A bit more Europe, please!

General elections took place in Austria last Sunday. It was a national election campaign without much emphasis on EU issues—unfortunately, as it is argued in this article. (Article in German) Read more

New EU Commission – What’s in for the Regions?

€ 351.8 billion. That’s how much the EU has assigned to Cohesion Policy funds in the period 2014 – 2020. € 351.8 billion. The number shows that the Commission post for Regional Policy is more important than many assume. While the general public has an eye on posts for trade, budget, digitalization or security, the portfolio for regional policy is a secret gem. With nearly one third of the overall EU budget, the European Regional Development Fund (ERDF) and the Cohesion Fund (CF) largely shape our everyday life in the EU: Investments in infrastructure like roads and digitalization, renewable energy sources or projects in education and arts are aimed at supporting “job creation, competitiveness, economic growth, improved quality of life and sustainable development” [1] in the EU. Basically, these funds make the benefits of living in the EU most tangible.

So, while everybody is discussing the candidates for budget, digitalization, security etc. we took a closer look at those reaching for the Regional Policy portfolio. 

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Are European and regional elections really subordinate to national politics?

European elections are just around the corner. Like regional elections, they have been described as second-order elections, strongly influenced by and subordinate to national politics. With multi-level governance becoming increasingly commonplace in Europe and the world, does the assumption of second-orderness still hold true? Or are we witnessing the emergence of increasingly independent political arenas? Read more

The effect of Brexit on the wealth of European regions


A recent study by the Bertelsmann foundation has quantified the economic impact of Brexit across European countries and regions… and the prospect looks rather grim.

All of United Kingdom (UK) suffers, but “Leaver” regions more

The inescapable reality of Brexit in both of its forms, hard or soft, will have far-reaching welfare consequences for all European regions. This is the conclusion of a study conducted by the Bertelsmann Stiftung quantifying the welfare effects, measured as changes in income, as a consequence of trade frictions arising out of Brexit.

Unsurprisingly, the most affected country will be the UK, which would lose 873 euros per capita translated into 57 billion euros of aggregate welfare for a hard Brexit. A soft Brexit would severely mitigate the welfare effects leading to losses of 491 euros per capita and an aggregate amount of 32 billion euros. The Brexit would also translate into an exodus of around 750,000 and 400,000 people for a hard and soft Brexit respectively.

At a regional level, the findings are more heterogeneous. Regions closer to the rest of the continent would suffer the highest welfare losses, being East Anglia (2.54% loss), Kent (2.53% loss) and Essex (2.48% loss) at the top when measured in relative terms. The smaller and more economically productive regions lose more than larger and less productive ones, as the example of London proves, where a hard Brexit would entail a loss of 1,700 euros per capita in absolute terms. In relative comparative light, however, London is the region with the smallest percentage loss (1,66%) as it holds the highest GDP per capita UK wide. These results could be regarded as surprising, as London is the region in England with the highest percentage Remain vote (59,9%) and would still suffer the lowest relative welfare loss. The three most damaged regions by a hard Brexit scenario voted to leave the European Union (EU), adding to the dramatic irony of Brexit: those who enacted it will pay the highest price.

While Europe suffers, the rest of the world profits

Image taken from: Estimating the impact of Brexit on European countries and regions, 2019 (Bertelsmann Stiftung)

With regard to the effect of a hard Brexit on the rest of Europe, geographical proximity correlates with higher welfare losses (see Figure 1). The closer a region to the UK, the higher the negative economic impact of Brexit. In the specific case of Germany, Schleswig Holstein would lose the most welfare in relative terms (0.3%), followed by densely populated regions in Nordrhein Westfalen such as areas around Cologne and Düsseldorf. In terms of aggregate welfare losses, Germany and France would lose amounts of 9,5 billion and 6 billion euros each year respectively.

A European loss

There are not only losers arising from Brexit. The disruption of European value chains, leading to increased prices, would benefit other world regions. As an example, US and Chinese welfare could rise by around 13 and 5 billion euros a year respectively as a result of a hard Brexit. Regarded from any standpoint, one observation seems clear: Europe will surely lose. The extent of the impact depends on trade volumes and geographical closeness to the EU, but every single European region will endure welfare losses.

Social movements, populist parties, and regional inequalities

Horst Seehofer (CSU) called it his „most important achievement for Bavaria“, Gregor Gysi (DIE LINKE) however the creation of a „competitive federalism“. In Germany, reforms to the federal system over the last 15 years have reshuffled the cards between the German federal level and the sub-national one strongly. At least since the 1990s regional politics in Europe have been shaped by competition and location politics. Instruments such as inter-state fiscal adjustments or the European Regional Funds, that aim at regional cohesion, are more and more under critique. Yet, European regions are shaped by social and economic inequalities, which have intensified strongly since the financial crisis of 2008.  Whereas the effects of austerity politics on social inequality and the reduction in welfare state programs (most important element for social security) are dealt with in political science, reforms of regional redistribution mechanisms in post-crisis Europe remain understudied.

 

That is where my PhD thesis in the project REGIOPARL focuses on. In the upcoming three and a half years I will investigate the interplay of austerity politics, regional inequalities and redistribution mechanism in a comparative manner. What role do inter-state fiscal adjustment programs play in times of financial crisis and how did austerity policies affect sub-national entities differently? Are regional redistribution programs able to retain a room of maneuver for regional governments during a crisis?

 

Besides economic turbulences, Europe has also seen an unprecedented rise of new political actors (often with populist tendencies). Yet also in this context regional variations in election turnouts and the growth of social movements remain largely unstudied. The second part of my project will, therefore, focus on the relation and regional variation between austerity policies and populist political forces in Europe and their policy proposals for reforming national and European redistribution mechanisms.

 

I will continuously publish recent results and updates from my PhD project on this blog. Stay tuned!