Kwartalnik 'Studia Regionalne i Lokalne' - The impact ... · miasto stołeczne. 1 The research...

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Maciej Smętkowski University of Warsaw, Centre for European Regional and Local Studies (EUROREG), Krakowskie Przedmieście 30, 00-927 Warsaw, Poland; [email protected] THE IMPACT OF THE ECONOMIC CRISIS ON THE METROPOLISATION PROCESSIN THE CAPITAL CITIES OF THE CEE COUNTRIES 1 Abstract: The aim of this paper is to discuss the situation of the EU-10 CEE capital cities during the years since the 2008 financial crisis. The paper concentrates on metropolisation processes that became particularly pronounced at the end of the first stage of the transformation, long before the accession of these countries to the European Union. The main hypothesis is that these processes also continued in the conditions of the economic crisis. As a result, the capital cities in most CEE countries should have done relatively well coming out of the crisis, mainly due to the nature of their diversified economies and the significant share of advanced business services in their structure. As a result, the crisis provided an opportunity to ‘verify’ the viability of the current economic model in the short term, in the specific conditions of transformation economies. Keywords: CEE countries, metropolisation, economic crisis, capital city. WpłyW kryzysu gospodarczego na proces metropolizacji W miastach stołecznych krajóW europy ŚrodkoWo-Wschodniej Streszczenie: Celem artykułu jest przedstawienie sytuacji 10 miast stołecznych krajów Europy Środkowo-Wschodniej w okresie następującym po kryzysie finansowym z 2008 r. Artykuł koncentruje się na procesach metropolizacji, które stały się szczególnie widoczne w pierwszej fazie transformacji, na długo przed przystąpieniem tych krajów do Unii Europejskiej. Przyjęta hipoteza zakłada, że te procesy postępują również w warunkach kryzysu gospodarczego. W rezultacie należy oczekiwać, że sytuacja miast stołecznych krajów Europy Środkowo-Wschodniej powinna być dobra z uwagi na zdywersyfikowaną strukturę gospodarczą i duży udział zaawansowanych usług dla przedsiębiorstw. W efekcie kryzys stworzył możliwość weryfikacji odporności aktualnego modelu rozwoju gospodarczego w krótkim okresie w specyficznych warunkach transformujących się gospodarek. Słowa kluczowe: kraje Europy Środkowo-Wschodniej, metropolizacja, kryzys gospodarczy, miasto stołeczne. 1 The research leading to these results has received funding from the European Union’s Seventh Framework Programme (FP7/2007-2013) under grant agreement ‘Growth-Innovation- Competitiveness: Fostering Cohesion in Central and Eastern Europe’ (GRINCOH). Studia Regionalne i Lokalne Nr 2(60)/2015 ISSN 1509–4995 DOI: 10.7366/1509499526002

Transcript of Kwartalnik 'Studia Regionalne i Lokalne' - The impact ... · miasto stołeczne. 1 The research...

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Maciej SmętkowskiUniversityofWarsaw,CentreforEuropeanRegionalandLocalStudies(EUROREG),KrakowskiePrzedmieście30,00-927Warsaw,Poland;[email protected]

the impact oF the economic cRiSiS on the metRopoliSation pRoceSS… in the capital citieS oF

the cee countRieS1

Abstract:TheaimofthispaperistodiscussthesituationoftheEU-10CEEcapitalcitiesduringtheyearssincethe2008financialcrisis.Thepaperconcentratesonmetropolisationprocessesthatbecameparticularlypronouncedattheendofthefirststageofthetransformation,longbeforetheaccessionofthesecountriestotheEuropeanUnion.Themainhypothesisisthattheseprocessesalsocontinuedintheconditionsoftheeconomiccrisis.Asaresult,thecapitalcitiesinmostCEEcountriesshouldhavedonerelativelywellcomingoutofthecrisis,mainlyduetothenatureoftheirdiversifiedeconomiesandthesignificantshareofadvancedbusinessservicesintheirstructure.Asaresult,thecrisisprovidedanopportunityto‘verify’theviabilityofthecurrenteconomicmodelintheshortterm,inthespecificconditionsoftransformationeconomies.

Keywords:CEEcountries,metropolisation,economiccrisis,capitalcity.

WpłyW kryzysu gospodarczego na proces metropolizacji W miastach stołecznych

krajóW europy ŚrodkoWo-Wschodniej

Streszczenie:Celemartykułu jest przedstawienie sytuacji 10miast stołecznychkrajówEuropyŚrodkowo-Wschodniej w okresie następującym po kryzysie finansowym z 2008 r. Artykułkoncentrujesięnaprocesachmetropolizacji,którestałysięszczególniewidocznewpierwszejfazietransformacji,nadługoprzedprzystąpieniemtychkrajówdoUniiEuropejskiej.Przyjętahipotezazakłada,żeteprocesypostępująrównieżwwarunkachkryzysugospodarczego.Wrezultacienależyoczekiwać, że sytuacja miast stołecznych krajów Europy Środkowo-Wschodniej powinna byćdobrazuwaginazdywersyfikowanąstrukturęgospodarcząidużyudziałzaawansowanychusługdla przedsiębiorstw.W efekcie kryzys stworzył możliwość weryfikacji odporności aktualnegomodelurozwojugospodarczegowkrótkimokresiewspecyficznychwarunkachtransformującychsięgospodarek.

Słowa kluczowe: kraje Europy Środkowo-Wschodniej, metropolizacja, kryzys gospodarczy,miastostołeczne.

1 The research leading to these results has received funding from the European Union’sSeventhFrameworkProgramme (FP7/2007-2013) under grant agreement ‘Growth-Innovation-Competitiveness:FosteringCohesioninCentralandEasternEurope’(GRINCOH).

