4. INTEGRATION IN EASTERN EUROPE (II)

The European Innovation Scoreboard73
comprehensive output indicator, which
based economy. There is a clear upward trend in
the capacity to innovate in the 12 new Member
States, whereas the innovation performance of
most old Member States is either stagnating or
declining (Graph III.2.3).
EU-27
EE
characterised as catching-up countries
Poland, Romania and Slovakia) but other have
evolved into moderate innovators (Cyprus,
Czech Republic, Estonia, Slovenia). There is a
general process of convergence, and innovation
followers are closing the gap on innovation
leaders. The Czech Republic, Estonia and
Lithuania could reach the EU innovation average
within 10 years.
2.1.3. Patent applications
well below the average of the old Member States
(Graph III.2.4). The countries with the highest
increase in applications are Slovenia and Malta.
As regards the number of patents granted by the
United States Patent and Trademark Office, the
data for the new Member States (in terms of
patents per million inhabitants) show significant
increases between 1999-2003 and 2004-2005.
Bulgaria and Slovenia have recorded the biggest
percentage increase since 1999.
0 50 100 150
Source: Eurostat
consist of creative work undertaken on a
systematic basis in order to increase the stock of
knowledge and the use of this stock of
knowledge to devise new applications. R&D
intensity represents R&D expenditure as a
percentage of GDP.
The R&D intensity in the 12 new Member States
is far below the EU average (see Chapter VII.1).
It is also lagging behind a number of emerging
markets outside the EU which have further
increased their lead since 2004 (notably South-
Korea, Singapore and Russia). However,
significant increases can be observed for Estonia,
Malta, Czech Republic, Lithuania and Latvia.
2.1.5. Skills
education have become so important is the
acceleration of scientific and technological
progress. Despite the increased duration of
primary, secondary and university education, the
knowledge and skills acquired there are usually
not sufficient for a professional career.
Cyprus channels nearly 7% of its GDP into
public investment in education - one of the
Source: European Commission (2009), Five years of an enlarged European Union:
economic achievements and challenges
The European Innovation Scoreboard
EU Sweden
Denmark Finland
Italy Cyprus
Slovakia Greece
Hungary Latvia
Poland Croatia
Bulgaria Romania
Summary Innovation Index 2016 Performance relative to that of the EU in 2010
Source: https://ec.europa.eu/growth/sites/growth/files/infographic-innovation-scoreboard-
2017-map-full-size.png
73
comprehensive output indicator, which
based economy. There is a clear upward trend in
the capacity to innovate in the 12 new Member
States, whereas the innovation performance of
most old Member States is either stagnating or
declining (Graph III.2.3).
EU-27
EE
characterised as catching-up countries
Poland, Romania and Slovakia) but other have
evolved into moderate innovators (Cyprus,
Czech Republic, Estonia, Slovenia). There is a
general process of convergence, and innovation
followers are closing the gap on innovation
leaders. The Czech Republic, Estonia and
Lithuania could reach the EU innovation average
within 10 years.
2.1.3. Patent applications
well below the average of the old Member States
(Graph III.2.4). The countries with the highest
increase in applications are Slovenia and Malta.
As regards the number of patents granted by the
United States Patent and Trademark Office, the
data for the new Member States (in terms of
patents per million inhabitants) show significant
increases between 1999-2003 and 2004-2005.
Bulgaria and Slovenia have recorded the biggest
percentage increase since 1999.
0 50 100 150
Source: Eurostat
consist of creative work undertaken on a
systematic basis in order to increase the stock of
knowledge and the use of this stock of
knowledge to devise new applications. R&D
intensity represents R&D expenditure as a
percentage of GDP.
The R&D intensity in the 12 new Member States
is far below the EU average (see Chapter VII.1).
It is also lagging behind a number of emerging
markets outside the EU which have further
increased their lead since 2004 (notably South-
Korea, Singapore and Russia). However,
significant increases can be observed for Estonia,
Malta, Czech Republic, Lithuania and Latvia.
