Promoting new trends in EU economies

BRUSSELS - On June 23-24, the traditional annual conference named Regions for Economic Change (this year its title had the distinction “Fostering Smart and Sustainable Growth in Regions and Cities”) was held in the Charlemagne Building in Brussels. The conference is organized by the European Commission as a forum for academics, eurocrats, NGOs, and regional officials from throughout the EU and beyond to exchange their views on good practice. As usual during this conference, the winners of RegioStars, awards for innovative business projects, were announced to reward innovation-oriented spending of EU funds dealing with the EU cohesion policy. Last year two Lithuanian projects got awards, while this year the Baltics were also quite noticeable during this competition.

“Nineteen out of 27 EU countries participated in this competition. I hope next year we will reach such a level that 27 out of 27 will take part,” Johannes Hahn, the EU’s commissioner for regional policy, said during his press conference of June 23, adding that the EU cohesion policy is the most essential factor unifying the EU. The EU member states’ leaders, who gathered in Brussels on the same day of June 23 to discuss mostly the Greek financial crisis, could probably have less euro-headaches if a common fiscal policy would be another factor unifying the EU.

There were 66 applications from across the EU to receive the prestigious RegioStars 2011. The jury selected 31 finalists - there were three Baltic projects among them, although, finally, the RegioStars went to projects from the city of Amsterdam, Sweden, Wales, and Portugal’s islands of Azores and Madeira. The presence of the Baltic States among the finalists is a great achievement for them, because they were the only finalists from the so-called ‘new EU states.’ Interestingly, Poland, which receives the biggest amount of financial help from the EU funds, was not present among the finalists.

The Baltics’ most financially heavyweight finalist (it was in the competition’s category of the Low Carbon Economy Themes) was the scheme to renovate 550 public buildings, mostly schools, to ensure efficient use of energy in Lithuania. The project’s duration is from 2008-2015, and has a budget of 296 million euros, of which 270 million euros is money from the EU’s Cohesion Fund. In the case of the M. Karka School of Panevezys, where a construction company used plasterboard instead of textolite for the repair of outer walls (this school’s new walls are already crumbling from kicks from sporty pupils, although the school is still under renovation), the funding looks more like charity subsidies, not value-added investment, but overall, the renovation of public buildings is quite beneficial for Lithuania’s economy. It is maintaining employment: by mid 2010, 443 companies had been involved in the project, creating or securing 24,000 jobs. It is planned to save 133 GWh of energy, mostly imported from Russia, per year after the end of the renovation.

Actually, during the peak of crisis in 2009, the renovation of buildings was considered by PM Andrius Kubilius to be the locomotive of the Lithuanian economy. However, he did not listen to proposals by Raimondas Kuodis, an economist who was recently appointed deputy head of the Lithuanian central bank. Kuodis suggested using the same successful scheme for private buildings as for the public ones, i.e. renovate the most energy-inefficient apartment blocks without financial participation of the buildings’ owners. The owners show little interest in spending their money on renovation and only a few private apartment blocks were renovated. Therefore, the current Lithuanian economy’s locomotive is export, not mass renovation of buildings.

Another Baltic nominee for the RegioStars awards (in the category of Economic Competitiveness Themes) was the Competence Center for Cancer Research in Estonia. The project’s budget is 2.2 million euros, of which 1.2 million euros comes from the European Regional Development Fund. The third Baltic nominee was the Lithuanian-Latvian joint project financed with EU money in the category of Information and Communication Theme: the artsy photo promotion of tourism in Lithuania and Latvia.

This year’s Regions for Economic Change forum discussed a lot on the clean mobility and eco-efficiency themes. The recent proposition of the European Commission to Lithuania on imposing green taxation on cars was a good one – it could help to reduce the number of cars on Vilnius streets: there are 438 cars per 1,000 inhabitants in Vilnius, while, for example, there are only 286 cars in Berlin and 174 cars in Tallinn per 1,000 inhabitants, according to Eurostat.

Kubilius agreed with the EC’s proposal, but President Dalia Grybauskaite, who cares about her ratings, was not eager to make car owners angry. The European Commission, despite its pro-green policy, took into account the suggestion by Grybauskaite and removed the recommendation to introduce a tax on cars, which could boost resource-efficient public transport, from the list of specific economic promotion measures submitted to the EU summit for approval. Lithuania is one of a few EU countries where such a tax has not been introduced. Latvia introduced such a tax, though it did this due to IMF financial recommendations, not environmental concerns. Lithuania, which, unlike Latvia, did not appeal to the IMF for loans, is free to behave as it wishes.

The green theme was so prominent at the conference that some enthusiast wrote “Degrowth” on the wall in the toilet situated near the conference hall in the Charlemagne Building. Degrowth is political movement based on environmentalist and anti-consumerist ideas advocating the downscaling of production and consumption.

The central and most interesting speech at the Regions for Economic Change was made by Ann Mettler, president of the jury of RegioStars and executive director of the Lisbon Council for Economic Competitiveness and Social Renewal: a think tank and policy network committed to defining and articulating a mature strategy for managing current and future challenges. Her speech echoed the general concern about the EU’s low GDP growth (only Estonia and Lithuania have growth in the style of China in the first quarter of this year) and high unemployment. She emphasized that China and other Asian countries are leaving the EU and the USA behind, according to the level of their younger generation’s education (note that Lithuania is the EU’s No. 1, according to percentage of people with university education in the age group of 20-29, and last in the EU according to percentage of children who leave their school studies early. Southern and Western European states have much worse statistics, according to brochures which were offered at the Charlemagne Building). The education level results in an innovative economy, according to Mettler.

Mettler also pointed out that an increasing number of people in the EU are choosing freelancing as their way of living, which she described as a positive tendency, boosting creativity in economies. There are 32.5 million self-employed people in the EU, or 15 percent of total employment now. “People don’t want to work in big companies, obeying a stupid and autocratic boss,” Mettler said.

She predicted a sunset for real estate deals related to office space. “Office space has already been turned into apartment space in Amsterdam and it will be the same tendency in Brussels too,” Mettler said. She also praised migration processes, stating that people with mixed backgrounds dominate in the sphere of revolutionary innovations.