Studia Regionalne i LokalneNr 2(60)/2015

ISSN 1509–4995DOI: 10.7366/1509499526002

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Introduction

Contemporarymetropolisationprocessestakingplaceondifferentspatialscalesarethemainfactorshapingtheeconomyandspaceoflargecities,particularlyinwell-developedcountries(Castells,1989,1998).Inaninformationeconomy,thedevelopmentofmetropolises isbasedon threemutuallysupplementarypillars(Sassen,2001;HallandPain,2006;Krätke2007).Thefirstisrelatedtotransnationalcorporations, including companies providing advanced business services. Thesecondisassociatedwithhi-techandcreativeindustries.Forinstance,T.Hutton(2010)drawsattentiontocontemporary,specificreindustrialisationprocessesinthecentralareasofmetropolises.Thethirdpillarencapsulatesculturalandtradefunctions,includingtheirroleinthedevelopmentofthetourismsector(WrigleyandLowe,2002;DegenandGarcia,2012).At thesametime, it ispossible toobserve thespatialdimensionof thegrowingpolycentricityofexistingspatialstructures(cf.e.g.Batten,1995;Kunzmann,1998;Criekingenetal.,2007),withcentralitybecomingincreasinglyfuzzyinthemetropolitanspace(Soja,2000).Tosumup,theobservablemetropolisationprocessesareassociatedwith(cf.

SmętkowskiandGorzelak,2008):• transition from a traditional industrial economy,with capital and labour asitsmainproductionfactors,toaninformationandservice-basedeconomyinwhichinnovationisthemainfactorofdevelopment;

• segmentation of the global economy, where the competitive advantage inthe high-technology segment is based on the capacity to create and adaptinnovations, whilst the low-technology segment is governed by the pricecompetition. The former segment is usually located in metropolitan areas,whilethelatter–innon-metropolitanareas;

• changes in the spatial linkages within the economy, which involve thedevelopmentofanetworkofglobalcitiesthatattractfirmsprovidingadvancedbusiness services, headquarters of the largest international corporations andresearch-intensiveindustriesthatorganiseglobalinformationflows.Inrecentyears,thechangestakingplaceintheservicesectorhavehadacrucial

impactontheeconomiesofthemetropolitancentresinhighly-developedcountries,andthemostimportantchangestookplaceoverapproximately10-yearperiods,starting in1970 (cf.Hutton,2010).Thefirstof theseperiods,whichbegan inthe 1970s, involved the externalisationof services from industrial enterprises,aprocessthatfosteredthedevelopmentofbusinessservicesandledtothecitiesbecoming specialised,nationalor regional, servicecentres.The secondphase,associatedwith the increasing internationalisationof the service sector, beganinthe1980sandwascharacterisedbyagrowthofintermediationservicessuchasbankingandfinance,but alsoofotheradvancedbusiness services, coupledwiththeirincreasingspecialisationincontrolandmanagementfunctions.Overthisperiod,metropolisesbecamethemainhubsforinternationalexchangeandinvestments.Thecurrentphase,whichstartedafter1990,canbedescribedastheglobalisationphase,duetotherapidgrowthofinformationandcommunicationtechnologies(ICT),accompaniedbyanexpansionofknowledge-basedbusiness

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servicesandtoughercompetitionbetweenmetropolisesforcontrolovertheflowsofcapital,technologies,andinformation.InCentralandEasternEuropeancountries(CEECs),lockedinthefettersof

the old industrial development paradigmuntil 1989, it couldbe expected thatthe scale ofmetropolisation processes associatedwith the transition to a freemarket economy and becoming a part of globalisation flowswould bemuchmorespontaneousthaninWesternEuropeancountries.Furthermore,itshouldbeassumedthatthesewavesofchangesintheservicesectortypicalofmetropolisesinhighly-developedcountrieswouldoverlapwitheachother.Thisiscorroboratedbymany empirical studies that clearly show that large cities, especially thoseincorporating capital cities, became the leaders of the transformation process(Gorzelak, 1996; Petrakos, 2001; Smętkowski and Wójcik, 2012). Thiswas a consequence of the fact that capital city regions had the best transportaccessibility,aswellas theircapitalcityfunctionsandthehumancapitalwiththebest qualifications, akey factor in thedevelopmentof aknowledge-basedeconomy. In effect, this led to a huge inflow of capital from abroad, withinvestmentsinter aliainthesectorofadvancedbusinessservices,whichinturnresultedinaboominthemarketforofficeandretailspace,boostedthenumbersofuniversitystudents,increasedairtravel,andproducedconsiderablestructuralchanges triggered by deindustrialisation processes (cf. e.g. Kuć-Czajkowska,2010;GorzelakandSmętkowski,2011).The global economic crisis originating in a crisis in the financial sector

couldhaveexertedastrongimpactonmetropolisationprocessesintheCEECs.However, the regional dimension of the crisis phenomena has not yet beendiscussed in depth, due to the lack of relevant statistical data. Preliminaryanalysesbasedonthechangestakingplaceinthelabourmarkets(cf.Gorzelak,2011) ledtoahypothesisstatingthattheregionstheleastaffectedbythecrisisshouldincludemetropolitanregionswiththemostdiversifiedeconomicstructureontheonehand,andontheother–agriculturalregionswiththeleastpresenceinglobalisationprocesses.Inconsequence,theremainingregionsshouldbemostheavilyexposedtothecrisisphenomena,especiallythosewiththemostattributesoftheformer,‘Fordist’modelofeconomicdevelopment.Themain aim of this paper is to present the situation in ten capital cities

ofCEEcountries thataremembersof theEuropeanUnionover the last threepost-crisis years, i.e. 2008–2011. The paper concentrates on metropolisationprocesses that became particularly pronounced at the end of the first stage ofthetransformation,longbeforetheaccessionofthesecountriestotheEuropeanUnion. The main hypothesis is that these processes also continued in theconditionsof theeconomiccrisis.Asa result, thecapitalcities inmostof theCEECsshouldhavedonerelativelywellcomingoutofthecrisis,mainlyduetothenatureof theirdiversifiedeconomiesandthesignificantshareofadvancedbusinessservicesintheirstructure.Asaresult,thecrisisprovidedanopportunityto‘verify’theviabilityofthecurrenteconomicmodelintheshortterm,inthespecificconditionsoftransformationeconomies.

