ABSTRACT
Since its inception, the European Union (EU) has aimed at consolidating the economies of its Member States to guarantee a competitive place on the global trade map. The expansion of the European free trade area has been considered beneficial, and at present, the EU consists of 28 members. However, the more states have entered the Union, the more complex the socio-economic framework has become: economic and social disparities among regions have become larger, thereby possibly affecting the Union’s efficiency. Two types of lagging regions currently stand out (EC 2015): low income regions that are concentrated in Central and Eastern European (CEE) countries, and low growth regions that are in the South of the EU (Greece, Southern Italy, Portugal and Southern Spain). Although both types of regions face structural and employment-related difficulties in resilience because of the economic shocks experienced in the recent past, the Southern regions seem to be better endowed with more developed industries and opportunities for diversification than CEE regions. In the CEE regions, diversifying conditions for human and physical capital are lacking outside capital regions due to past political, social and economic development. CEE countries are also in greater need of institutional reforms regarding labour market, as well as educational, environmental, structural and governance systems and policies than are Southern regions (EC 2015). However, smart specialisation as a development concept suggests place-based opportunities for all regions in the EU (Foray 2015). In this chapter, we concur with the view that opportunities might indeed be present in capital and second-tier city regions in CEE countries, but we also argue that much more focused policy effort and directed investments are needed for such opportunities to materialize in CEE regions than elsewhere in Europe. Yet, even if such necessary reform conditions are satisfied, diversification and innovation processes are not guaranteed as these are largely globally self-organizing in economic and knowledge networks.
