Analysing the megatrends As a consequence of the crisis, more public investment in the digitalisation of education, government and medicine are to be expected. National support for the digitalisation of SMEs, which were especially hit by the pandemic, is likely to be augmented. A further upgrading of digital skills of employ­ees, which has started due to more remote work, and more private and public spending on it is also to be expected. Larger acceptance of remote work by employers, induced by pandemic mobility restrictions, can offer better job chances for skilled labour from EU-CEE countries on the global labour market and prevent, to some extent, emigration. ly less developed in the EU, more public-private partnership schemes or direct public procurements and more state in­terventions would be beneficial for countries aiming to participate in technological leap-frogging or develop ad­vanced industrial ecosystems. Large data-driven firms, platforms, or marketplaces with high global market power, like in the US or China, are unlikely to arise in Europe given common market competition regulation. Strict data pro­tection may be a barrier to the deployment of particular technologies based on biometrics and artificial intelligence. A trend of growing use of digital technologies during the lockdown was partly reversed after restrictions were lifted. This suggests that without respective strategies and target­ed policy measures, a return to»business as usual« is most likely in the post-pandemic period. In addition to national budgets and the new EU budget, the new Recovery and Resilience Facility of the EU could provide additional re­sources to implement digitalisation incentives. Croatia, Bul­garia, Romania, Slovakia, and Latvia may have more fiscal room, as they are among the largest beneficiaries relative to their GDP from overall recovery fund grants(above 5 percent in 2018 prices over 2021–2023). 3.5.6 IMPLICATIONS OF EU-POLICIES ON DIGITAL TRANSFORMATION IN EU-CEE The European Digital Strategy and Digital Single Market agenda, which aim to foster a sustainable digital transition, set up a framework to address broad common aspects of digitalisation at the supranational level(European Commis­sion, 2020f). In this way, every country in EU-CEE benefits from common regulation on data protection, standardisa­tion and interoperability, e-commerce and digital pay­ments, and cyber-security. An additional boost to a digital transformation for EU-CEE countries may come from participation in the Digital Eu­rope Programme, which starts in 2021 with a budget of EUR 9.2 billion. It provides funding for special aspects of digitalisation(supercomputing, artificial intelligence, cy­bersecurity), advanced digital skills and connectivity along the digital value chain. This includes measures to»support the uptake of advanced digital and related technologies by industry, notably small and medium-sized« and to»build up and strengthen the network of European Digital Inno­vation Hubs, aiming to have a Hub in every region, to help companies benefit from digital opportunities.«(European Commission, 2020g). Overall, the Multiannual Financial Framework 2021–2027 and the Next Generation EU envis­age allocations of EUR 143 billion for»single market, inno­vation and digital direction,« which is partially dedicated to digital transformation projects. On the other hand, common EU policies impose certain re­strictions on states on the stimulus available for digital technologies. State aid rules limit volumes of direct nation­al funding. As venture capital private funding is traditional­3.6 DEMOGRAPHIC DECLINE In most of the EU, populations grew in the last two dec­ades. However, almost everywhere, the working-age pop­ulation grew more slowly, and in many cases, didn’t grow at all. Consequently, dependency ratios increased in the vast majority of countries, meaning those of working age increasingly facing a higher burden in supporting those of non-working age. Particularly strong discrepancies be­tween the total and working-age population growth rates were recorded in parts of EU-CEE, including the Czech Re­public, Slovenia, and Poland. Meanwhile, the working-age population outright contracted particularly strongly in Lat­via, Lithuania, Bulgaria, and Romania(all in the range of 1–1.5 percent per year). In very recent years, these trends have changed somewhat, thanks in part to major intra-CESEE migration. Especially large numbers of Ukrainians have moved to work in Poland and other Visegrád countries, while workers have also ar­rived in EU-CEE from Belarus and the Western Balkans. This represents an attempt to deal with labour shortages and rising wages. However, this does not seem to be a lasting solution. Ukraine, Belarus and the Western Balkans are themselves faced with negative demographic trends. Mean­while, EU-CEE countries have continued to record histori­cally low unemployment rates, high vacancy rates, labour shortages even for low-skilled jobs. Moreover, unit labour costs are rising. Eurostat projects indicate that the working-age population will decline rapidly across EU-CEE in the coming decades. The region is projected to experience an overall population loss that is unprecedented outside of a war or famine. This, in turn, will have a serious impact on the economy, as well as important political consequences. Holmes and Krastev (2020) argue that it is actually this population decline, rath­er than fears about immigration, which is really at the heart of the populist-nativist trends in regional politics and the rise of ethnonationalism. Before the current pandemic hit, the Vienna Institute for International Economic Studies(wiiw) calculated that the tipping point at which EU-CEE countries would run out of labour was imminent. Our pre-pandemic calculations sug­gested that, along with Germany, most of EU-CEE would run out of workers by 2026(Table 3.5). The only exceptions to this were Croatia and Romania. 45