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The paper has the following structure: the first part discusses the national(domestic) dimension of the economic crisis and the development trajectoriesof thecapitalcityregionsin1995–2011.Thesecondpart identifiesthefactorsthatunderpinnedthemetropolisationprocessesintheCEECs.Thethirdandfinalpartdemonstrateshowthecapitalcityregionsof theCEECswereaffectedbytherecenteconomiccrisis,withanemphasisonthedynamicsoftheireconomicgrowth compared to their respective national economies, the direction ofstructuralchangestakingplaceoverthisperiod,andthechangingrelationshipsbetweenthemetropolisesandtheirregions.Inaddition,basedontwoselectedcasestudiesofmetropolitancentres,WarsawandRiga,thedevelopmentstakingplaceinthelabourandofficepropertymarketsduringtheeconomicslowdown/crisisarediscussed.

1. Economic crisis in the CEECs and capital cities

Thefinancialcrisis, theonsetofwhichwassymbolicallyepitomisedby thecollapse of LehmanBrothers, aUS investment bank, on 15 September 2008,quickly turned into a global economic recession. Themain channels throughwhich the global crisis was imported into the CEECs included (Orłowski,2010) the collapseof exports toWesternEuropean countriesdue to shrinkingconsumer demand, reduced scale of FDIs globally, and financial instabilitycausedbydependencyonexternalsourcesoffinancingthatwerecrippleddueto declining confidence in emergingmarkets. In parallel, G. Gorzelak (2011)dividedthefactorsunderpinningthecrisisintotwocategories:external,whichinclude decreasing exports, reduced activity of foreign banks, drop in FDIs,andoutflowofcapital;andinternal,embracinghighspecialisationlevelsofthenationaleconomies,housingbubble,excessivesalaryrises,overvaluednationalcurrencies,highpublicdeficitlevels,andweakinstitutions.The scale of the economic crisis differed across the CEECs (Figure 1). In

2009, thecrisiswas themostacutelyfelt in theBalticstates, leadingtoarealGDPdropby a staggering15%, afigureunheardof even in thefirst stageoftheeconomictransformation.Intheremainingcountries,therecessionoscillatedbetween5%and8%,withtheexceptionofPoland,whichrecordeda1.7%riseinGDP.Acomparisonof theGDP level in2008with thatat theendof2013showedthatPolandhadanaggregateeconomicgrowthof14.3%.Inthisperiod,Slovakia andEstoniawere the countrieswhose economies had bounced back(a5.0%anda3.0%increase,respectively).ChangesintheGDPofanotherfourcountriesapproximatedtheEUaverage,whichmeantaslightdecreaseofca.2%.However,Hungary,Latvia (a5–6%decrease)andSlovenia (a9.4%decrease)hadnot rebounded, even though twoof these countrieswere thefirst to entertherecessionphase.Inaddition,post2010,onlyfivecountriesclearlyrecoveredgrowth;thesewerePoland,SlovakiaandtheBalticstates,whilstgrowthinthecaseofRomaniaandBulgariawasmuchlowerthanintheformergroup.Atthesametime,theeconomiesofSlovenia,theCzechRepublic,andHungarywerestillstagnating,andevenrecordedasmalldropinGDPin2012–2013.

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Figure 1. Real GDP changes in CEECs in 2008–2013 (2008 = 100)

Source: own elaboration based on Eurostat data.

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Figure 2. Dynamics of economic development of the capital city regions (GDP per capita in EUR)

* MA – metropolitan area

Source: own elaboration based on Eurostat data.

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InnominalvaluesmeasuredbyGDPpercapitainEUR,thecapitalcityregions(which,forthepurposesofthisstudy,aredefinedasthecapitalcitiestogetherwiththesurroundingNUTS3subregions)intheCEECsweredevelopingrapidlyuntil2008.Inthisperiod,thesituationdeterioratedonlyinSofiaasaresultofforeigncurrencyfluctuations(in1996–1997),andinWarsaw(in2002–2004)(Figure2).In contrast, the most dissimilar paths of growth characterised Bratislava andTallinn,thesuccessofwhichcouldbeexplainedbytheadvantagescreatedbytheirlocationintheproximityofViennaandHelsinki,respectively.Ontheotherhand,andespeciallyintheyears2004–2008,theregionsofSofiaandLjubljana,thecapitalsofthepoorestandthewealthiestcountriesofthemacroregion,weredevelopingatavisiblyslowerrate.Asaresultofthecrisis,thesituationoftheBratislavacapitalregionimproved

significantly,withitbeingrankedfirstamongtheCEEcountries(EUR30,000percapita),alikelyconsequenceofSlovakia’saccessiontotheeurozonein2009.Otherthanthat,thefiguresforGDPmeasuredinEURdidnotdecreaseonlyintheSofiaMA(metropolitanarea),asaresultofwhichithadagainrecordedaGDPpercapitagrowthsimilartothatoftheRiga,Vilnius,andBucharestMAs.Thelatter,followingthedeeprecessionof2009,begantoimprovetheirsituationstartingin2011,similarlytoWarsawandTallinn,whichhadrecoveredfromthe2009level.Incontrasttothistrend,thepositionofLjubljana,Prague,andBudapestbegantodeterioratesteadily,whichcouldbeviewedasaconsequenceofpoordynamicsofgrowthnationally,discussedabove.

