HUNGARIAN ACADEMY OF SCIENCES

European economic integration drives a political economy of region-alism that – far more than traditional divisions between labour and capital – defines the principal axis of political-economic division in the New Europe. The New Economy drives a radical shift in EU pol-icy from cohesion or redistribution toward innovation promotion, af-fecting distributional struggles and policy approaches at the EU, na-tional and subnational levels. Shifting strategies pose significant chal-lenges at the national and subnational levels with important implica-tions for future EU, national and subnational economic and regional development policy goals. At the national level, and in particular less developed economies, the New Economy creates incentives for the increasing centralization of decision-making. EU-level reforms, such as the Lisbon Agenda and an increasing emphasis on cohesion as opposed to structural funding, do much to strengthen these trends. Subnational regions, at least in the near term, may be the principal losers. But such trends are likely to strengthen future demands for greater subnational political decentralization