The European Union’s economy faces major challenges caused by the green and digital transitions. The next phase of transformation will be felt even more acutely by citizens. We know that the social impact of these transformations will vary across Europe since countries and regions are at different stages of digitalization and have varying readiness for decarbonizing their economies. Too great a disparity in economic opportunities and development possibilities jeopardizes the attractiveness of the European Union and its ability to act.

In the past, the European Single Market has made a decisive contribution to the development of member states’ economies and the well-being of Europeans. But the benefits of the Single Market are not evenly distributed among the countries and regions of the EU. The post-pandemic economic recovery will not even out the disparities. And while the overall economic fallout from Russia’s war on Ukraine is still difficult to predict, the impact will also be different across the EU.

What are the likely effects of European initiatives and policies to green and digitalize the European economy on regional development and cohesion in Europe? And what can European policymakers do to strengthen European cohesion along the way?

As part of The State of the Union conference organized by the European University Institute (EUI), Katharina Gnath from the Bertelsmann Stiftung moderated an expert panel on May 5th to gain insight into some of these questions with

A video recording of the panel is available here:

A Summary of the Panel Discussion: Understanding the Green and Digital Transition

Faced with the need to reduce lingering regional disparities in the EU and to support the greening and digitalization of the single market, cohesion policy needs to navigate a difficult path ahead. In our panel discussion, Sven Giegold, Ivailo Kalfin and Julia Bachtrögler-Unger grappled with the different challenges posed to cohesion policy by the green and digital transitions. Despite some disagreement on how to guide cohesion policy in the years ahead, the panelists agreed on the utmost importance of both greening and digitalizing the EU’s regions.

Sven Giegold argued that the green and digital transitions are in the self-interest of the EU’s members and are essential transformations to preserve the EU model of economic and social integration that is under stress from globalization. Greening and digitalizing are a way of defending common European values, he said and helping those regions and citizens acutely impacted by the consequences will help prevent future political strain.

Ivailo Kalfin presented statistics showing that the fiscal discipline implemented in the wake of the 2008-2009 financial crisis led to a longer recovery and more persistent disparities than the more recent COVID crisis, to which the EU adopted a stimulus approach. This response to the COVID crisis helped lift the EU’s economy faster and helped reduce further regional economic disparities, Kalfin argued. The green and digital transition must move forward, he concluded, despite other crises. Cohesion policy, Kalfin said, which helps regions struggling with economic development, has worked well so far and must continue to be guided to advance economic recovery in the EU.

Julia Bachtrögler-Unger emphasized that, while cohesion policy has worked, stubborn disparities remain. Cities have performed better than rural regions and eastern EU regions have grown more quickly than those in other parts. For example, some middle-income regions in the west and south have found themselves in development traps, and these need special attention to help affected regions escape from these traps and to prevent others from falling into similar situations. Finally, Bachtrögler-Unger said, other green and digital investments from the EU must be tracked to make sure everything is working in harmony.

Which is better underway—the green or digital transition?

When it comes what kind of policy approach the green and digital transitions need, Sven Giegold and Ivailo Kalfin disagreed somewhat on the nature of the two. Ivailo Kalfin believes that the digital transition will be guided primarily outside of high-level policy—it will be driven by private investment and local efforts at modernization. On the other hand, he said, the green transition needs strong top-down policy. Sven Giegold, in contrast, believes that the digital transition must be pushed by strong top-down policy, while the green transition can in part be carried by the fact that green energy continues to become more cost-competitive.

What to do about regions left behind?

In response to a final question about how the EU can do better to help left-behind regions, Ivailo Kalfin argued that cohesion funds often go to middle and high-income EU regions, and these are not the regions who will be challenged most by the green and digital transitions. We must be conscious, he cautioned, of which regions and which citizens will bear the costs and target cohesion policies accordingly.

On the topic of solidarity, Sven Giegold remarked that EU members who are calling for large sums via cohesion funds must also not stand up against greening measures like carbon trading and Fit for 55 targets. These members cannot have it both ways, he emphasized, they must be on board with greening their economies.

The panelists stressed that it would be difficult road ahead, but the green and digital transitions have far-reaching benefits for EU citizens going beyond economic prosperity to ensuring European sovereignty and political and social harmony across the EU.

We appreciate Sven Giegold, Ivailo Kalfin and Julia Bachtrögler-Unger for taking part in this panel and want to thank everyone who joined the live event in person or virtually.

For more on the green and digital transitions, read our series of articles outlining them here in the context of cohesion policy:

Green, Smart and Fair: Rethinking European Cohesion in an Era of Structural Change

A Smart Europe: Digitalization and Regional Economic Development 

A Green Europe: Regional Strengths and Weaknesses and the Green Transition