{"id":30111,"title":"A Smart Europe:\u00a0Digitalization and Regional Economic Development\u00a0","link":"https:\/\/bst-europe.eu\/de\/investment-budget\/a-smart-europe-digitalization-and-regional-economic-development\/","date":"13. April 2022","date_unix":1649863814,"date_modified_unix":1754484397,"date_iso":"2022-04-13T15:30:14+00:00","content":"

In the second of our four-part series on the future of European cohesion, we argue that the EU is facing up squarely to the challenges of the digital transition, with a set of far-reaching policies and large-scale funding in place. Yet the likely uneven territorial impact of digitalization remains both under-examined and insufficiently catered for.<\/span>
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Europe needs to become smarter – and the EU has kicked into action<\/strong>\u00a0<\/strong><\/h2>\n

Europe is experiencing a process of full-scale digitalization. This process is underway in most areas of the economy, overhauling industries and business models whilst establishing new ones at the same time. Its impact is felt by individuals in all areas of their lives, be it in the workplace or in hospitals, in places of leisure or of learning.<\/p>\n

Digitalization, by all accounts, underwent a major acceleration due to the COVID-19 crisis, when large swathes of the population found themselves interacting online both professionally and socially practically overnight, with the \u201cnew normal\u201d heralded by the pandemic taken for many to be the \u201cnew digital\u201d.<\/p>\n

The response on the part of the EU to this megatrend, even before the pandemic, has been full-on. Building on a well-regarded strategy for a digital single market of 2015<\/a>, which, in turn, stemmed from a decision by the Heads of State and Government to optimistically regard \u201cdigital technologies as an immense opportunity for innovation, growth and jobs<\/a>\u201d, the result has been a once-in-a-generation set of legislative packages, as varied as the twin bundle of DSA and DMA, which cover, respectively, market rules and content of digital service providers, a European Data Act,\u00a0governing who can use and access digital information, a regulation on the use of Artificial Intelligence (AI), a 5G security toolbox<\/a> and more.<\/p>\n

The creation of a \u201cEurope that is prepared for the digital age\u201d is indeed one of the six strategic priorities of the European Commission<\/a>. Its President, Ursula von der Leyen, declared in her State of the Union speech in 2021 that \u201cdigital is the make-or-break issue\u201d of Europe\u2019s future. The Commission duly designated the 2020s to be nothing less than the \u201cdigital decade<\/a>.\u201d<\/p>\n

Clear European objectives are in place \u2013 and considerable funding is on its way\u00a0<\/strong><\/h2>\n

For practical purposes, the Commission has broken down this vision into four areas<\/a> \u2013 skills, government, infrastructure and business, and has underpinned each of these fields with measurable objectives<\/a> to be achieved before the decade is out. Those that stand out for our purposes are the digital transformation of businesses, whereby 75% of EU companies use cloud\/AI\/big data-technologies; the support of scale-ups and finance to double the number of EU unicorns (that is, companies with a market capitalization of more than \u20ac1 billion), and, with regard to \u201clate adopters\u201d, to ensure that more than 90% of SMEs reach at least a \u201cbasic level of digital intensity\u201d.<\/p>\n

As for the crucial area of skills, the Commission wants to see 20 million information and communication technology (ICT) specialists in the European workforce, whilst at the same time achieving gender convergence in its makeup. Finally, it aims to bring about a level of basic digital skills for at least 80% of Europe’s population \u2013 up from a low 44% today.<\/p>\n

Put simply, there is a consensus that digital solutions will be instrumental not only to the EU\u2019s recovery following the pandemic but also to protect its global competitiveness. And this consensus is underpinned by substantial resources: A fifth of the EU funds earmarked under the NextGenerationEU recovery program and a minimum of a quarter of the EU\u2019s next generation of cohesion funds are designated for the digital transition, with additional sources of funding coming from the EU\u2019s research and development program, Horizon.<\/p>\n

On European cohesion, digitalization cuts both ways<\/strong><\/h2>\n

A recent in-depth assessment of the EU\u2019s understanding of digitalization<\/a> found that digitalization is framed overwhelmingly<\/a> in the narrative of geopolitics<\/em>, that of the green transition<\/em>, that of the protection of individual rights<\/em> and, finally, as a driver for growth and competitiveness<\/em>. What remains arguably underdeveloped are the implications of digitalization for the overriding political goal of cohesion in Europe, thus drawing the latter two together.<\/p>\n

For while the digital transition is \u2013 rightly and importantly \u2013 associated with opportunities for progress, there is no reason to believe that its fruits will in and of themselves be evenly distributed by nature. On the contrary, in much the same way that the pandemic had an uneven territorial impact on EU regions and evidentially deepened already existing inequality in individual member states,<\/a> the same applies to the impact of larger transitional challenges \u2013 and here, digitalization stands out.<\/p>\n

This concerns, above all, the threat to jobs. According to an impact assessment conducted by the European Investment Fund (EIF)<\/a>, digitalization will hit increasingly polarized EU labor markets hard, in that the types of skills required will change, and existing jobs will be destroyed. \u201cDigitalization has changed ways people work, increasing flexibility for some but uncertainty for others.\u201d<\/p>\n

The EIF is clear in its prediction<\/a>: \u201cSome places in the European Union are more likely to experience larger-scale job losses linked to transitions.\u201d Crucially, for our purposes, EIF data suggests that \u201c…digitalization has added to growing spatial disparities\u201d occurring, for instance, when both people and businesses cluster in popular urban areas, where innovation and growth then occur. A closer look at further key indicators, however, reveals an even more complex picture.<\/p>\n

A region\u2019s \u201cdigital readiness\u201d determines its future prosperity\u00a0<\/strong><\/h2>\n

To master the digital transition for the economy, the Digital Economy and Society Index (DESI)<\/a> Digital Economy and Society Index (DESI) of the European Commission sets out three levers that must be set correctly. First, people must be adequately skilled, thus enabling them to work in a digital environment. Second, excellent ICT infrastructure must be broadly available to connect people and firms with the internet.<\/p>\n

And third, firms must be enabled to integrate digital technology into their business model. Today\u2019s figures show that Europe needs to step up in all three of these areas: 54% of Europeans lack basic digital skills, 8% of all European households have no internet access at all<\/a> and many firms are struggling with the integration of digital technologies in their production processes.<\/p>\n

But the overall picture only tells part of the truth. Zooming into EU regions points to a more nuanced picture, revealing substantial disparities across regions. Starting with digital skills, it is particularly apparent that the regions of Southern and Eastern Europe need to catch up. Yet when looking at the share of people who have never used a computer and therefore appear to lack any sort of digital skills, it is regions in Southern Italy, Greece, Bulgaria and Croatia that exhibit values of 29% and more.<\/p>\n

In contrast, the corresponding share of people in all regions in Scandinavia, the Netherlands and in some parts of Germany is 4% and less. Also, it is noteworthy that capital regions all over Europe perform better on digital skills, as the examples of Budapest and Paris demonstrate.<\/p>\n

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