Baseline: GDP progress of regions with better regulation (left image);
Baseline: Slowdown of GDP progress with less efficient regulation (right image)

May 2016 - Better Regulation, with the aim to lead to EU policies achieving their objectives in the most effective and efficient way, is one of the central themes of the Dutch EU-Presidency. Upon request the ESPON EGTC analysed possible long-term effects in case the design and implementation of the regulatory framework would not be aligned with Better Regulation. This policy brief shows the necessity of better regulation by addressing two types of EU policies: Cohesion policy and the Transport Infrastructure policy. Comparing better and less efficient regulation conditions in relation to 3 territorial scenarios that assume alternative policy mixes towards promoting the development of (1) metropolitan areas, (2) the city network and (3) regions (smaller cities, more rural and lagging regions) respectively, the regional diversity of implications of less efficient regulation becomes evident.

Key policy messages

Key policy messages resulting from the analysis of EU Structural Funds subsidies and Transport Infrastructure policies are:

• Better regulation is expected to have a positive effect on the European territory supporting a better overall balance between European regions improving the convergence process of member states currently falling behind and leading to higher overall economic growth for Europe. At the same time, less efficient regulation is likely to slow down the convergence process.
• For Structural Funds the likely impacts related to less subsidy absorption and efficiency are measurable but not large probably due to the fact that the total Structural Funds subsidies only amount to 0.4 percent of the total GDP of the European Union, however regional diversity is significant.
• The long-term impacts of better regulation in Transport Infrastructure policies are likely to add up to 3 percent of increased economic performance of individual regions in the year 2051.
• Negative impacts in the less developed member states are expected to be substantial as, due to the policy attention to cohesion, convergence and territorial balance, they receive the highest Structural Funds subsidies relative to their GDP per capita. 
• Negative impacts of less efficient regulation are in general expected to occur to a lower degree in the core areas and to a higher rate in the more peripheral regions of Europe, regardless of the territorial scenario being promoted by policies. The impacts are expected to spread beyond the regions directly affected due to transport network effects.
• However, the territorial patterns of impacts differ significantly depending of the territorial scenario promoted in policy terms with more evenly spread impacts when promoting metropolitan areas and network of cities and with a higher concentration of vulnerability to less efficient regulation in eastern and southern parts of Europe when promoting regions, including smaller cities and lagging regions.
• Dedicated efforts and investments in administrative and human capacity to ensure an efficient regulation in particular in countries/regions characterised by high relative levels of Structural Funds subsidies, are expected to contribute to cohesion and balance within the European territory.
• For territorial cohesion, a clear and explicit territorial orientation towards higher regional convergence in the policy coupled with sufficient attention to efficient regulatory framework and administrative capacities, is likely to increase positive policy outcomes.

Read the Policy Brief and Working Paper "Territorial Implication of Better Regulation for Europe towards 2050". (Please see below)