Many parts of Europe have recovered from the lows of 2008, but some continue to struggle. They are ideal as hunting grounds for populists says a report from ING economists Joanna Konings and Bert Colijn.
The European Union is able to show a 2 percent increase in its employment levels. However, some regions are still dragging on.
Germany has shown a growth in its employment levels, but regions like Thuringia and Saxony-Anhalt continue to show a decline for the past 10 years.
In Italy, there is an improvement in the northern regions, especially in those regions around Rome. But South Italy continues to show poor employment growth.
The ING report says that digital infrastructure and R&D investment are most essential to lay the foundation for growth. Where such growth is dragging, the unemployment rate continues to be poor, says the report.
The report further says that the regional divide brought in through employment growth may cause an increase in support for populism in these weak regions in the years to come.
This happened in the general elections that took place in Italy in 2018. The southern regions showed surging support for the Five Star Movement, an anti-establishment, says the report.
If this redistribution becomes stronger, it will lead to a high political backlash with escalating fiscal matters. The report says that these findings suggest that such weak countries may have an increased risk premium.
With the escalating trade tensions between China and the U.S., the European Union has cut down its growth forecast for many countries.
The EU expects Germany to grow at 0.5 percent for this year. After Italy, Germany is the second-worst economy in the European Union in terms of growth.
The Commission further expects that the whole of the European Union will be hit this year. Growth is expected to be 1.4 percent for this year and 1.6 percent for the next year.