Policy Pathways Beyond the Shoreline

7. Country perspectives: Case studies of Croatia, Greece and Sweden

Abstract

This chapter compares how Croatia, Greece, and Sweden approach the development of their island and coastal regions through distinct governance and policy models. Based on six regional case studies, it shows that development outcomes depend more on governance quality, data availability, and small-firm competitiveness than on geography. While most island regions display demographic resilience, economic and productivity growth remain modest, particularly in Greece. Croatia exhibits strong institutional co-ordination, Greece operates through fragmented but constitutionally recognised frameworks, and Sweden benefits from decentralised autonomy. Shared priorities include improving data visibility, fostering small-business innovation, and using islands as laboratories for green and digital transitions. The chapter concludes that integrated, evidence-based governance is crucial for sustainable island development.

Introduction

This chapter examines how Croatia, Greece and Sweden address the development challenges and opportunities of their island and coastal regions through distinct institutional and policy approaches. Drawing on six case-study territories that include Zadar and Dubrovnik-Neretva in Croatia, the islands unit of Chios and Kastelorizo (Dodecanese Islands) in Greece, and Gotland and Öckerö in Sweden, it analyses demographic, economic and firm-level dynamics, as well as the governance and policy frameworks shaping them.

The analysis follows two steps. First, it presents a socio-economic diagnostic comparing demographic trends, economic performance and enterprise structures across the six regions. Second, it assesses the policy mechanisms underpinning these outcomes, identifying lessons relevant to national and European island policies.

Throughout, the chapter emphasises that development outcomes in islands are strongly mediated by governance quality, data availability and small-firm competitiveness, not by geography alone.

Socio economic diagnostic of case study regions in Croatia, Greece and Sweden

Diversity and comparability

The six case studies constitute a heterogeneous sample. All include island regions, but their formal classifications and spatial contexts differ markedly. Only Chios, the Dodecanese Islands and Gotland are officially recognised as Island regions under the European Commission typology. Zadar, Dubrovnik-Neretva and the TL3 region containing Öckerö (Västra Götaland) are instead classified as Coastal regions (see Chapter 3). In several cases, islands are embedded in broader TL3 administrative units (e.g. Öckerö within Västra Götaland and Kastellorizo within the Dodecanese), creating data aggregation issues and constraining comparability. This highlights a structural limitation of current Eurostat NUTS 3 classifications, which often merge island and mainland components. As a result, many inhabited islands remain statistically invisible, complicating cross-country analysis and the targeting of public investment.

Heterogeneity extends beyond administration to population size, economic structure and connectivity. Zadar and Dubrovnik-Neretva are medium-sized Adriatic counties with strong tourism sectors; Chios and Kastellorizo are smaller Greek islands facing structural economic constraints; Gotland is Sweden’s only TL3 island region; and Öckerö is a small municipality composed of ten islands embedded within the large and urban-anchored region of Västra Götaland. Aggregated comparisons can therefore obscure local realities.

To address these differences, the OECD applied a bespoke island classification capturing both island and coastal characteristics while focusing, where possible, on non-metropolitan contexts. However, differences in data coverage and administrative boundaries still affect comparability and must be considered when interpreting results (see Chapter 3).

Across Europe, Island regions represent just 4 % of all NUTS 3 units (47 of 1 348) but exhibit distinctive trajectories. Between 2001 and 2021, their populations grew by 9.3 %, outpacing coastal and inland regions, but GDP increased by only 5 % and labour productivity fell by 6 %. In contrast, non-metropolitan coastal regions achieved 16 % GDP growth and 5 % productivity gains, while other regions grew by 37 % and 14 %, respectively. These patterns frame the national analyses below.

Croatia

Croatia’s overall population declined by 9 % between 2001 and 2021, but its island-coastal counties performed relatively better. Zadar grew by 4 % and Dubrovnik-Neretva fell only 1 %, with stagnation after 2011.

Economic output increased despite demographic decline. National GDP rose from USD 80 billion to 115 billion (CAGR 1.4 %), with faster expansion in Zadar (2.6 %) and Dubrovnik-Neretva (2.0 %). Growth was strongest in 2001-2011 before slowing, mirroring other coastal regions.

Labour productivity improved markedly: +59 % in Zadar and +44 % in Dubrovnik-Neretva over the period, exceeding national and benchmark averages. Gains stemmed from stronger gross value added (GVA) growth relative to employment, indicating efficiency improvements despite weak demographic performance.

The firm structure is dominated by small enterprises (1-9 employees), representing 57-58 % of firms and around 40 % of employment. Self-employment (36-39 %) is relatively low versus other island or coastal benchmarks. Firm density averages 5.7-6.3 firms per 100 inhabitants, above the national mean but below similar coastal regions (about 6.9), suggesting moderate competition and an active business base.