2. Drivers of metropolisation processes in CEECs before the crisis

PositionoftheCEECs’capitalcityregionsinadvancedproducerservicesrankings

Ingeneral,metropolisesintheCEECsoccupyquitedistantplacesinvariousglobalcityrankings.Forinstance,onthebasisoftheGaWC(GlobalandWorldCities)study(Taylor,2007),itcanbeconcludedthat,ofapoolof315surveyedglobalcities,onlyPrague,Warsaw,andBudapestwererankedamongthetop50citiesintermsoftheconnectivityofglobalservicefirms,atalevelofca.40%ofLondon’spotentialinthatregard,whilsttherespectivevaluesinthecaseofBucharest,Bratislava,andSofiawerebetween20%and25%,andforthecapitalcities of theBaltic states and Slovenia – only 15%. (Table 1).However, thissituationgradually changed in the followingyears. In2011, basedon anotheranalysis examining the branch structure of 350 transnational corporationsprovidingadvancedbusiness services (CBRE,2011), it couldbe seen that thecitiesinquestionvisiblywentupintheranking(althoughcomparedtoasmallernumber of cities). For the three cities with top positions in the ranking, i.e.Warsaw,Budapest,andPrague, thiscouldbeobservedparticularlywell in thecaseoftheformertwocities.Inthenextgroupofcities,thechangeofrankwasevenmorepronounced,particularlyinthecaseofBucharestandBratislava,andtoalesserextent–Sofia.Ontheotherhand,theremainingCEECs’capitalcities

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continued tobescoredat theverybottomof the ranking,probablydue to thesmallsizeoftheirnationaleconomies.

Table 1. Rank of CEECs’ capital cities based on the location of headquarters and subsidiaries of largest advanced producer services (APS) companies

City

CB Richard Ellis (2011) GAWC (P. Taylor) (2000)

Rank (197 cities)

Number of global APS companies (max. 350)

Rank (315 cities)

Connectivity index for 100 global APS companies (max. 1.00 London)

Warsaw 12 150 39 0.42

Budapest 20 128 45 0.41

Prague 21 126 29 0.43

Bucharest 29 110 83 0.25

Bratislava 35 93 113 0.21

Sofia 53 80 121 0.20

Riga 76 59 154 0.16

Vilnius 86 51 179 0.14

Tallinn 89 49 176 0.14

Ljubljana 93 45 185 0.14

Source: prepared by the author on the basis of data from: CBRE, 2011; Taylor, 2000.

Itshouldbenoted,however,thatahighplaceinanyoftheaboverankingsdoesnotmean that thesemetropolises serveanysignificantcontrolormanagementfunctionsintheglobaleconomybutratherthatthey:• provideconvenient locations forbranchofficesofglobalservicecompanies(withasignificantroleofinternationalairports),whichofferservicesmostlytolocal/domesticenterprises;

• employ a well-qualified and cheap workforce, largely performing ancillaryfunctionsinrelationtothoseperformedbytheheadofficesofsuchcompanies;

• someofthebranchofficesmaybesmallinsizewhencomparedtothescaleofoperationsintheirhomecountriesand/orglobally.TheseobservationsarecorroboratedbythelowpositionoftheseCEEcities

inthelocationrankingsofmajortransnationalcorporations(coveringnotonlyservicefirms),particularlywhenthelocationofcorporateheadofficesistakenintoaccount(cf.ESPONFOCI,2010).Atthesametime,citiesinthispartoftheEuropelagbehindthemajorcitycentresoftheEU,alsoinrelationtothelocationofbranchofficesofsuchcorporations.

Metropolisationandsupplyanddemandfactors

The prominent places occupied by the CEEC capital city regions in theserankingscanbeexplainedbybothsupplyanddemandfactors.Theformernotablyincludereadyavailabilityofacheapworkforcewiththerequiredqualifications.

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It is quite accurately expressed by the total number of the population in themetropolitan area, which reveals a linear correlation between the size of thepopulationandthenumberofsubsidiariesofinternationalcorporationsprovidingadvancedbusinessservices(Figure2a).OnesignificantexceptiontothisruleistheBratislavaMA,wheredemandfactorsarealsolikelytoplayaroleduetoitscloseproximitytoVienna.Thishypothesisiscorroboratedbytheregion’shighscores in the attractiveness ranking ofEuropeanMAs for business activity intermsofcostsoflabour.In2011,Bucharest,Bratislava,andWarsawoccupiedthetopthreeplacesinthisranking,whileBudapestandPraguewereranked6th and 7th,respectively(CushmanandWakefield,2012).Ontheotherhand,thedemand-sidecorrelationbetweenthenumberofsubsidiaries/branchesandthesizeofthenationaleconomythatcouldgeneratedemandfortheprovidedadvancedservices

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Source: own elaboration based on CBRE, 2011, Eurostat data.

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iscurvilinear(Figure2b).Thiscoulddemonstratethat,inbiggercountrieswithamorepolycentricstructureofthesettlementsystem(notablysuchasPoland),othercitiescanalsoofferattractive locations foradvancedservicesproviders.Ontheotherhand,itshouldbeborneinmindthatsomeoftheseservicesmaybe exported. Nevertheless, the low scores awarded to metropolitan areas ininvestment attractiveness surveys suggest that the scale of operations reachesonly slightly beyond national borders. In this approach,Warsaw was ranked19th,whilstPrague andBudapestwere at thebottomof the33MAsanalysed(CushmanandWakefield,2012).

