The EU Regional Policy and its impact on two Mediterranean Member States (Italy and Spain) PhD Thesis University of Birmingham (2011)

The aim of EU Regional Policy is to intervene effectively in regions that “lag-behind” in economic terms and to finance development programmes through the allocation of Structural Funds which operate in accordance with the principles of subsidiarity, additionality and partnership. This policy should allow regions to converge with EU averages in terms of income and employment. Italy and Spain provide very good examples within the EU as a whole, of significant economic disparities between regions that still appear to be present.

We argue and provide substantial evidence of the fact that the persistence of such disparities is mainly due to inefficient administrative and institutional capacity at the regional level. Although some regions have brought themselves towards the average, in Italy and Spain, there is evidence that certain administrative, institutional and implementation problems have tended to appear, hampering the opportunities of regions to converge in the required way. Because of this, regional economic convergence and thereby socio-economic cohesion are still beyond reach.

Two decades after the 1988 Reform of Structural Funds, EU Regional Policy has only partially succeeded in reducing regional economic divergence within Italy and Spain, where regional economic inequalities still exist. Although we demonstrate that some regions have been able to move forward in the requisite way, it is questionable whether all of the support for these regions can actually be eliminated completely in the near future with the challenges that the EU faces, particularly in relation to the latest round of Enlargement.

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The PhD thesis of Ioannis Vasileiou critically examines the economic [Gross Domestic Product, Gross Value Added, employment and unemployment rates] and political aspects of EU Regional Policy, not only in Italy and Spain, but in the entire Union as well. The PhD thesis examines how EU Regional Policy has affected Italy and Spain in both political and economic terms. Therefore, a critical comparison between a) Italy and Spain and b) these two countries and the rest of the EU member states is necessary and indeed takes place in an analytical and systematic way.

Institutional capacity is the basis for regional economic convergence to take place and the comparative element in the examination of the Italian and Spanish case studies is strengthened by a framework focused on institutional capacity building. Institutional capacity includes all the actions, programmes and projects needed in order for an institution to function properly and according to the specific needs for which it has been established. In the case of the thesis, this term is applied to regional institutions.

Institutional capacity building means the establishment of regional administrations capable of putting the regional policy into practice and, hence, satisfactory regional institutional capacity building involves making the regional institutions that comprise the regional administrations competent to a) identify the regional problems and needs, b) become familiarised with the EU Regional Policy framework and basic principles, c) efficiently cooperate with the EU institutions for EU Regional Policy [European Regional Development Fund (ERDF), European Social Fund (ESF), Cohesion Fund, European Agricultural Guidance and Guarantee Fund (EAGGF) and Financial Instrument for Fisheries Guidance (FIFG)] and d) find solutions to regional problems that hamper development.

Institutional capacity is closely linked with administrative capacity. Regional administrative capacity includes all the actions and management conducted by the regional governments in order for regional development to take place. Such actions include not only the management of the amounts provided by the Structural Funds (SFs), but also the entire range of responsibility of regional governments. Administrative capacity is linked to the efficient absorption of SF amounts and thus it is linked with the term “spending capacity”.

Spending capacity is the ability of regions to absorb SF amounts (allocated to them by the EU in the context of EU Regional Policy) in the best possible way in order for regional development to take place. Spending capacity is the ability of regions to invest SF amounts in certain sectors and areas which have potential for future economic growth and development. Spending capacity can be measured as a percentage of the funding already “spent” compared to that initially allocated.

Regional economic convergence in general means the elimination of economic disparities that exist between regions. Convergence is here intended in economic terms and it is measured in terms of per capita GDP (relative to the EU average). Convergence is understood as a process of regional growth that permits low performing regions to experience increasing GDP per capita, which ultimately tends to converge to the EU-27 average. For Convergence Regions this means aspiring to reach a GDP per capita above 75% of the EU-27 average, thereby exiting Convergence Objective.

The concept of convergence is closely related to the concept of cohesion. Cohesion is the related political objective. This close relation between cohesion and convergence is indicative of the close relation of the fields of economics and political science in this thesis. If economic convergence does not take place, then the political objective of socio-economic cohesion cannot take place either. Cohesion is the outcome of convergence.

Regional economic divergence is the exact opposite of convergence and means the continuous existence of economic disparities between regions. Regional economic disparities are the economic differences between regions in the context of specific economic variables, such as GDP, income, employment and unemployment.

The key question we aim to address is whether EU Regional Policy, through the allocation by SFs, has indeed resulted in a reduction in unemployment and an increase in GDP per capita and employment in the four Italian (Campania, Calabria, Puglia and Basilicata) and four Spanish (Castilla y León, Comunidad Valenciana, Andalucía and Extremadura) case studies of the thesis.