• Key challenges include scaling up small firms, diversifying economic activities beyond tourism and strengthening business ecosystems and innovation capacity to sustain productivity growth in a context of demographic decline.

Greece

Greece’s population fell modestly (-1.5 %) between 2001 and 2021, however Chios and the Dodecanese Islands grew strongly (+13.2 % and +14.5 %, respectively), reflecting notable demographic vitality.

However, economic outcomes diverged sharply. National GDP contracted slightly (-0.2 % CAGR), with output also declining in Chios (-0.1 %) and Dodecanese (-0.7 %), particularly after 2011 amid the financial crisis.

Labour productivity fell by 12 % nationally, 14 % in Chios, and 35 % in Dodecanese, indicating rising employment but weak value creation.

Self-employment dominates Greece’s firm landscape (61 % nationally, 65 % in Chios, 55 % in Dodecanese). Small firms (1-9 employees) account for 41-43 % of employment, while larger firms are scarce. Firm density is high, especially in Dodecanese, exceeding national averages, implying a dynamic but fragmented small-firm economy with limited scaling potential.

These fragmented firm structures are further affected by limited access to finance, high operational and taxation burdens, strong seasonality in tourism and persistent shortages of specialised skills, underscoring why productivity-led upgrading of island entrepreneurship is essential for Greece.

• Key challenges include reversing persistent productivity decline, reducing dependence on micro-enterprises and developing policies that help small firms adopt new technologies, innovate and grow.

Sweden

Long-run socio-economic data are available only at TL3 level, enabling comparison between Sweden, Gotland and Västra Götaland. Between 2001 and 2021, Sweden’s population increased by 16.8 %, with Gotland growing by 4.9 % and Västra Götaland by 16 %.

National GDP grew robustly (2.1 % CAGR), with solid gains in Gotland (1.4 %) and Västra Götaland (2.0 %), with the strongest rates 2011, then moderating. Despite modest GDP growth, labour productivity increased: +34 % nationally, +33 % in Gotland, +29 % in Västra Götaland.

Firm structures differ from southern cases: self-employed firms comprise 68-72 % of enterprises, small firms just 23-26 %, and large firms (more than 10 employees) represent about 5 % but employ 55 % (Gotland) and 72 % (Västra Götaland) of workers. Firm density is high standing 12 firms per 100 inhabitants in Gotland and 9 in Västra Götaland, exceeding all benchmarks and indicating strong entrepreneurial dynamism.

Within Västra Götaland, the island municipality of Öckerö displays a much smaller-scale and distinct island profile. Unlike its fast-growing host region, Öckerö experienced slight population decline between 2001 and 2021 and faces demographic ageing. However, its economy has been among the strongest-performing at municipal level in Sweden over the past decade, with youth unemployment around 1.9 % and adult unemployment around 2.2 % in 2022 (municipality-level data). Öckerö hosts around 1 500 companies, roughly 800 of which employ staff, concentrated in tourism and maritime activities such as fishing, shipbuilding, education and marine consumer goods.

• Key challenges concern ensuring that smaller island municipalities such as Öckerö benefit from broader regional prosperity and that productivity gains are widely shared across communities.

Comparative insights

Across the six territories, several recurring patterns emerge:

• Classification and visibility. Current Eurostat typologies obscure intra-regional diversity; many islands remain statistically invisible within mixed NUTS 3 units.

• Demography. Most island and coastal regions gained population between 2001-2021, often contrasting with national declines (notably Croatia and Greece).

• Economic divergence. Despite demographic resilience, island regions recorded only 5 % GDP growth versus 16 % in non-metropolitan coastal regions and 37 % elsewhere, revealing a persistent performance gap. Öckerö demonstrates that strong local performance can occur even when regional aggregates mask local variation.

• Productivity. Weak GVA trends drive lagging productivity in many island regions. Swedish cases stand out positively. Across European island regions, productivity growth concentrates in agriculture (+1.9 % CAGR) and financial activities (+0.8 %), now surpassing industry.

• Firm structure. Small and micro-firms dominate, providing employment but facing barriers to innovation and scale.

• Sectoral trends. Trade and services remain main employers (about 30 % of jobs) but GVA in these sectors fell slightly (-0.3 % CAGR). Agriculture and professional services posted modest gains (+0.3 % and +0.1 %), signalling a need to rebalance toward higher value-added activities.

• Competition. Firm density averages 7 firms per 100 inhabitants, similar to coastal benchmarks but below urban levels, limiting competitive spillovers.

Overall, island development outcomes are shaped not only by geography but also by economic structure, connectivity and governance capacity.