Structuralchangesinmetropolitanareas

TheconsiderableattractivenessoftheCEECs’capitalregionsfortransnationalcorporationsledtofar-reachingchangesintheireconomicstructures,whichtookplace in theperiodof rapidgrowthpreceding the recent economiccrisis.Theprevailingtrendwasthetransitionfromanindustrialeconomytoaninformationeconomy,manifestedbyafallingshareofindustryingrossvalueadded(GVA)andan increasingshareofbusinessservices(Table2). In2008, theseserviceswere of the greatest significance for the economy of themetropolitan area inWarsaw,reachingalevelcloseto30%,whereasinVilniusandRigatheirsharewasonly21.3%and24.4%,respectively.Inthelatterregions,thesectorexpandedatthefastestrate,reachingca.6ppin2000–2008,comparedtoamere1.7ppinWarsaw.Theshareofadvancedservicesintheremainingmetropolisesoscillatedatca.25–26%,andtheirsignificanceincreasedataraterangingfrom2.0ppinLjubljanato4.8ppinPrague.Inthiscontext,thesituationofBudapestdifferedfromthegeneralpicture,astheshareofthissectorhadnotundergoneanymajorchanges,whilethespecialisationoftheregionaleconomyinthisarea,measuredbythelocationquotient(LQ),hadevenslightlydecreased.Suchspecialisationwas the greatest inWarsaw (1.6) and Bratislava (1.5).Among the remainingcities,Praguerecordedhigher-than-averagevalues(1.4),andTallinnandRiga–below-averagevalues,withthedegreeofspecialisationbeingverylowcomparedtothenationaleconomybeingverylow,reachingca.1.1in2008.Ontheotherhand,deindustrialisationprocesseshadbeenmostadvancedin

Warsaw,Riga,andSofia,wheretheshareofGVAinindustryreachedameagre12–14%, a comparable figure to those found in the majority of metropolisesin highly developed countries.At the other extreme, therewas Prague (20%)andBudapest (ca. 18.5%),which hadmaintained their industrial traditions intheir functional urban area. In contrast, the share of industry in GVA in theremainingcapitalcityregionsoscillatedaround15–17%.Intheanalysedperiod,deindustrialisation processes were occurring at the fastest rate inVilnius andBratislava (a drop of over 4pp),whereas in the case of Prague andBudapestthissectorhadstillmaintainedamajor role (aslightdecreaseby0.5pp),withasimilarsituationbeingobservedinSofiaandTallinn(a1ppdecrease).Intheremainingcities,theroleofindustryhaddiminishedbyca.3pp.Itshouldalsobenotedthatdeindustrialisationhadtakenplaceacrosstherespectivecountries,but

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THEIMPACTOFTHEECONOMICCRISISONTHEMETROPOLISATIONPROCESS… 41Ta

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MACIEJSMĘTKOWSKI42

asharpdecreaseinindustrylocationquotientvaluessuggeststhat thisprocesshadagreaterdynamicinthecapitalcityregions.Thefollowingsimplifiedtypologycouldbeproposedtosummarisethesituation

oftheCEECs’capitalcityregionsintermsofboththestatusandthedynamicsofstructuralchanges.Attheoneend,wehavePragueandBudapest,whichretaineda large share of industry in the economyof theirMAs,with a strong leaningtowardsadvancedservicesobservableinPrague.Attheotherextreme,thereisWarsaw,and, toalesserextent,Riga,Vilnius,andBratislava,whereadvancedserviceshaveamajorshareingeneratingGVA,orwheresuchashareisgrowingatthefastestrate.Sofia,Tallinn,andLjubljanacanbeplacedbetweenthesetwoextremes.

3. Impact of the crisis upon the CEECs’ metropolises

The crisis and/or economic slowdown of 2008–2011 did not considerablyaffecttheearlierpositionoftheCEECs’capitalcityregionscomparedtotheirrespectivecountries(Figure4).Inmostofthem,thedynamicsofGDPgrowth

80

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80 85 90 95 100 105 110 115 120

Real

GDP

gro

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(%)

GDP growth relativised by national average (country = 100)

Warsaw

Bratislava

Sofia

Riga

Vilnius

Prague

Ljubljana

TallinnBudapestBucaresti

Figure 4. Performance of capital city regions* in GDP terms in 2008–2011

* Cities with their surrounding NUTS3 regions.

Source: own elaboration based on Eurostat data.

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THEIMPACTOFTHEECONOMICCRISISONTHEMETROPOLISATIONPROCESS… 43

washigherthanthenationalaverage,aphenomenonespeciallyvisibleinSofia,but also inBratislava, i.e. capital citieswhich, in the researchedperiod,werejoining theglobal economyat the relatively fastest rate (the location rentduetotheproximityofViennainthecaseofBratislava,fastexpansionofbusinessservices inSofia). In theanalysedperiod,onlyPrague,VilniusandRigaweredeveloping at a slower rate than the national average, but only insignificantlyso in the former twocases.TheRigacapital city regionwasanexception, asitspositionhadconsiderablydeteriorated,notonly in relative,butalso in realterms, as proved by an 18%GDP decrease compared to 2008. On the otherhand,itshouldbenotedthatthiswastakingplaceinasituationofthegreatestconcentration, amongall theCEECs,of economicpotential in thecapital cityregion.Intheremainingcountries,thecapitalcityregionsweredevelopingmorerobustlythanthenationalaverage,butthedynamicsofthisprocesswaspositiveonly in theWarsawregion.Tosumupthesechanges, itcouldbesaid that thefinalpicturewasratherpatchyincharacter,andmadeitimpossibletoofferanyin-depthgeneralisationsconcerningtheperformanceofthecapitalcityregionsinthetimeoftheeconomiccrisis.More information can be derived from the structural changes taking place