2.1.5. Skills
education have become so important is the
acceleration of scientific and technological
progress. Despite the increased duration of
primary, secondary and university education, the
knowledge and skills acquired there are usually
not sufficient for a professional career.
Cyprus channels nearly 7% of its GDP into
public investment in education - one of the
The number of patent
old MS.
European Patent Office Applications
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Number of EPO Patent Applications per Mio. Inhabitants (2005=1)
European Union (28 countries) Germany (until 1990 former territory of the FRG) Latvia Lithuania Poland Romania Bulgaria Czech Republic
Source: Own calculations based on data available from Eurostat
Tertiary graduates in science and
technology
74
areas of public investment in education and
training, while private investment in education is
significant only in Cyprus and Slovakia.
In Malta almost all pre-school children (4 years
old) receive education. Slovenia (+11%) and
Romania (+15%) have achieved significant
increases in this area since 2000.
The new Member States are among the best per-
forming countries in the EU in terms of their
upper secondary attainment: the Czech Republic,
Poland, Slovenia and Slovakia are above 90%;
Lithuania and Cyprus are above 85% and Malta
(+14%) has made significant progress (from a
low base).
0 5 10 15 20
LT
Source: Eurostat (2008f)
that can be compared worldwide are the number
of researchers per million inhabitants, where old
and new Member States have increased their
respective figures. However, the new Member
States (on average 1.574 researchers per million
inhabitants in 2004-2006 according to Eurostat)
still lag behind the old Member States (2.905
researchers per million inhabitants) and
competitors such as South Korea and Hong-
Kong (3.732 and 2.090).
suggest that competition in the new Member
States is increasing significantly and the widened
business advantages provided by the EU Single
Market play an important role in the expansion
of business activities in the new Member States:
(1) A representative pan-European survey
(Observatory of European SMEs, 2007) shows
that 67% of enterprises in the new Member
States report increased competition within their
markets while only 7 % of them believe that it
decreased during the last two years (Graph
III.2.6). In the old Member States, competition
seems to have increased somewhat less: 58% of
their enterprises report increased competition and
5 % report that it has decreased during the last
two years. According to the perceptions recorded
in the survey, competition has intensified in all
new Member States more than on average in the
old Member States, which indicates that the new
Member States have overall well functioning
markets and that increased competition is
underpinning the catching-up process at the
macro-economic level.
for the business activities of enterprises located
in the new Member States, even though a
comparatively large number of their enterprises
do not appear to operate in foreign EU markets
(about 40% compared to one third of enterprises
in the old Member States). A relatively high
share of enterprises in the 12 new Member States
attributes significant importance to the Single
Market legislation (46% as compared to 37% in
the old Member States). This indicates that the
enterprises in the new Member States are
relatively well integrated in the EU. The same
currency in most of the EU Member States and
the absence of border controls are the second and
third most important Single Market features for
enterprises in the new Member States.
Within the new Member States the increase in
quality, which within the entire EU is the most
frequently mentioned strategy to deal with
increasing competition, is a particularly popular
response in Estonia (86%), Slovakia (81%),
Romania (79%), and Bulgaria (78%). It is the
All new MS display are
achieving increasing
increase.