Governance and policy approaches: Croatia, Greece and Sweden

Croatia

Croatia’s 53 inhabited islands (about 127 800 residents) are recognised in the Constitution as territories of special concern. The Island Act (1999, revised 2018) and National Island Development Plan (2021-2027) mark a shift from compensatory aid to integrated policy. The Ministry of Regional Development and EU Funds (MRDEUF) leads co-ordination through its Directorate for Islands, working with the Islands Council, island co-ordinators appointed at county level, and the island partnerships established under the Integrated Territorial Programme (ITP) 2021-2027, whose mandate focuses on designing and implementing ITP territorial strategies.

Data tools underpin policy innovation: the Island Development Indicators (IDI), Digital Island Atlas, and Central Register of Island Projects enhance transparency and planning.

Croatia invests about EUR 20 million annually in island programmes, supplemented by state aid (up to 75 % co-financing) and tax incentives. Within the Integrated Territorial Programme (EUR 1.57 billion), roughly EUR 150 million is earmarked for island projects.

County priorities illustrate local diversity:

• Zadar: youth services, housing access, ferry renewal.

• Dubrovnik-Neretva: overtourism management and environmental infrastructure.

Infrastructure gaps remain substantial, particularly in wastewater management, water supply, digital connectivity and sustainable transport. At the same time, innovation is advancing through initiatives such as the blue-economy and digital-innovation work of InnovaMare and national programmes supporting the introduction of electric ferries. Social measures include relocation grants for young families, telemedicine, and distance learning. The “Croatian Island Product” label promotes entrepreneurship and local identity.

Croatia’s experience shows how EU Cohesion Policy can drive institutional reform and data-based governance, positioning its islands as laboratories for blue and digital transition.

Greece

Greece’s 114 inhabited islands host around 1.8 million residents (16 % of the population). The principle of insularity, enshrined in Article 101(4) of the Constitution and operationalised by Law 4770/2021, mandates differentiated measures for islands, including a Transport Equivalent Mechanism to offset higher travel and freight costs.

The General Secretariat for the Aegean and Island Policy (GSAIP) leads island affairs under the Ministry of Maritime Affairs and Insular Policy, but responsibilities remain fragmented across ministries, limiting coherence. Local governments rely heavily on central transfers (about 80 % of budgets) and EU funds.

Socio-economic disparities persist: about 40 % of small islands lost more than 10 % of population since 2000; GDP per capita in many islands equals about 78 % of national average; and energy and transport costs are up to 1.5 × higher than mainland equivalents.

These pressures are particularly acute in Greece, especially for small and remote island clusters that experience double insularity, such as the Oinousses and Psara islands in relation to Chios or outer Dodecanese islands depending on larger hubs, where access to the mainland systematically requires multiple maritime or air connections. At the same time, mixed regions within larger territorial units such as Attica, Peloponnese and Central Greece group islands together with extensive mainland areas, reducing the statistical visibility of insular territories and complicating the design of island-specific programmes, including GR-eco Islands; forthcoming GSAIP data and typology initiatives aim to address these visibility gap.The flagship Gr-eco Islands Initiative (2021-) pilots renewable energy, electric mobility and digital governance on islands such as Chalki, Astypalea, Tilos, later extending to Kastellorizo and Symi. Supported by the DAFNI Network and private investors, it positions the Aegean as a hub for climate-neutral innovation.

Complementary reforms include Energy Communities under Law 4513/2018, the Digital Transformation Strategy 2030, and the SYZEFXIS II broadband programme. Case studies (Chios-Oinousses-Psara; Kastellorizo) illustrate diverse pathways (e.g. blue-economy diversification versus energy autonomy).

The Greek case highlights a shift from fragmented, compensatory approaches addressing island disadvantages toward a more integrated and innovation-driven insular policy that combines energy, digital, and environmental goals within a more coherent governance framework.

Sweden

Sweden’s 267 570 islands, 984 of which are inhabited by around 93 000 residents living without a fixed mainland connection exemplify how decentralised governance and welfare systems can mitigate insularity. Islands range from autonomous Gotland to small archipelagos like Öckerö integrated with urban labour markets.

There is no dedicated island law; island development is embedded in regional growth and territorial cohesion policy. The Swedish Agency for Economic and Regional Growth (Tillväxtverket) and Swedish Transport Administration (Trafikverket) oversee development and connectivity.

Region Gotland combines municipal and county roles, while Öckerö municipality benefits from integration with the Gothenburg region. Regional Development Strategies (RUS) and EU Cohesion Policy instruments (ERDF, ESF+, CF, CLLD) guide investment. The regional development strategy of Gotland (Our Gotland 2040) sets ambitious climate-neutrality goals through renewable energy and industrial transition.

Despite Sweden’s decentralised system, both Gotland and Öckerö face specific island pressures:

• High transport and travel costs, particularly acute for Gotland.

• Limited fiscal space in small island municipalities, as illustrated by Öckerö.

• Demographic ageing, even in areas with strong tourism inflows such as Gotland.

