comparison is much less favourable. The proportion of electrified lines is well below the EU average except in Bulgaria and Poland, while, as in the cohesion countries, there are also many fewer double-track and high-speed lines.

The main problems to address, therefore, if transport networks are to further territorial balance in an enlarged EU are:

  • the ageing of the infrastructure in the candidate countries because of lack of investment in the 1980s and 1990s;

  • the need to integrate networks in the candidate countries into the EU transport system as a whole as well as in the trans-European networks;

  • the need to strengthen the intermodal aspect of transport systems, especially as regards links between ports in peripheral regions and less favoured areas inland. In contrast to the candidate countries, infrastructure in the cohesion countries tends to be modern and better integrated with that in the rest of the EU, because of the large-scale investment in the 1990s. Nevertheless, the rail network remains less developed than elsewhere and links between different modes of transport, which, inter alia, are important for internal communication within less favoured regions, are inadequate.


The availability of energy in a region, the flexibility of supply in terms of the diversity of different sources and a high degree of self-sufficiency are important for regional development, in that they help define the limits to growth and employment. In addition, the type of output produced, the consumption of energy per unit of output and the capacity to reduce environmental pollution will determine the ability of a region to develop in a sustainable way.

Over the past 10 years, energy consumption in the Union has continued to increase as GDP has grown. Energy intensity, measured by the amount of energy used per unit of output has declined, though less significantly than in the 1980s. Between 1988 and 1998, GDP in the EU grew by 25% in real terms while energy consumption increased by 6%, a reduction in energy intensity.

Consumption of energy per head of population in the Union increased by 1.6% between 1988 and 1998, the rise being particularly marked in the cohesion countries, which started the period with a level under half the EU average but which increased consumption by almost 40% over these 12 years. This increase was largely the result of their economic growth and the energy intensity of consumption. This was especially the case in Portugal and Greece, the two countries with the worst performance in terms of energy use. Even though consumption per head in these two countries remains well below the EU average, mainly because of the their low level of GDP per head, consumption per unit of GDP increased substantially instead of declining as elsewhere. High economic growth in Spain was accompanied by an increase of over 30% in total consumption of energy and a small rise in the energy intensity of consumption. This, nevertheless, remains below the EU average, as it does in Ireland, which experienced a significant reduction in the energy intensity of consumption (of 33%)(See Graph A.18, in annex ).

Water and the environment

For economic development to be maintained over the long-term it also needs to be sustainable in environmental terms. If the growth of an economy has damaging effects on the environment, this will ultimately limit its development. Accordingly, the availability of resources and the measures taken to protect the environment are factors which determine the long-run performance of regional economies and which, therefore, merit special attention.

Reserves and use of water

In the EU, estimates of renewable water reserves are relatively low - around 3,200 cubic metres per head of population a year as compared with an average in the world as a whole of 7,300. Nevertheless, the European countries have adequate reserves in overall terms, since the annual rate of abstraction is only around 660 cubic metres per head.

The distribution of reserves, however, varies significantly between regions. Reserves per head are 5 times greater than average in Finland and Sweden, as well as Norway, and 3 times greater in Ireland, while they are only around half or less of the average in Denmark, Belgium and Germany (see Graph A.19). In relation to land area, the variation in reserves is wider still. In Norway, they are 60 times larger than in Spain, 30 times larger than in Sicily, eastern Greece, the central parts of Poland and Hungary and the areas around the Romanian-Bulgarian border.The availability of water reserves, however, depends not only on their quantity but also on the level of use, which depends, in turn, on a number of factors, such as the kind of industrial and agricultural production, the level of household consumption and the potential for treatment and re-use of waste water. Across Europe as a whole (including the candidate countries and the European Economic Area as well as the EU), the overall rate of abstraction a year is only 16% of available reserves. Moreover, since a large part of the water abstracted is returned to the original source, net final consumption amounts to only 5% of reserves. In the EU, the situation is slightly less favourable, the annual rate of abstraction amounting to 21% of reserves and the net rate to just under 7%.

Water use varies significantly between Member States. The rate of consumption is relatively high in Belgium (43% of reserves) and Germany (35%) because of population density and high industrial use. In the Mediterranean countries, agricultural irrigation is responsible for most of the water extracted. In Spain, where the annual rate of abstraction is over 30% of reserves, 60% goes to agriculture, in Portugal, 52% and in Italy, 50%, while in Greece, the figure is as high as 80%. In Greece and Portugal, however, the overall rate of abstraction is relatively low (under 10% of reserves).

Nevertheless, it is the extent to which water abstracted is returned to its source which also determines the relative abundance or scarcity of reserves in each country. While more than 80% of water abstracted is returned to source in Belgium and Germany, in Spain and Italy, the figure is only 40%(See Graph A.20, in annex).

The treatment of waste water and household waste

Improvements in irrigation techniques in agriculture and in the treatment of waste water from industry and domestic consumers have increased the efficiency with which water reserves are used. In agriculture in the Mediterranean, new irrigation methods are enabling water to be re-used as well as treated, while the treatment of salt water is also likely to improve the relative situation in southern Europe.

Given that most of the population in Europe lives in towns and cities, it is important to pay as much attention to the damage that household waste disposal can do to the environment, as that caused by industry and agriculture. A policy of creating public awareness and of putting in place the necessary infrastructure to treat water and dispose of waste is essential to reduce the pressure on the environment.

So far as the treatment of domestic water is concerned, 90% of the population in the EU is connected to main water supply and 70% to main drainage. There are, however, large regional variations. Whereas in northern Europe as a whole, 90% of the population is connected to a main drainage system for treating waste water, in the cohesion countries, the proportion varies from 27% in Portugal to 58% in Greece (see Graph A.21, in annex). Moreover, in Belgium, it is only 32%. In the candidate countries, 40% of the population is not connected to a main water supply system and only 42% of waste water is treated, and only a small proportion of this to the level required by Community standards.

Household waste is treated in very different ways in different parts of the Union, in terms of whether it is incinerated, recycled, buried or simply dumped. Although the southern Member States tend to produce much lower levels of household waste than the rest of the EU (see Graph A.22, in annex), they also have much less in the way of treatment systems. Whereas 60% of household waste was recycled in the EU as a whole in 1995, and 80% in Germany and France, in Greece, the figure was only 5%, in Portugal, 30% and in Spain 45%.

Although the candidate countries have already introduced recycling of waste on a relatively large scale in order to compensate for their shortage of primary resources, nearly all of them are having difficulty meeting the recycling targets set out in the Community directive (50% of waste recycled by 2001 for current Member States). Recycling installations have not been modernised and a number have even had to be closed down because of lack of public funds. The Czech Republic, for example, currently recycles only 15% of the packaging waste produced, Slovenia, 29%, and Hungary, 32%. The situation is likely to deteriorate further in the future as the higher rate of economic growth, which will probably occur, could increase the amount of waste produced (according to the European Environmental Agency Report for 1999). In consequence, the support of structural measures in this area is required in order to sustain economic development in the enlarged Union.

  1. Density is measured by a composite index which indicates a region's endowment in relation to the EU average. Specifically, it is an arithmetic average of the number of miles of motorway relative to its land area and population.
  2. Measured in the same way as for roads, by a composite index of the length of track in a region relative to its land area and population in relation to the EU average.

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