Male Female Total
• Knowledge spill-over in various forms: organisational imitation, higher quality standards,
greater variety of products and increased competition which eliminates inefficient
incumbents
• Widening income disparity in the host countries
• Activities being shifted from old to new MS as firms supposedly take advantage of low
wages or taxes in these countries
01.12.2017 8
01.12.2017 9
Source: Eurostat
01.12.2017 10
Source: Eurostat
2007, shares in %
01.12.2017 11
Source: Bruegel (2010), Whither growth in central and eastern Europe? Policy lessons for an integrated Europe
Percentage Share of Total Intra-EU Trade (Goods)
01.12.2017 12
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Share of Intra-EU Imports
Cyprus Latvia Lithuania Hungary
Malta Poland Romania Slovenia
Slovakia
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
4,0
4,5
5,0
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Share of Intra-EU Exports
01.12.2017 13
Source: Eurostat
0,0
0,5
1,0
1,5
2,0
2,5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Share of Extra-EU Exports
Slovakia
0,0
0,5
1,0
1,5
2,0
2,5
3,0
3,5
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Share of Extra-EU Imports
Impact of the crisis
• Disruption of financial markets after the collapse of Lehman Brothers (Sept. 2008) and the
rapid collapse in global trade
• Eastern European Countries along with former Soviet countries were particularly hard hit
Welfens / Yushkova; Universität Wuppertal 2014
01.12.2017 14
Quarterly GDP developments (2008Q3=100), 2005Q1-2010Q2
Real GDP Growth Rate (volume)
01.12.2017 15
Source: Eurostat
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Unemployment (% of active population)
Hungary Malta Poland Romania Slovenia Slovakia
Source: Eurostat
-2
0
2
4
6
8
10
12
14
16
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Inflation Rate
Hungary Malta Poland Romania Slovenia Slovakia
Source: Eurostat
hard hit by the crisis?
• Poland had, as an exception, no recession
• Fall in foreign demand for their exports
• Sudden stop, or even reversal, of the massive foreign-capital inflows that fuelled the
expansion of domestic credit
• Distinctions between new MS and old MS: the growth of credit was much faster in new
MS + credit expansion has been mostly financed by capital inflows from abroad, rather
than domestic deposits, in contrast to EU15 countries and non-European emerging
countries
• New MS are not a homogenous bloc, different factors must have been at work in different
countries
01.12.2017 18
4. EUROPE 2020 STRATEGY
01.12.2017 19
the present without compromising the
ability of future generations to meet their
own needs. It contains within it two key
concepts:
poor, to which overriding priority
should be given; and
state of technology and social
organization on the environment's
needs.”
Environment and Development (1987):
“... to become the most competitive and dynamic knowledge-based economy in
the world capable of sustainable economic growth with more and better jobs
and greater social cohesion“ (Council of the European Union, 2000)
21
Economy
Social
inclusion
Environment
5 Targets
1. Employment
2. R&D
• 3% of the EU's GDP to be invested in R&D
3. Climate change and energy sustainability
• greenhouse gas emissions 20% (or even 30%, if the conditions are right) lower than
1990
4. Education
• at least 40% of 30-34–year-olds completing third level education
5. Fighting poverty and social exclusion
• at least 20 million fewer people in or at risk of poverty and social exclusion
01.12.2017 23
Seven Flagship Initiatives
Inclusive growth
European platform against poverty
European Semester
Employment
01.12.2017 32
Source: Eurostat
European Commission
• Budgetary powers
01.12.2017 33
European Council
• Decides on the EU's overall direction and political priorities – but does not pass laws.
• Deals with complex or sensitive issues that cannot be resolved at lower levels of
intergovernmental cooperation
• Sets the EU's CFSP, taking into account EU strategic interests and defence implications
• Nominates and appoints candidates to certain high profile EU level roles, such as the
ECB and the Commission
• ask the Commission to make a proposal to address it.
• pass it on to the Council of the EU to deal with
• Source: https://europa.eu/european-union/about-eu/institutions-bodies/european-council_en
Council of the European Union
• What does the Council do?
• Negotiates and adopts EU laws, together with the European Parliament, based on
proposals from the Commission
• Coordinates EU countries' policies
• Develops the EU's foreign & security policy, based on European Council guidelines
• Concludes agreements between the EU and other countries or international
organisations
• Adopts the annual EU budget - jointly with the European Parliament.
01.12.2017 35
Source: https://europa.eu/european-union/about-eu/institutions-bodies/council-

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4. INTEGRATION IN EASTERN EUROPE (II)