The Swedish case shows that islands can thrive within mainstream regional frameworks when local autonomy and co-ordination are strong. Future priorities include improving the statistical visibility of islands within national data systems, strengthening intergovernmental co-ordination, and scaling energy-autonomy and digital-service pilots on islands.

Comparative institutional lessons

Across the three systems, governance traditions shape outcomes more than insularity itself (Table 7.1).

Table 7.1. Comparative institutional lessons: Croatia, Greece, Sweden

Governance Type	Example	Core Strength	Key Constraint
Integrated decentralisation	Sweden	Strong local autonomy, cohesive regional planning	Limited statistical visibility and constrained fiscal space in small island municipalities (narrow tax base, high fixed service costs and strong reliance on equalisation/own-source revenues).
Institutionalised co-ordination	Croatia	Clear legal framework, data systems, EU-funded coherence	Implementation capacity and infrastructure gaps
Constitutional recognition	Greece	Legal foundation for differentiated policy	Fragmented delivery and limited cross-ministry integration

Common themes include:

• The centrality of data and monitoring (e.g., Croatia’s IDI, Greece’s planned observatories, Sweden’s efforts to improve the visibility of small island municipalities such as Öckerö within regional statistics).

• The dependence on EU funds in Croatia and Greece versus Sweden’s self-financed model.

• Convergence around green energy, digital connectivity, blue-economy diversification and demographic renewal as shared policy goals.

Policy directions for national and European action

The evidence from the analysis suggests that successful island development relies on co-ordinated governance, granular data and inclusive innovation rather than compensatory support. Six interlinked policy priorities emerge.

Reinforce multi-level governance

• Establish inter-ministerial island co-ordination bodies with stable funding.

• Embed “island-proofing” in policy design to assess territorial impacts.

Develop a European Island Data and Knowledge Framework

• Harmonise national observatories (Croatia’s IDI, Greece’s observatories, Sweden’s statistical reforms).

• Include indicators on accessibility, cost of insularity, productivity and sustainability.

Establish or strengthen Island Business Observatories and related tools (e.g. island business barometers and cost-indicator mechanisms) at national and regional level to systematically track entrepreneurship, investment and innovation in island contexts.

• These observatories should monitor firm creation, access to finance and infrastructure, and assess the impact of public measures on SMEs. Leverage islands as laboratories for green and digital transitions.

• Support renewable microgrids, circular-economy pilots, and smart-mobility systems building on examples such as Our Gotland 2040 (regional strategy), Unije (Croatia’s sustainability pilots) and Greece’s GR-eco Islands programme.

• Use EU instruments such as REPowerEU, Digital Europe and Interreg to replicate and expand successful island pilots across other territories.

Embed island priorities in future EU Cohesion Policy (2028-2035)

• Ensure that the next generation of Cohesion Policy programmes explicitly reflects island realities.

• Strengthen Policy Objective 5 (“A Europe closer to citizens”) and expand the use of Integrated Territorial Investments (ITI) and Community-Led Local Development (CLLD) for island strategies.

• Introduce island-sensitive indicators and dedicated financing windows in operational programmes so that islands benefit proportionally from investments in connectivity, energy transition, business support and social inclusion.

Support small-firm competitiveness and innovation

• Facilitate access to finance, clustering and digitalisation; develop island business accelerators and export consortia.

• Promote branding, quality certification and geographic-labelling schemes for island products, reinforcing local identity and market differentiation while linking SMEs to tourism, blue and agri-food value chains.

Promote demographic and social resilience

• Combine housing and skills policies to retain youth; expand telemedicine, distance learning and e-administration.

Enhance inter-island and cross-border co-operation

• Strengthen regional and sea-basin networks (CPMR, DAFNI, Baltic forums) to share solutions and build scale.

Conclusions

Island and coastal regions across Croatia, Greece and Sweden display demographic resilience but uneven economic outcomes. Productivity gains in Croatia and Sweden contrast with persistent structural weaknesses in Greek islands. In all contexts, micro and small firms remain central but constrained, requiring co-ordinated support linking demography, skills and innovation.

Sweden’s dual case illustrates how regional-level strength (Gotland, Västra Götaland) can mask the vulnerabilities and opportunities of small island municipalities such as Öckerö, which face demographic ageing and fiscal constraints but also show strong entrepreneurial and labour-market performance.

Turning population vitality into sustainable and inclusive growth demands better data, multi-level governance and investment in human and entrepreneurial capital. Islands should not be treated as peripheral territories requiring compensation, but as strategic platforms for Europe’s green, digital and social transitions.

By reinforcing governance, improving data systems and empowering local innovation, Europe can transform its islands from marginal spaces into drivers of territorial cohesion, sustainability and living laboratories for a more integrated and resilient European Union.