The economic and sovereign debt crisis has had a great impact on local finances, discouraging investments and compromising the future economic growth of the regions as it is emphasized in a study committed by the Committee of the Regions (CoR). Moreover, the surge of public expenditure led to a fiscal crisis, which exposed the regulatory and governance weakness.
While the level of local debt is relatively low due to the restrictions limiting local authorities’ access to credit, the local authorities’ share of investment expenditure is well above the EU average according to the same CoR study. Countries with a low level of public debt, which are the new Member States (MS) and some old MS eligible at receiving Cohesion Funds (CF), are associated with the largest amount of investments. In the example given by CoR , some less decentralised countries such as Latvia, Ireland and Slovakia the investment expenditure is financed by the EU Structural Funds. Due to the contraction in bank credit the vulnerability of the local authorities’ financing systems increased, affecting this way the expenditure of Structural Funds. On the other hand, the report stresses that countries whose debt exceeds the Stability and Growth Pact limit are characterised by a lower share of public investments.
Among other effects of budgetary constraints noticed by the experts in this field, it can be noticed the switch of investments, private or public, towards projects and sectors with higher short-term return, a shrinkage in the public investment decision and the challenges which appeared regarding the MS possibility to co-finance the large projects financed by the European Regional Development Fund (ERDF) and CF.
The Library Navigator Financial crisis and EU Cohesion Policy from June 2009 provides a series of documents and information with regard to the European Cohesion Policy area which contribute at the recovery-plan proposed by the European Commission.
Subnational public finance in the European Union: Summer 2012 / Dexia-Research Department, 2012, 36 p.
This study provides a comparative analysis regarding the crisis’ impact on territories, identifies institutional and financial reforms, reviews the way investment funding is provided and, lastly, observes reactions, initiatives and responses offered everyday by local and regional authorities (see also p.27, European Structural and cohesion Funds).
The EU Added Value Test to Justify EU spending: What Impact for Regions and Local Authorities?: Note for the Temporary Ad hoc Commission on the EU budget of the Committee of the Regions / European Policy Center, 2011, 29 p.
This paper highlights how to obtain the highest possible added value within the current economic crisis and taking into account the negotiations on MFF and how to prioritise spending between policy areas (see p. 20-21 “How does the current economic context impact on cohesion policy rationales and on the subsidiarity test?”).
Les collectivites locales et la crise financière: une mise en perspective (Local authorities and the financial crisis: putting it into perspective) / Thierry Paulais , The Cities Alliance, 2009, 26 p.
The impact of the economic crisis on regions can be felt in terms of revenue, expenditure, financial capacities and foreign investments but the revitalisation of areas will depend on the measures and reforms adopted by central authorities.
Financial Instruments in Cohesion Policy 2014-2020: Proposed framework – where we stand / JESSICA Networking Platform, Brussels, 27 June 2012, 22 p.
This paper describes the background & objectives of regulatory framework 2014-2020, the legislative process – current stage, the key elements of Common Provisions Regulation (June 2012) and the next steps for the future.
COESIONET – Reseau d’etudes et de Recherches sur la Cohesion et les Territoires en Europe: Case study: the Apulia Region /SciencesPo, DATAR, 2011, 31 p.
COESIONET – Reseau d’etudes et de Recherches sur la Cohesion et les Territoires en Europe: Case study: The Calabria Region, /SciencesPo, DATAR, 2011, 29 p.
COESIONET – Reseau d’etudes et de Recherches sur la Cohesion et les Territoires en Europe: Case study: The Veneto Region /SciencesPo, DATAR, 2011, 29 p.
Patrizia Luongo, research fellow at the Bari University, Italy, has carried out three regional case studies in the region of Puglia, Calabria and Veneto. The aim of these case studies is to analyse the impact of the current economic crisis on the three regions and the role of the European Cohesion Policies on local development and on the overcoming of the crisis. (Source: CoesioNet)
What role for local and regional authorities in the post-2013 budgetary framework?: A territorial perspective on the interrelation between the Europe 2020 strategy, the Multiannual Financial Framework post-2013 and new EU economic governance / European Policy Center, October 2011, 66 p.
Having regard to the proposals for the new MFF, the Europe 2020 strategy and the new economic governance mechanisms, this paper presents the risks associated with a top-bottom approach and recommends instruments to reinforce the multilevel governance approach, taking into consideration the strategic and budgetary implications of the EC’s proposal.
Impact of Additionality on the Real Economy of the EU Member States: Open questions, some facts and a review of the literature / Centre for Industrial Studies, 2010, 72 p. (See p. 19)
The scope of this report is to compare and analyse the effects of additionality on public and private funds in EU Member States, based on an extensive literature review.
Additionality and regional development: are EU Structural Funds complements or substitutes of national public finance? / University of Milan, CSIL, 2009, 24 p.
The paper suggests European Commission to move away from the current verification approach and to adopt a new one that could more effectively assess to what extent the Structural Funds complement national investments.
How Does Sub-National Autonomy Affect the Effectiveness of Structural Funds? / Cornelius Bähr, RWTH Aachen University, 2006, 15 p.
This analysis presents the effects of decentralization on the conditional effectiveness of Structural Funds expenditure.
EU Institutions’ views
Financial Engineering Instruments Implemented by Member States with ERDF Contributions – Programming Period 2007-2013 – Synthesis Report Situation as at 31 December 2010 / European Commission, 2010, 30 p.
Report on the European Semester for Economic Policy Coordination: Annual Growth Survey 2013, (2012/2256(INI)), PE 501.955 / Rapporteur: Elisa Ferreira, Committee on Economic and Monetary Affairs, 4 February 2013, 24 p.
European Parliament resolution on the proposal for a regulation of the European Parliament and of the Council amending Council Regulation (EC) No 1083/2006 as regards certain provisions relating to risk-sharing instruments for Member States experiencing or threatened with serious difficulties with respect to their financial stability, (2011/0283(COD)), P7_TA(2012)0133, Strasbourg, 19 April 2012
Committee of the Regions
Synergies between private investment and public funding at local and regional levels – partnerships for economic growth and prosperity: draft opinion of the Temporary Ad-hoc Commission on the EU Budget / Committee of the Regions, 6 March 2013, 12 p.
Creating greater synergies between EU, national and subnational budgets: Opinion / Committee of the Regions, 1 February 2013, 13 p.
Impact of budgetary austerity on local finances and investment / Committee of the Regions, 2012, 32 p.
International organisations’ views
Regions at the bedside of Europe: AER Summit of the Regions and the crisis: draft resolution, Pescara, 21-22 September 2012. 6 p.
The impact of the economic crisis on local and regional authorities in Europe / Parliamentary Assembly of the Council of Europe, Resolution 1886 (2012) 1, 26 June 2012
Local Government in Critical Times: Policies for Crisis, Recovery and a Sustainable Future / Council of Europe, 2012
Making the Most of Public Investment in a Tight Fiscal Environment: Multi-level Governance Lessons from the Crisis / OECD, 2011, 200 p. Chapters on Spain and Sweden.
Financial institutions’ views
2011 Annual Report: Macroeconomic and fiscal developments / Romania Fiscal Council, 2012, 89 p.
L’investissement public : malgré les difficultés, une priorité / Didier Ridoret, CES, France 2012, 62 p.
Beyond big banks and big government: Strategies for local authorities to promote investment / Ed Coxand, Katie Schmuecker, Institute for Public Policy Research, March 2013, 23 p.