inthemetropolitanareas,whichoccurredatafastrateduringthecrisisandinthefollowingyears(Figure5).First,itshouldbenotedthat,viewedinrelativeterms,thecrisisinindustryprovedrathershort-lived,andtheshareofthesectorinGVAwassimilar to thatfrombefore thecrisisasearlyas2011.ThiscouldsuggestthatthedeindustrialisationprocessesintheCEECs’capitalcityregionshadcometoanend.Furthermore,insomecases,suchasthecapitalcityregionsof Bulgaria and the Baltic states, the role of the industrial sector had visiblyincreased,whichcanpointtothehugescaleoftheeconomiccollapseinothersectors.Theconstructionsectorwasabranchespeciallybadlyhitbythecrisis,particularlyinthecapitalcityregionsoftheBalticstatesandSlovenia(withanexceptionallyheavydrop in thecaseofVilniusandRiga).Thiswas theresultofaspeculativebubbleintherealestatesector,whichwaslargelyfinancedbyfinancialinstitutionsfromabroad.Inthiscontext,Warsawcouldbeviewedasanexception,astheconstructionboomwasstillstrongthere,alikelyconsequenceofthefastestrateofGDPgrowth,relatively,inthisperiod.Apalpableregressioncouldalsobeobservedinthesimpleservicessector,aphenomenonmostclearlyvisibleaboveallinPragueandBratislava.Thiscouldbeaneffectofdwindlingconsumer demand, also that generated by consumers from abroad due to theweakening of the tourism sector.At the same time, paradoxically, this sectorhadbecomerelativelystrongerinthecaseofRigaandVilnius–capitalsofthecountriesmostheavilyaffectedbythecrisis.Anothertypicalfeatureofthisperiodwasthegrowingsignificanceofadvancedbusinessservicesinalltheanalysedcases,whichwasparticularlyvisibleinSofia.Thisindicatesthattherestructuringdirectionof theCEECs’metropolitanareasnoticeable in theperiodbefore thecrisiscontinued.Vilniuswasoneexceptioninthisregard,althoughtherelativestagnationofthesectorcouldbeobservedinthecapitalcityregionsofRigaandWarsaw.Incontrast,theincreasingroleofpublicservices,quiteprobablydueto

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thecontinuinginterventionofthecentralauthorities,couldbestbeobservedinLjubljana,Bratislava,andTallinn.Tosumup,itshouldbenotedthatthelargest,andtherebythemosteconomically

diversified,metropolitanareasofWarsaw,Budapest,andPraguedemonstratedarelativelyconsiderableinertiaoftheireconomicstructuresbothduringthecrisisandinthepost-crisisconditions.WhileinthecaseofWarsawandBudapestthiscouldbeobservedalsointheperiodleadinguptothecrisis,Praguehadearlierbeenabletochangeitseconomicstructuremuchfaster,followingtheexpansionofthebusinessservicessector.

–6

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PRAGA MA BUDAPESTMA

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VILNIUS MA

Industry

Construction

Simple services

Business services

Public services

Figure 5. Structural change of MAs’ economies in 2008–2011 (percentage points, pp)

* Bucharest was excluded from the analysis due to low reliability of statistical data.

Source: own elaboration based on Eurostat data.

Anotherspherethatcouldhavebeenaffectedbytheeconomiccrisisinvolvedtherelationsbetweenthemetropolisanditsregionalhinterland.Therapidlywideningdisparitiesinthelevelofeconomicdevelopmentbetweenthemetropolisandtheregion,visibleespecially in thefirstphaseof the transformation,characterisedall theCEECs (Table 3). In effect, the scale of these disparitiesmeasured byGDPpercapitawasthehighestofalltheEUcountries(cf.Smętkowskietal.,2011). Interestingly, therewasadistinctcatch-upeffectobservableduring the

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crisis,particularly in theRigaandWarsawMAs,although inboth thesecasesthenarrowingscaleofthedisparitiescouldalsobeseenintheearlierperiodofrapideconomicgrowth.Intheremainingcases,avisibletendencyforreducingthesedisparitiesortheirstagnationcouldbeobserved.TheonlyunquestionableexceptionsinthisregardwereSofia,andtoalesserextent,Vilnius.Oneofthepotential reasonsforsuchconvergence,whichcanbeseenasquitesurprising,giventherelativelyfastdevelopmentofthemetropoliscomparedtotherestofthecountry,couldincludetheincreasedspreadeffectswithinthemetropolitanregions.Thiscouldinvolve,ontheonehand,anincreasedinvestmentattractivenessofthedirectmetropolitansurroundingsforbusinessactivitiesrequiredbythemetropolis,mostly in thesphereof transportand industrialoperations.Ontheotherhand,it could be a consequence of the increased polycentricity of themetropolitanareas’structure,whichinturncouldleadtoincreasedworkcommutingfromtheregionalhinterlandtothemetropolis.Thiscanresultinthetransferofearningsfromworkandaboostedconsumerdemanddrivingthedevelopmentofsimpleservicesintheregionalhinterland.

Table 3. GDP per capita ratio between the metropolis and its regional hinterland*

Metropolitan macroregion

Ratio Change

1995 2004 2008 2011 1995–2004

2004–2008

2008–2011

Bratislava 1.86 1.87 2.01 2.02 0.01 0.15 0.01

Bucharest 1.32 2.43 3.17 3.05 1.11 0.74 –0.13

Budapest 1.72 2.00 2.17 2.20 0.27 0.17 0.03

Ljubljana 1.57 1.60 1.63 1.61 0.03 0.03 –0.03

Prague 1.39 1.77 1.94 1.82 0.37 0.17 –0.12

Riga 1.47 2.13 2.13 1.80 0.66 0.01 –0.33

Sofia 1.60 2.22 2.81 3.21 0.62 0.59 0.40

Tallinn 1.74 2.28 2.38 2.45 0.53 0.10 0.07

Vilnius 1.31 1.89 2.07 2.20 0.58 0.18 0.13

Warsaw 2.00 2.35 2.44 2.28 0.35 0.09 –0.17

* Ratio for the metropolis calculated for the city within the administrative boundaries together with the surrounding NUTS3; regional hinterland defined as the NUTS2 region or the directly adjoining NUTS3 regions

Source: own elaboration based on Eurostat data.

