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Blog,  EU funding,  HorizonEurope

Getting back on track for economic growth with excellent research

Over the next few years, the European Union will face tremendous challenges. Immediate action is required to manage and overcome the various crises, be it Brexit, finances or migration.

Since February 2020 Europe has been shaken by the next “earthquake”, one which is even more severe: the coronavirus crisis. Thousands of people are dying, member states have shut their borders, EU heads of government are still unable to come to an agreement on the next seven-year budget (which was due a year ago) and we have fallen into an apocalyptic mood, hoping every second to wake up from this nightmare. At the core of all these challenges lies one central question: where is the EU heading to?

Europe’s economy in competition

For many years the EU economy has been racing neck and neck with the USA at the top of the world economies. With a share of world GDPs of nearly 60% in 2006 they left all other economies far behind.

Slowly but steadily however a third economy has been catching up: the People’s Republic of China. Deng Xiaoping opened the socialist economy up to foreign trade and investments and has turned it into a market-based economy. Its GDP growth is according to the World Bank “the fastest sustained expansion by a major economy in history”[1].

The Belt and Road Initiative is the name of China’s recent trade and infrastructure project, tying Asia with Europe and delivering Chinese products around the Northern Hemisphere. The Chinese government supports Chinese business in locating along the railway network in order to create a new economic area. Already now China is the biggest competitor for the European internal market.

The results of this policy became very obvious during the coronavirus crisis. The European market is dependent on the Chinese market. It was a bitter lesson to learn that e.g. many drugs on the European market are produced in China, and that due to the coronavirus the pharmaceutical supply chains were heavily disrupted, which led to shortages of antibiotics and ibuprofen in Europe.

But even without the coronavirus, the EU’s economic situation in 2019 was not exactly splendid. Twenty years before, the EU had had the ambition of becoming “the most competitive and dynamic knowledge-based economy in the world”[2]. But in 2019 it was still recovering from the 2008 financial crisis.

Taking charge of the EU’s future

In order to regain its economic pole position the EU adopted a strategy, defining three priorities for future policymaking and economic development[3].

  • Smart growth: developing an economy based on knowledge and innovation.
  • Inclusive growth: fostering a high-employment economy delivering social and territorial cohesion.
  • And, what was “sustainable growth” in the 2020 strategy has been strengthened under the new European Commission President Ursula von der Leyen by the “Green Deal”: “to transform the EU into a fair and prosperous society, with a modern, resource-efficient and competitive economy where there are no net emissions of greenhouse gases in 2050 and where economic growth is decoupled from resource use.”[4]

For each priority the EU decided on distinct policies which are based on clear objectives, implemented by targeted actions and fed by respective funds. One major policy to implement all three priorities is to foster groundbreaking research and innovation (R&I) which makes the EU economy grow further.

Strengthening EU research to foster innovation and economic growth

To foster excellent research and groundbreaking innovation, the EU dedicated €80 billion for the current policy-planning period in a programme called “Horizon 2020”. The upcoming programme is called “Horizon Europe” and will become effective in 2021 or 2022. Its budget has been considerably increased to approximately €100 billion for a seven-year period. However, this has not been confirmed yet (April 2020).

The interim result of the ongoing research funding programme, Horizon 2020, can be summarised as: very good, but not yet sufficient to turn the EU into “the most competitive and dynamic knowledge-based economy in the world”. The interim evaluation puts forward several reasons for this, one of the most important of which is:

EU research must be backed by strong investments in national research

The EU research funding programme is huge, but not sufficient as a stand-alone measure to foster excellent research. It can only achieve an impact if the EU-funded research is combined and complemented by research and innovation actions at the national level.

The EU confirmed this necessity and its member states committed to invest 3% of their national GDP in research by 2010. That was back in 2003[5]. The European Commission urged the EU member states: The EU must “bridge the growing gap in the levels of research investment between Europe and its main trading partners, which is putting at risk our long term innovation, growth and employment potential”. This ambition stands in contrast to the very sobering facts: by 2017 the 28 EU member states just reached the 2% threshold. There are some member states which have higher investments, e.g. Sweden (3.4%), Austria (3.1%), Denmark (3.04%) and Germany (3.03%)[5]. These countries are among the strongest economies in the EU.

A look at the strongest economies in the world confirms the assumption that there is a direct correlation between research & development (R&D) investments and economic growth. The strongest investors in R&D are Israel and Korea (both over 4%), followed by Switzerland, Sweden and Chinese Taipei. The US invests 2.8% and China 2.1%, steadily increasing since the 1970s. The conclusion is evident: if the EU wants to become “the most competitive and dynamic knowledge-based economy in the world”, all member states must considerably increase their investments in R&D. It is not sufficient to rely on a few trailblazers; a strong community is needed.

