Innovation, Digitization & Structural Change

The EU is losing the global innovation race. EU industry invests less than its peers in R&D, it lags way behind in software and artificial intelligence, and its pharmaceutical component is at risk. For over 20 years the same companies, mostly from the automotive sector, have dominated EU innovation activity. 

The outbreak of an unprecedented global health crisis about four years ago put the very foundations of our communities, economies and politics to the test. Policymakers had to learn and react fast to limit human and economic costs at the same time. This article highlights the importance of existing markets, technological features such as payments systems and economic decisions at the transactional level in combating the spread of a contagious disease while stabilizing aggregate economic activity.

Russia’s invasion of Ukraine in February 2022 led to gas supply in Europe dropping significantly, shaking the EU out of its complacency regarding energy procurement and consumption habits. The costs of going green on top of more expensive energy are putting a strain on European competitiveness, with higher energy prices hitting the chemical, steel and metal processing industries in countries like Germany, Spain or Poland particularly hard.

While eight out of ten German manufacturing firms reported material shortages at the height of the pandemic in December 2021, this share had fallen to 18 percent in October 2023. Nonetheless, the recent attacks by the Yemeni Houthi rebels on container ships in the Red Sea highlight the fact that supply chain risks remain significant.

EU Cohesion Policy constitutes an important item in the EU budget. For the Multiannual Financial Framework 2021–2027, EUR 392 billion is reserved for the promotion of economic and social cohesion among the regions of the European Union. This article presents results from a pilot study that combines official data on projects co-funded by the ERDF and the CF in the programming period 2007–2013, with remote sensing data on night light emission and land cover to assess the effect of EU funding on economic growth at the municipal level, where regional GDP data are not available. Our approach can also be applied in other contexts, for example to study the impact of investment projects funded by Next Generation EU.