Casestudiesofselectedmetropolises

Anin-depthevaluationoftheimpactoftheeconomiccrisisonselectedaspectsofmetropolisationcanonlybeattemptedonamicroscale,thatis,atthelevelofasinglemetropolis,duetotheavailabilityandcomparabilityofstatisticaldata.Consequently,twocategorieswereselectedforanalysis–thelabourmarketandtheofficepropertymarket– in twocasestudiesof thecities thathadoppositedynamicsofeconomicgrowth.TheseareWarsaw,whichrecordedgrowth,and

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Riga,whoseMA,similarlytothewholecountry,sufferedfromthedeepestcrisiscomparedtoallofthecapitalcityregionsincludedinthisresearch.

Thelabourmarket

In thecaseofWarsaw,changes in the labourmarketwereanalysedfor twosub-periods: 2005–2008, comprising a period of rapid economic growth, and2008–2012,when an economic slowdown could be observed (Figure 6). The formerperiod,takingintoaccountthenumberofpeopleemployedincompanieswith10ormorestaff,sawanincreaseinemploymentby10%,whereasinthenextfouryearstheaggregateincreaseinthisareatotalledamere2%.

–30

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Heal

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2005–2008

2008–2012

Figure 6. Changes in the number of employed in Warsaw in 2005–2012 [%]*

* Statistics for businesses employing 10 or more staff.

Source: own elaboration based on Central Statistical Offi ce data.

AmongthebiggestlosersintermsoftheirshareinWarsaw’slabourmarketwas the financial and insurance sector,which employed ca. 85,000 staff, andcurrently ranked 2nd with a 10.5% share. The sector expanded rapidly in theperiodleadinguptothecrisis(anincreasebymorethan30%inthreeyears),buttheyearsafter2008sawacontinuedriseinemploymentinthesector,by10,000jobs(13.5%)overall.Othersectorsthatweredevelopingatamodestratepriorto

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2008,butgrewrapidlyintherecentperiod,includedpublicservicessuchaspublicadministration,education,andhealthcare.Ontheonehand,thiscanpointtoanincreasingscaleofpublicintervention,butontheotherhand,itcanbeviewedasaconsequenceofthedevelopmentofprivateenterprisestosatisfythegrowingdemandforhealthandeducationservices.Asimilarconclusioncanbedrawninthecaseofemploymentintheconstructionsector,whichisgrowingasaresultofimplementingmanypublicinvestmentprojects,includingthosefinancedbytheEuropeanUnion,butalsoduetothecontinueddemandforcommercialproperty.Otherbranchesthatweredevelopingrapidlyprior to2008respondedtothe

new circumstances in a variety ofways. In the case of professional services,employmenthadstabilisedandthesectormaintainedits9.4%shareinthelabourmarket(securingits3rdplaceintheranking),whereastheICTsectorhadshedmore than7%of jobs.The transportation andwarehousing sectors performedratherbadly (whichcouldalsomean that theseactivitieswerebeingrelocatedoutsideofthecity’sadministrativeboundaries),asweretheaccommodationandcateringsectors,whichlostnearly10%ofjobsduetothereduceddemand.Nevertheless,thebiggestlosersintheperiodofeconomicslowdowninWarsaw

includedmanufacturingandrealestateserviceproviders,wherethelossofjobsreached20%oftheworkforce.Intheformercase,thiswasassociatedwiththecommissioningofnewindustrialplantsinthevicinityofWarsaw.Similarly,thetradesectorperformedpoorlybutmanagedtoretainits firstplaceintheWarsawjobmarket,witha16%share(130,000employed).Interestingly, a comparison of the situation ofWarsaw to that ofRiga, one

of the capital cities most heavily hit by the economic crisis (with an overalllossofjobsinthe2008–2012periodreaching17%)revealscertainsimilarities(Figure 7). Firstly, in Riga the financial, insurance, and professional servicessectorwasdevelopingbetterthanotherbranchesduringthecrisis,recordinganastounding20%increase.JustasinWarsaw,thiswasaccompaniedbyincreasingemploymentinthepublicsector,mainlyineducationandhealthcare.However,therewerenonewjobscreatedinpublicadministration,wherethegovernment’sausterityschemesslashed30%ofjobsoverafour-yearperiod.Theconstructionsectorwasevenworsehit,asithadlostmorethanhalfofitsjobs,togetherwiththe industrial sector,which recordedadrop inemploymentofnearly40%. Inthe former case, this could demonstrate the scale of the speculative bubble,whose sizewasnowherenear to that ofWarsaw. In the latter case, the crisis,just as in Warsaw, had accelerated deindustrialisation processes within thecentre of the agglomeration, while at the same time the industrial sectors inthemetropolitan areawere being consolidated.On the other hand, the fall inindividualconsumption,whichwasbiggerthaninPoland,andweakereconomicperformance,ledtoadropinthenumberofjobsinthesimpleservicessectorby20%,mainlyintrade,hotel,andcateringactivities.

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–60

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Educ

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2008–2012

Figure 7. Change in the number of employed in Riga in 2008–2012 [%]

Source: own elaboration based on CSO data.

