Fostering the Catching-Up Process of Central Europe: The Need for an Innovation-Oriented Cohesion Policy
The future of the so far successful growth model of Central European economies, based on low-to-medium technology sectors, is under threat. The Central European countries have not undertaken sufficient reforms in the area of innovation, education and the labour market. The EU should commit to a stronger conditionality regarding the Cohesion Policy funds to provide a stronger incentive to beneficiary countries that need to enforce reforms and put into effect a better coordination between regional and sectoral policies of the EU. The reforms in the Member States should encompass business support structures together with education institutions to ensure that research incubators have meaningful impact on the competitiveness of their businesses.
The enlargement policy was the focus of the debate at the beginning of the crisis in 2008–2009 because of the problems faced by some Baltic States and Hungary. “Central Europe is the sick man of the emerging markets,” argued N. Roubini.1 However, the dim scenarios he painted – drawing parallels with the experience of the 1930s and predicting a rise in unemployment, nationalism and an overall weakening of democracies – have proved mistaken. Since the enlargement, populist parties have emerged in different Central European countries (in Poland, Hungary, and Slovakia, for example) but the situation of the 1930s has not repeated itself.
Eventually, the situation came to be very diverse from one country to another across Central Europe. For some countries, the crisis has only slightly slowed down their catching up process. For others, it has been a serious hurdle. Still, countries that joined the EU from 2004 onwards have been overall much more resilient than those which joined in 1981 and 1986. However, the Central European countries should learn from their experience if they want to escape the fate of countries whose initial economic successes have turned into economic stagnation. In order not to be stuck in amiddle-income trap, they should move up the value chain and invest more significantly in innovation, education and long-life learning. In turn, the EU should make sure that the Cohesion Policy, which has not prevented the Southern European countries from being the countries that were worst hit by the crisis, puts more emphasis on innovation and productivity gains.