We would argue that satisfactory institutional capacity building depends on the efficiency of the structural adjustments that should take place within the regional administrations, in order for the Community Support Framework (CSF) to be put in practice in a more adequate way. This would lead to a better utilisation of EU funds, which would then be likely to have a more visible impact on regional economic development.

In order for a satisfactory regional economic performance to take place to work towards the target of economic convergence, spending capacity must be successfully associated with adequate institutional capacity. In the EU context, the mark of a satisfactory regional economic performance for a region would be its exclusion from Convergence Objective, as its GDP per head had grown above the 75% threshold.

So far, we can argue that in the cases of Sardegna, Basilicata, Castilla y León and Comunidad Valenciana, the results of the combination of spending and institutional capacity have been encouraging, with the result that these four regions have been able to be excluded from Convergence Objective.

In the remaining five regions selected in the thesis, despite the fact that the allocation by EU SFs was more than generous, the results are less than encouraging, as these regions are still included in Convergence Objective for the current CSF Cycle (2007-13).

Regional economic development has indeed taken place in these regions as well, but to a lesser extent. We would argue that one of the main reasons for this is their institutional problems.

Apart from the introduction, the thesis includes six more chapters and three appendices. Chapter 2 is on “Regionalism, Structuralism and Regional Development” and presents the conceptual theoretical framework encasing the research.

This is essential for a better understanding of the thesis’ arguments. We draw on the following theories: a) region-regionalism, b) structuralism-dependency theory and c) theories of regional development (“top-down” and “bottom-up” approaches). The first section of the first part of the chapter concerns the clarification of the term “region”.

An analysis of the term “regionalism” follows in order to define the “regional scale” at which this study is based. We then link regionalism with region for a better understanding of the foundations of EU Regional Policy.

Indeed, regionalism is the main theoretical and methodological tool on which EU Regional Policy is based, and it is important for analysing the regional policy of Italy and Spain. We also present the clash between the intergovernmentalist and supranationalist approaches at the EU level and adapt it in the context of the implementation of SF amounts by the regions.

The second part of this theoretical chapter presents an analysis of “dependency theory”, an introduction to the terms “core”, “periphery” and “semi-periphery” and an examination of the theory of “structuralism”, as a predecessor of dependency theory.

It is essential to examine dependency theory, since it can be efficiently linked to regional policy. It highlights the uneven development that takes place in the two countries of our study and sets the criteria according to which adequate structural development can become a reality.

In the third part, we look at the theory of “regional development”, which argues that regional convergence and regional divergence are fundamental processes not only for identifying the problems of regional development, but more broadly also for measuring the extent of a country’s uneven development. The last part reviews the “top-down/centre down” and “bottom-up” approaches. We critically compare them and use such concepts to trace how policy has changed over time in both Spain and Italy.

Chapter 3 is on “EU Regional Policy and Policy Evaluation” and discusses how EU Regional Policy has been conducted from the establishment of the European Economic Community (EEC) up to the current CSF Cycle (2007-13), with an emphasis on the most important debates and decisions concerning the impact of EU Regional Policy on Italy and Spain.

This chapter not only concentrates on the 1988 Regional Policy reforms and the following CSF Cycles, but also provides a background to the regional policy of the EEC since its establishment.

In this chapter, we also refer to the Economic and Monetary Union (EMU), as well as to EU Enlargement, as these are factors that have clearly had a serious impact (mainly budgetary) on EU Regional Policy.

It further presents a critical survey of the literature on policy evaluation with an emphasis on issues such as the ex-ante, intermediate and ex-post evaluations and the monitoring procedures. In the final section, an evaluation framework is established in order to attempt to estimate the impact of EU Regional Policy in the context of regional economic development in Italy and Spain, towards the target of regional economic convergence.

In the “Profile of Regional Policy in Italy and Spain” chapter, an analytical and comparative profile of regional policy and regions in the two EU Member States of the thesis is presented. The aim of this chapter is to offer a coherent view of the regional economic situation in Italy and Spain, through the use of GDP per capita, employment and unemployment rates.

A wealth of data is relied upon in order to ascertain whether EU Regional Policy has had a positive impact on these countries and their regions in particular. The tables and figures included in this chapter are intended to offer a quantitative view of the economic situation, whereas the further analysis based on the literature review offers a more qualitative view.

In the “Analysis of the four Italian regions” chapter, there is an attempt to critically present the four Italian case studies in order to understand why some Italian NUTS 2 regions have experienced a high degree of regional economic development, whilst some others have not. The case studies examined in this chapter are four regions (Basilicata, Calabria, Puglia and Campania) which were eligible for Objective 1 funding during the third CSF Cycle (2000-2006).