Officepropertymarket

In2004–2014,thevolumeofmodernofficespaceinWarsawincreasedtwofold,from2,400,000m² toca.4,400,000m².Theannual increaseofmodernofficespaceinWarsaw,shownonthediagram(onaverage,250,000m²peryear)werecharacterisedbyadistinctcyclicality:periodsofhighsupply,250–300,000m²,werealternatingwithperiodsofdownturnin theofficepropertymarket,whenca.150–200,000m²ofnewofficespacewasputtouse(Figure8).Itshouldalsobenotedthattheimpactofthemostrecenteconomicslowdownin2008wasfeltonlyin2011,whichindicatesadelayoftwotothreeyearsinrelationtoGDPperformance.Overall,theoutlaysontheconstructionofnewofficebuildingsinWarsawcouldbeestimatedatMEUR500peryear,whiletheannualinvestmentspendingbythecityauthoritiestotalswereca.MEUR900.ThedynamicsofofficespacegrowthinRigain2004–2014wereevenfaster

than that ofWarsaw, but were largely a consequence of the low base effect(Figure9).The stockofmodernoffice space increasednearly threefold, from200,000m²to600,000m².InRiga, justas inWarsaw,theyearsleadinguptothe crisis brought record highs in this regard. The main difference betweenRigaandWarsawwasthelowersupplyofmodernofficespaceintheformerasaresultofthecrisis.Stagnationinthepropertymarket,whichwasobservablein2011–2013,wasslowlyreplacedbyarecovery,visibleinthefirsthalfof2014.Itshouldbeborneinmind,however,thatalargesingledevelopmentprojectcouldsignificantlyaffecttheoverallpictureinsuchashallowmarket.

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0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Figure 8. Annual increase of office space in Warsaw in 2004–2014 (sq m)

Source: own elaboration based on Warsaw Research Forum data.

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014/H1

Figure 9. Annual increase of office space in Riga in 2005–2014 (sq m)

Source: own elaboration based on NEWSEC data (2014).

Conclusions

Metropolisation in theCEECs ismanifestedmainlyby thegrowing roleoflargecities,especiallythenationalcapitals,ineconomicdevelopmentprocesses.Theglobalfinancialcrisis,whichdevelopedintoarecessionthataffectedmostoftheCEEcountries,hasnotputanendtothisprocesseitherinthecountrieswhichweretheleasthitbythecrisis,i.e.PolandandSlovakia,orintheBalticstateswheretheeconomicdownturnwasthedeepest.Themainfactorunderpinningthedevelopmentofthecapitalcityregionswas

theincreasingroleoftheadvancedbusinessservicessectorintheireconomies,which triggered a number of interrelated changes in the labourmarket or the

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officepropertymarket.Itshouldalsobenotedthat,insomecountries,theshareofthebusinessservicessectoringeneratingGVAreachedasaturationlevelofca.30%.Therefore,thestructuralchangestakingplacewithinthemetropolitanareasarebecomingslower.Inadditiontothat,specialisationwithinthemetropolitanareasis increasing,duetosomebusinessactivitiesbeingpushedfromthecitycentres to the outer parts of themetropolitan area, especially in industry andselected simple services. Presumably, these developments are taking place onanincreasinglywiderspatialscale,whichismanifestedbyanimprovementofthe situation in theouterpartsof themetropolitanmacroregions in relation tothemetropolis,aprocessparticularlyvisibleduringthecrisisandtheeconomicslowdown.Thedevelopmentofbusinessservicesislargelydrivenbytheinfluxofforeign

capital,includingtransnationalcorporationsdrawntometropolisesbyalow-costworkforcewithrelevantqualificationsfortheadvancedservicessector.Theroleofsupplyfactorsisdemonstratedbythelinearcorrelationbetweenthesizeofthepopulationinthemetropolitanarea(functionalurbanareaforworkcommuting),andthenumberofbranches/subsidiariesofmajorglobalcorporations,whereasthedemandfactorsassociatedwiththescaleofthenationaleconomycanbeoflesserimportance,especiallygiventhegrowingvolumeofexportservices,alsothose,providedbytransnationalcorporatestructures.Amongadvancedservices,financial and insurance services play a special role; they contributed to theincreaseinthenumberofjobseveninthetimeoftheeconomiccrisis,asprovedbytheexamplesofWarsawandRiga.Duringthecrisis, thenumberofpeopleemployedinpublicservicessuchashealthcareandeducationalsoincreased.This,however,couldbeaconsequenceofthedevelopmentofthemetropolitanclassandanincreaseddemandforsuchservicesfromcorporateemployees,satisfiedbyprivatecompaniesoperatinginthesesectors.Theexpansionoftheservicesectorwasnoticeablyassociatedwithanincrease

in modern office space, which means that the construction sector, despiteadownturndrivenbythespeculativebubbleintheresidentialpropertymarket,isalsodevelopingrelativelywell.This,however,couldalsobeaffectedbypublicinvestmentprojects,alsothoseco-financedfromtheEUfunds.Tosumup,therecenteconomiccrisisdidnotchangethedevelopmentmodel

thathadevolvedinthelastdecade,whichsuggeststhatthecurrentlyobservablemetropolisationprocesses in theCEECswillcontinue. It shouldalsobenotedthat the high level of development that the capital city regions of theCEECshad achieved, associatedwith the expansion of knowledge-intensive businessservices,needs tobecomplemented in thenear futurewith the tworemainingpillarsdrivingthegrowthofcontemporarymetropolises,viz.hi-techandcreativeindustries.Shouldthisnotbethecase,thecurrentdevelopmentsandprocessesarelikelytolosemomentum,whichcouldineffectgraduallyleadtothenarrowingofthegapinlevelsofdevelopmentbetweenthemetropolisesandtheremainingregionsinthecountriesthatwereanalysed.

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