The richest member states receive the most EU funding

The imbalance sketched above is mirrored by the implementation of the EU research programme Horizon 2020. There is a strong divide between member states in terms of winning EU research grants. The member states which receive the most EU research funding are Germany, the United Kingdom, France, Spain and Italy. The funding these five members have received amounts to 59.4% of the overall funding. At the other end of the scale are Bulgaria, Latvia, Lithuania and Malta receiving 0.1% each[6].

Interestingly, the five countries with the highest funding success rate are those with the highest GDP investments in R&I. Together they represent 64.5% of R&I investments in the EU.[7] In addition, Germany, the UK and France have a GDP higher than the average of the Eurozone.[8] In other words: 45% of the EU funding goes to the three richest EU member states.

This gap is a major political issue, well-known since the previous funding programme FP7. An analysis highlighted several factors for these different success rates. The most obvious factor is the correlation between success rate and national investments in research and innovation, since they are suitable to foster skills of young and advanced researchers.

Also, it takes some time for “newcomers” such as the EU-13, which have been accessing the EU since 2004, to familiarise themselves with the regulations. Again, this would be facilitated by investments in training. Another factor is the strong “old boys’ clubs”[9], “networks and the clustering of countries (…) which tend to be dominated by the large research performing countries”[10]. Newcomers seem to perceive EU research funding a “closed shop”.

Are redistribution and quotas a way of fostering research and weaker member states?

So, would a stronger allocation of EU funding to the member states at the end of the scale be the simple solution? Would this compensate for the weak national investments in R&I and help those economies grow? As a matter of fact, this argument was put forward in a proposal to introduce geographical quotas: research consortia with a strong representation of weaker member states should be preferred during the evaluation process. This idea charmingly expresses the EU’s quest for more solidarity among its members.

But what if not scientific excellence is the decisive criterion in deciding the allocation of grants but the location of a university? Does this tackle the structural problem and lead to better training and infrastructure for researchers and students at the national level? Is this distribution mechanism a promising way to turn the EU into the “most competitive and dynamic knowledge-based economy in the world”?

Allocating research funding to universities located in disadvantaged regions or states is a distribution mechanism known from the cohesion policy. Between 2007 and 2013 the EU invested about €355 billion[11] through three funds in particular to bridge disparities between the rich and the poor in the EU: the European Regional Development Fund (ERDF), the European Social Fund (ESF) and the Cohesion Funds. This corresponds to 35.6% of the EU’s total budget[12]. The measures are manifold, covering start-up support to road construction and broadband access, and all serve one common goal: the creation of equal living conditions.

A way out of the dilemma

The EU is in a dilemma. On the one hand it is crystal-clear that the extreme discrepancy between strong and weak states must be overcome, not only for the sake of becoming a strong economic region, but also for reasons of solidarity. On the other hand it is equally clear that the EU must face the global challenge and invest in its brightest brains to ensure long-lasting and competitive smart growth.

One way out of the dilemma could be the use of Structural Funds. Groundbreaking research should continue to be financed by the EU research programme. Structural Funds could fund the second best. This has already been discussed and practised since the introduction of a seal of excellence in 2015, but has been practised by only a few countries so far. The seal of excellence could be issued to excellent research proposals for which there is insufficient funding in Horizon Europe. These projects could be funded without further examination by the Structural Funds. The Structural Funds are administered at national and regional level. Thus, EU members could choose local universities and SMEs and foster their own scientific and economic infrastructure. As not all member states fully draw down the funds they are entitled to, spending Structural Funds on research would not compete with social projects.

This approach will make research funding fairer while increasing the economic success of the EU. We just have to make it happen.


[1] https://www.worldbank.org/en/country/china/overview

[2] Presidency Conclusions. Lisbon European Council, 23 and 24 March 2000

[3] EUROPE 2020 STRATEGY

[4] The European Green Deal, COM (2019) 640 final

[5] https://ec.europa.eu/eurostat/statistics-explained/images/9/9e/Gross_domestic_expenditure_on_R_%26_D%2C_2007_and_2017_%28%25%2C_relative_to_GDP%29.png; https://data.oecd.org/rd/gross-domestic-spending-on-r-d.htm

[6] European Commission (2017): In-depth Interim Evaluation of Horizon 2020, Commission Staff Working Document No. 220, Brussels, p. 64

[7] European Commission (2017): In-depth Interim Evaluation of Horizon 2020, Commission Staff Working Document No. 220, Brussels, p. 64

[8] https://de.statista.com/statistik/daten/studie/188766/umfrage/bruttoinlandsprodukt-bip-pro-kopf-in-den-eu-laendern/

[9] European Commission (2017): In-depth Interim Evaluation of Horizon 2020, Commission Staff Working Document No. 220, Brussels, p. 65

[10] Council of the EU (2011): Analysis on low participation in FP 7 – Information from the Commission, Note 14728/11, p. 5

[11] https://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ecofin/139831.pdf

[12] http://ec.europa.eu/budget/explained/budg_system/fin_fwk0713/fin_fwk0713_en.cfm