Europe of the regions is dead, long live Europe of the industries
If you were still a “Europe of the regions” believer in spite of all the signs in the direction of re-nationalisation of European policies; the latest communication from the European Commission “A Competitiveness Compass for the EU” could leave the impression that it is the final blow to the idea that the European project also takes place at the local level, closer to the citizens.
There had been many warning signals: in the last years, the EU has changed the “delivery model” of its funds towards a de facto recentralisation. After the National CAP Strategic Plans, the National Social Climate Plans and the National Recovery and Resilience Plans, there was not much doubt anymore that the European Commission is looking for simplifying the life of its own administration, with a single contact point in Member States, preferably budget Ministries. Then, however the Member States decide to organise and draft the national plans, in consultation or not with the subnational government levels and the most relevant stakeholders, this is outside of Commission’s remit.
With the new Competitiveness Compass, the Union at least reaffirms a common European objective that governments, at all levels, should follow. And there is a broad consensus that industrial renewal, research and innovation, transitioning to low carbon economies are all very important priorities that could contribute to improving life of Europeans – because that is the end goal, right? But there is one element critically missing for this vision to become true: a territorial vision.
Start-ups, universities, research labs, factories, all still need to be physically located somewhere: in a municipality, city, region. Somewhere with access to a fast broadband, somewhere with efficient mobility and transport solutions for employees commuting, receiving or shipping products, somewhere with good public services, ensuring a quality of life that would attract or retain the skilled workforce needed, and somewhere the taxes on these economic activities may contribute to a municipality’s revenues and therefore effectively benefit the entire local community[1].
And while the communication clearly identifies the need for public investments to de-risk and unlock private investments, it is completely overlooking the major role of local and regional governments to drive public investments. Subnational governments are responsible for 53% of the total public investment in the EU[2], and yet they are increasingly required to contribute to the fiscal consolidation efforts of Member States, steadily reducing their investment capacities.
One of the major risks with a complete lack of territorial vision, is the major downside of the Single Market: the concentration of capital, wealth and work forces in a few already attractive places, leaving entire regions behind the competitiveness run. The Cohesion Policy was created especially to prevent this type of concentration and channel EU public investments in places that would otherwise fail to attract businesses, investments or researchers.
Mayors, counties or regions’ local leaders know the best their local ecosystem and the development opportunities in their territories. The Competitiveness framework should rely on them and suggest not another centralised national plan, but territorial competitiveness plans, ensuring a broad territorial coherence of investments for growth and competitiveness. Yet, the few mentions of local and regional governments in the communication are to say that they should play their part in the simplification efforts and acceleration of administrative procedures at the service of the private sector.
And the Competitiveness Compass is probably just a foretaste of what the Commission is preparing for the entire architecture of EU funds in its next multi-annual financial framework. Writing in the communication “The Multiannual Financial Framework (MFF) proposal will be the opportunity to further streamline access to and simplify EU funding instruments – currently fragmented over too many programmes – across the board”, the Commission is confirming the leak and rumours in the direction of having a single national plan (yes, another one) for all currently shared management fund (i.e. all Cohesion Policy funds, and the Common Agricultural Policy). This could be a worst-case scenario: investments and reforms priorities decided at top European level that make no sense for the people and the places where the funds are spent. This is already happening with the European Semester[3].
The only solution to reconcile the overarching European goal of competitiveness, and the actual needs and priorities of Europeans wherever they want to live, is to enshrine multi-level governance in the competitiveness agenda and the upcoming long-term budget of the EU.
[1] European Joint Research Centre , Local taxes on economic activity in municipalities in EU Member States, European Joint Research Centre, https://publications.jrc.ec.europa.eu/repository/handle/JRC129095
[2] OECD (2024) Subnational governments structure and finance, OECD, Paris, https://www.oecd.org/content/dam/oecd/en/topics/policy-issues/subnational-finance-and-investment/subnational-governments-infrastructure-finance-2024.pdf/_jcr_content/renditions/original./subnational-governments-infrastructure-finance-2024.pdf
[3] CEMR, Top level decision – local consequences : The European Semester explained, 2024 https://ccre-cemr.org/wp-content/uploads/2024/11/EU-Semester-Study-2024.pdf
Advisor – Territorial Cohesion & Local Finances