The reason for choosing them is that Basilicata has exited Convergence Objective, even as a “Phasing-Out” Region, which means it has exited because of the EU Enlargement, while the other three, despite the fact that they also received significant amounts of funds, have not significantly reduced divergence and are still included in Convergence Objective, mainly due to problems regarding their institutional capacity

We compare the economic performance of these four regions to find out the reasons for this outcome with a special emphasis on the management of the funds. Regions such as Sardegna and Sicilia are excluded from further study since their economy is mainly based on tourism and the inputs and outputs are not clearly presented in official statistics.

The main variables considered are the GDP per capita and the unemployment and employment rates, in addition to a critical observation of regional spending, administrative capacity and implementation problems. In this chapter, the analysis of secondary data is integrated with primary data extracted from the interviews we conducted with key regional authorities.

In the “Analysis of the four Spanish regions” chapter, we present the four Spanish case studies – Castilla y León, Comunidad Valenciana, Andalucía and Extremadura - in order to understand the effects of EU Regional Policy on the regions and to measure their degree of convergence.

These regions have been chosen due to the fact that during the third CSF Cycle (2000-2006) they were all included in Objective 1, but during the current CSF Cycle (2007-2013) Castilla y León and Comunidad Valenciana have been excluded from Convergence Objective (both as “Phasing-In” Regions, which means they have exited Convergence Objective due to their significant regional economic development).

On the contrary, the other two regions are still included in Convergence Objective despite the fact that they have all received significant SF amounts.

Our analysis critically compares the management of funds and the institutional capacity amongst the regions and sheds light on whether EU Regional Policy, through SFs, has indeed helped such regions reach the target of achieving regional development and thereby decreasing their extent of their economic divergence.

Again here a combination of primary and secondary data is essential. Primary data are extracted from the interviews we conducted with key regional authorities.

Finally, the “Concluding remarks and policy recommendations” chapter summarises the main findings of our analysis, offering an evaluation of the convergence level reached within the two countries.

The main conclusions are three: a) the evident regional divergence (clear distinction between core and periphery) that exists in Italy and Spain can be effectively analysed and explained by the use of dependency theory, which emerges from structuralism, b) the terms new and soft regionalism, as well as MLG can be effectively adapted to the case of EU Regional Policy and c) the less-centralised, “bottom-up” approach seems to be more effective than the “top-down” one, in order for regional development to take place.

The currently existing regional economic divergence in our eight EU regions used as case studies has its roots in the high degree of centralisation of the national regional policies, the inadequate cooperation between EU, national and regional authorities, and the lack of respect for the principles of additionality, subsidiarity and partnership.

Also, in this chapter there is a critical discussion about EU Enlargement and the challenges it poses to EU Regional Policy, with the main emphasis given to budgetary constraints and more specifically to whether or not (after 2013) the EU can actually afford to fund underperforming regions, which have not shown significant traces of regional economic convergence and development for the last 20 years.

This issue is closely related to the question of whether the EU should continue using the bottom-up approach after 2013. We feel that this study helps estimate and evaluate the impact of regional policy not only in the eight Italian and Spanish case studies, but more generally in the cases of the new EU Member States of the currently significantly enlarged EU.

The academic contribution of this thesis is mainly applied. The novelty lies in the collection of the secondary data and the results that can be drawn from them in the context of EU Regional Policy and the adaptation of the aforementioned theoretical models to the cases of Italy and Spain.

It should be mentioned that the aim of this thesis is not to produce a new theory, but to adapt existing theoretical models to the case studies in a slightly different way to the studies existing in the current bibliography.

The combination of primary and secondary data and their analytical presentation in order to measure the impact of EU Regional Policy on Italy and Spain are the main contributions of the thesis.

Conclusions drawn from the study of the aforementioned regions offer substantial evidence in order to further support and justify the PhD thesis main arguments. During his PhD course, Ioannis Vasileiou conducted many interviews with key stakeholders in terms of EU Regional Policy in Italy, Spain and Brussels. The interviewees at regional, national and EU level were carefully chosen according to their knowledge, experience and specific positions they held.

Interviewees at regional level were members of regional administrations, professors, heads of regional administrations, directors, managers and administrative members in charge of regional policies and economic development. Interviewees at national level were general directors, sub-directors, economic analysts and members of evaluation units at the Italian and Spanish Ministries, responsible for regional policies and development. Interviewees at EU level were programme managers in charge of EU Regional Policy in Italy and Spain, working for the European Commission in Brussels.

The contribution of all interviewees proved to be valuable, as they analyzed in depth a) the exact economic and political situation at the three levels, b) issues regarding institutional capacity, c) specific problems and needs that had to be taken into account and d) the future prospects. PhD supervisors were from the Department of Political Science and International Studies (University of Birmingham) and the Birmingham Business School.

The PhD thesis has not been published, so you can only find it at the University of Birmingham.

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