European Union Overview: Development news, research, data

Overview

In the Euro area, growth slowed sharply in 2023, to an estimated 0.4 percent, as high energy prices—largely related to Russia’s invasion of Ukraine—weighed on household spending and firms’ activity, particularly in manufacturing. Estimated growth in 2023 is in line with last June’s projections, with unexpected resilience in the first half of the year offset by weaker-than-expected activity in the second half. The downturn in late 2023 reflected broadening weakness in the economy, which extended to the services sector. This was partially attributed to the ongoing decline in exports amid deteriorating export price competitiveness and tepid external demand.

Growth in 2024 is forecast to firm to a still-anemic 0.7 percent. Easing price pressures should boost real wages and lift disposable incomes, but the lagged effects of past monetary tightening are expected to keep a lid on domestic demand, especially business investment, partly by reducing credit growth. The forecast for growth in 2024 has been downgraded since June 2023 by 0.6 percentage point, largely owing to weaker-than-expected momentum at the start of the year and more adverse credit supply conditions than previously assumed.

Growth is projected to pick up to 1.6 percent in 2025, supported by a recovery in investment growth, especially as the European Union’s NextGenerationEU (NGEU) funds lift public investment and help offset modest consolidation of national fiscal balances. Increased absorption of NGEU funds is predicated on reform milestones being met under Recovery and Resilience plans. NGEU-related investments and reforms are expected to accelerate the green and digital transitions and address longstanding structural issues, thereby supporting long-term growth.

Last Updated: Jan 31, 2024

The World Bank in the European Union

In the European Union, the World Bank helps Member States achieve their development objectives by helping countries navigate near-term challenges, build resilience, advance the green transition, and undertake critical structural reforms. Our longstanding, multidimensional partnership with both Member States and EU institutions spans knowledge exchange, financial cooperation, contributions to global public goods such as climate action, and sharing important development lessons from EU countries with the rest of the world.

The World Bank offers client countries within the EU financial and knowledge services. Currently, four countries – Bulgaria, Croatia, Poland, and Romania – benefit from the full portfolio of World Bank instruments. Our lending focuses on catalytic operations that help these countries pursue reforms in transformative development areas, such as social protection, provision of public services, and support for a thriving private sector.

In addition, the World Bank has a large program of advisory services in EU countries, including technical assistance and economic analysis. Such work is financed through Reimbursable Advisory Services or trust funds carried out in partnership with the European Commission (EC).

These engagements, combined with the World Bank’s support for institutional strengthening and foundational analytical work, help countries prepare with the implementation of EU policies and EU financial instruments, including through the National Recovery and Resilience Plans (NRRPs).

Long-Term Engagements

The World Bank's engagement with EU countries is focused around three themes: (i) improving human capital outcomes; (ii) creating better jobs and opportunities for all; and (iii) increasing resilience and accelerating the green transition. These priorities are closely aligned with those of partners including the EC, with whom the WB works closely at technical and strategic levels.

Examples of the Word Bank's work in these areas include:

Improving Human Capital Outcomes

The World Bank works to advance service delivery to underserved groups, including through analytical work on Roma inclusion and lagging regions. In Romania, a EUR600 million Development Policy Operation supports the government’s efforts to integrate displaced people as well as advance critical structural reforms.

With the help of the World Bank’s RAPID education framework and support from the European Union, Romania is deploying strategies to reduce growing disparities between rural and urban areas by focusing on disadvantaged students and accelerating learning from early childhood to tertiary education.

In Croatia, the Sustainable, Equitable and Efficient Education Project is supporting the introduction of the “whole day school” system, which is designed to improve student learning outcomes, particularly among disadvantaged students, through increased instructional hours and improved teacher training and school infrastructure.

Better Jobs and Opportunities for All

In EU countries, technology adoption has increased productivity, demand for skilled graduates, and market concentration – leading to a growing divide among workers with the requisite skills and others, and between smaller and larger businesses. The World Bank’s recent Future of Work report lays out what governments can do to close this divide and promote inclusive opportunities. A joint World Bank – IFC Country Private Sector Diagnostic for Romania demonstrates how the country could build on the success of its booming IT sector and further boost its services sector by improving digital skills, increasing enrollment in tertiary education, and enhancing management practices.

Increasing Resilience and Accelerating the Green Transition

The World Bank is supporting several EU countries with advisory services on their energy security agenda while advancing the transition away from coal. One aim of this work is to ensure the transition works for the most vulnerable, for example through analytical work on how green fiscal reforms can help protect vulnerable households.

