CNBC Business | Middle ground

Middle ground

The geographical heart of Europe is united under a single banner once more. Justin Keay discovers what Centrope has to offer

Throughout the communist era, the idea of Central Europe seemed to belong to a different time, evoking memories of the Hapsburg Empire when the geographical heart of the continent was united under one ruler. Since 1989 and the restoration of democracy, policymakers have struggled to define what constitutes Central Europe. Is it the countries of the former Austro-Hungarian Empire or does it encompass a broader but less distinct region; an area unified by shared cultural values and expectations?

As far as the architects of Centrope were concerned, central Europe is something rather more distinct. In 2003, 14 provincial leaders met at Burgenland, Austria to launch their cooperative initiative, in conjunction with EuropaForum Wien, an Austrian consultancy, bringing together six million people at the heart of the continent. With the twin city of Vienna-Bratislava as its capital, Centrope includes the Austrian states of Vienna, Burgenland and Lower Austria; west Slovakia; west Hungary (and the key city of Gyor) and south Moravia in the Czech Republic (with Brno).

A year after Centrope's foundation, a major step towards the region's cohesiveness was made with EU enlargement; this has since been boosted further with the enlargement of the Schengen zone, although full, cross-border labour mobility will not become a reality until Austria abandons the derogations it has negotiated to be in place until (probably) 2011.

Peter Huber, a senior analyst at Austria's WIFO economic forecasting institute who has followed Centrope closely since its inception, says the region's increasingly obvious dynamism lay behind its launch, together with the availability of EU funding, which made business initiatives more realisable. He says that Centrope has helped boost investor interest from within and outside; and although there is still too little cross-border activity, it is growing, with joint ventures and other initiatives increasing in number and importance.

"Centrope is a win-win situation. For example, Slovakia's emergence as a centre for car manufacture has run alongside Vienna's consolidation of itself as the destination for financial services investment," he says.

Certainly, the region has gained from the cooperation in the fields of education (with the boosting of links between higher education facilities, especially Centrope's 25 universities), culture, tourism and infrastructure generally. Vienna and Bratislava - which during the Hapsburg era were linked by railcar - are now linked by the new A6 motorway and much improved Danube river links. Traversing the 50km that separate these two dynamic cities is now quicker than ever.

Centrope initiatives have also boosted inter-connectedness in other ways. Vision Centrope 2015 launched in 2006 gave a clear indication of how the 14 regional authorities saw it evolving over time. Last year, as well as the Business & Labour Report, which gave practical insights into how to improve labour mobility and flexibility, it published a guide highlighting some of the wine and architectural destinations within the region, including the famous Heurigen of Vienna and wine cellars in Bratislava and Trnava, in Slovakia, prompted by the realisation that cross-border tourism will help promote recognition of Centrope as a distinct region.

Later this year a more precise roadmap for Centrope's development is promised; the hope must be that this will find ways of further improving cooperation, which currently remains constrained by the fact there are still four sets of national regulations governing Centrope's decision-making.

"The Centrope economy has huge potential but faces challenges, not the least of which are huge income disparities equal almost to those prevailing within the EU as a whole," says Huber.

Vienna is the wealthiest area within Centrope with 172% of the EU average per capita GDP, followed by the Bratislava region - which thanks to Slovakia's excellent record of attracting foreign investment now has per capita income over 120% of the EU average. Brno and Gyor are currently within the middle of Centrope's per capita income range; by contrast Trnava in Slovakia has per capita GDP at just 59% of the EU average.

Huber says that investment and the fast growth of countries such as Slovakia - which grew almost 10% in 2007 - will help narrow these gaps but that Centrope still needs to marry the need for cooperation with the fact competition is very much alive and kicking, especially when it comes to attracting FDI. Huber says the hope must be that the unifying concepts that have underlain Centrope since its foundation - promoting international recognition of it as a distinct regional entity - eventually overcome vested interests.

"Even if in 20 years time you don't have people saying they are from the Centrope region or fully identifying with it at a cultural level, the fact the authorities cooperate can only be to the region's continuing advantage," he argues. "If the concept is to really flourish however, there must also be greater clarity about Centrope's objectives and how all this cooperation benefits people personally."