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Are the eastern EU Member States catching up or lagging behind?

The European Commission published its 8th report on economic, social, and territorial cohesion. Published every three years, the report reveals how disparities between European countries have changed between the millennium and the pandemic and shows in which areas did the different regions catch up or lag behind. Analysis from Hype&Hyper.

If we open the report and look at the first graph, we can immediately see that Northwestern Europe is the most developed part of the continent in terms of GDP per capita, and the further the south or east we go, the less developed the regions are. But it is worth digging deeper into the paper as there have been significant differences between the regions over the last 20 years in catching up. Furthermore, the periphery of the continent is not at all homogenous.

Between 2001 and 2019, the most significant GDP per capita growth was in the post-communist states, with almost every region having a growth rate of 3-4%, while the southern Member States lagged behind the average European growth rate. The growth in the eastern Member States is mainly due to the economy’s structural transformation from agriculture to higher value-added sectors.

The employment rates in the eastern Member States have significantly increased over the past two decades. In 2020 only one or two regions had unemployment rates of around 10%, while in Southern Europe, this figure is 15-20% on average, and in some areas, it is higher than 20%. The report discusses the concept of labor market slack, which is intended to show what percentage of the labor force in the broad sense (aged 15-74 years) is unemployed or underemployed. While in the eastern Member States, this figure is around the European average of 14.5%, in Southern Europe, it is above 21% nearly everywhere. It should be added, however, that in the eastern Member States, there is a labor shortage in many sectors due to, among other things, migration to the West and lower wages.

Although life expectancy has improved over the past 20 years in the eastern Member States, the figures are still the lowest in this region. The Mediterranean countries overperform the rest of the continent in this respect with an average life expectancy of 82-83 years; what is more, in some regions, it is 84 years or more. The average life expectancy in the post-communist Member States is only 78 years. The stark differences are the most conspicuous between Greece and Bulgaria or Estonia and Finland, where there are 3-4 years differences between adjacent regions of the two countries.

There is still much work to be done to tackle gender inequality. According to the report, the largest gap in employment rates between women and men is in the eastern Member States; in some regions, the employment rate of men is 20% higher than that of women. Inequality is a huge issue in the southern part of the continent too, and there is still room for improvement in Northwestern Europe, where 7% more men are employed.

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Réka Pisla | Hype&Hyper

The better inclusion of women in the labor market is a globally important challenge as they are one of the largest untapped resources of global productivity. Housework and childcare are not included in productivity statistics, so as long as the social norm is that women stay at home with children, there will be a significant difference between men’s and women’s productivity. But there are also notable social differences between member states. In France, Spain, Portugal, Sweden, and Finland, roughly 50 percent of the representatives are women in the regional assemblies and similar bodies, while in the rest of the EU, especially in the eastern Member States, this figure is only 10-20%. However, there is a positive trend in women’s political participation in the eastern and southern Member States; in many cases, the increase was more than 14% between 2010 and 2021.

There has long been no question that Europe is aging. The continent’s population grew in the 1960s, 70s, and 80s because more babies were born than people died. However, since the 2010s, the natural increase has turned into a decline, and only immigration can ensure population growth. The share of the foreign-born population is lowest in the eastern Member States, at 4%, compared with 12% in Southern Europe and 16% in the north-western Member States. The decreasing rate of natural increase, which is already negative in many countries, is caused by the decreasing birth rate; the death rate has not changed significantly in Europe over the past 20 years. To sustain a stable population level, the fertility rate should be 2.1. Europe last reached this number in 1975, and today there is only an average of 1.5 live births per woman in the continent. Europe’s population pyramid looks like a light bulb, wide in the middle but narrow at the top and bottom. This tendency causes an avalanche of problems; fewer young people will have even fewer children, further exacerbating the demographic crisis.

Central and Eastern Europe is catching up. Capitals and other major cities of the post-communist region reached the Western European level in terms of development. Nonetheless, the Cohesion Report also shows that there is still much room for improvement and many tasks to do. And there is a lot of work for Europe as a whole, such as environmental challenges, globalization, and hyperconnectivity within the continent, which turned out to be unsustainable in its current state during the pandemic. The green, digital, and demographic transitions can also lead to new inequalities that must be addressed.

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