The recent World Bank Country Climate and Development Report for Romania presents options for the country to meet its pledge of carbon neutrality by 2050 while substantially increasing national income and boosting resilience to climate change. The report identifies transport and water as two sectors needing urgent investment for both climate adaptation and mitigation.

Last Updated: Mar 27, 2024

World Bank Brussels Office and Liaison with EU Institutions

The World Bank Brussels Office manages day-to-day relations with the EU institutions, including the European Commission (EC), European External Action Service (EEAS), Council of the European Union and European Parliament headquartered in Brussels, and the European Investment Bank headquartered in Luxembourg. The Brussels office is mandated to handle bilateral relations with Belgium and Luxembourg as well as NATO and works to leverage developing country representations, such as the Organisation of African, Caribbean and Pacific Countries (ACP) states.

A Global Partnership

The World Bank’s collaboration with the EU aims to tackle global challenges such as climate change and to boost country outcomes around common priorities, in all regions spanning from the EU’s immediate neighborhood to Africa, Asia, Latin America/Caribbean, including in fragile and conflict-affected contexts. Thematic priorities include public finance management, water, food security, pandemics, digitalization, climate, disaster risk management, private sector development and more. This joint work spans from knowledge exchanges to upstream policy coordination, to joint implementation, and financial cooperation. The European Commission is one of the largest contributors to World Bank Trust Funds and a significant donor to several Financial Intermediary Funds (FIFs) housed in the World Bank. The EC/WBG Financial Framework Partnership Agreement (FFPA), signed in July 2020, underpins this financial relationship.

Some examples of the World Bank’s Partnership with the EU include:

· Development Impact Evaluation (DIME): The EU supports DIME looking to generate high-quality and operationally relevant data and research to transform development policy.

· Ukraine’s Rapid Damage and Needs Assessment (RDNA): The RDNA is an ongoing effort, undertaken jointly by the World Bank, the Government of Ukraine, the European Commission and the United Nations, to take stock of Ukraine's damage and losses from Russia's invasion.

· The Pandemic Fund: The EU has pledged €450mn to the Pandemic Fund to finance critical investments to strengthen pandemic prevention, preparedness, and response capacities.

· The Horn of Africa Initiative: The EU contributes to the Horn of Africa Umbrella Program to support its priority projects and activities.

· Global Facility for Disaster Reduction and Recovery (GFDRR): The EU is a longstanding partner to GFDRR which strives to help countries address vulnerabilities to natural hazards and climate change.

Strategic Partnerships

In its work in the EU, the World Bank has built a strong and multifaceted partnership with the European Commission on areas of mutual priority, including reforms to advance strategic national goals and improve inclusion, and on global public goods such as building resilience to climate change and accelerating the energy transition.

One element of this partnership is the EU2020 Programmatic Trust Fund. Between 2015 and 2023, this program has channeled EUR239 million to finance technical assistance, analytical and policy work to countries across the Europe and Central Asia region.

Technical assistance delivered through the EU2020 program has supported critical reform agendas by providing analysis, tools and recommendations on topics such as the integration of migrant populations, the energy transition, Roma inclusion, and economic governance.

Examples include: helping Romania integrate Ukrainian migrants into the education system; providing Polish authorities with a framework and analyses to inform their coal transition, including tools to increase the economic diversification of regions; supporting Greece modernize its Vocational Education and Training system, and providing annual macro monitoring analysis of the Turkish Cypriot economy.

Bringing Europe’s Knowledge to the World

As a global knowledge institution, the World Bank is committed to bringing the best development lessons from EU Member States to help countries around the world address their pressing challenges.

In 2020, the World Bank partnered with the EC to help Greece develop a framework to shift away from coal. This work not only allowed Greece to become the first EU member state to submit a detailed roadmap for a just transition that would support workers and communities in coal-dependent regions, but also guided the development of a platform to support the same shift in the Western Balkans. These efforts helped similar efforts in Poland, and have since informed World Bank engagements on the coal transition in Asia, Africa and elsewhere in Europe.

In Italy, the World Bank helped the Ministry of Labor develop an online system to support the work of social workers that was recognized as best in its class internationally. This system was adapted into a global tool by the World Bank and is being used to support social work and case management in countries around the world.

Last Updated: Mar 27, 2024